Types of business presence in China:

Before starting up a business in China, you have to know what the options are. Foreign Investors generally establish a business presence in China in one of five modes: Wholly Foreign Owned Enterprise (WFOE); Representative Office(RO); Joint Venture(JV),  Partnership Enterprise (PE) and Hong Kong company, the definition difference between each of these are summarized here:

WFOE: is a Limited liability company wholly owned by the foreign investor. WFOE requires registered capital and it's liability of equity, can generate income, pay tax in China and its profit could be repatriate back to investor's home country. Any enterprise in China which is 100% owned by a foreign company or companies can be called as WFOE.

Representative Office:is a Liaison Office of its parent company. It requires no registered capital. Its activities would be: product or service promotion, market research of its parent company's business, Quality Control liaison office etc in China. RO generally is prohibited to generate neither any revenue nor generating contracts with local businesses in China.

Joint Venture: is a Limited liability company formed between Chinese company investor and foreign investor. The parties agree to create a entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. JV usually been used by foreign investor to engage the so called restricted in areas such like: Education, Mining, Hospital etc.

Partnership Enterprise: for Foreign Investor is a new type of business presence in China, it's carried out since March 1, 2010. It refers t a). 2 or more Foreign enterprises or individuals establish a Partnership Enterprise (PE) in China; and b). Foreign enterprise(s) or individual(s) with Chinese individual, company establish a Partnership Enterprise (PE) in China. It's a new type of business entity in China, and this might take some time for local authority to finger it out how to compliance with other types of business entity establishment.

Hong Kong Company: usually been used as a Special Purpose vehicle (SPV) to invest Mainland China. Hong Kong is one of the quickest locations to incorporate a business. Although a HK company is not a legal entity in Mainland China, lots foreign investors, especially investors from Europe and North America still chose to setting up a Hong Kong company as SPV to invest China.

Company Registration:

RMB 100,000~ RMB 500,000 (approx. 10,000 ~ 50,000 EURO) is minimum registered capital for Consulting, Service, Hi-TechWFOE registration. Different cities of China have different policies on minimum registered capital;

For WFOE, Joint Venture setting up in China: Company bulletin fee has been cancelled by government since Jan. 1, 2009, the cost used to be RMB 4,000, Partnership Enterprise in China for unlimited Liability is available since March 31.

After China’s entry to WTO, most industries in China welcome foreign investment, WFOE setting up in China becomes the first option of foreign investment’s entity structures instead of Rep. Office setting up in China At the mean time, for tax purpose, effective licensing system etc more and more investors use Hong Kong as the holding company to invest China mainland, using the offshore company to hold their operations in China.

Gold Brand Management Consulting Co.,Ltd.; Associates is a specialist foreign direct investment practice, providing corporate establishment,  business advisory, tax advisory and compliance, accounting,China company registration, Chinese Visa,due diligence and financial review services to multinationals investing in emerging Asia.For further details or to contact the firm, please email gbd33@163.com, visit www.chinagbd.com,tel +86 20 61133120, or 020 61133120.