Registering an enterprise in China takes one to be fully aware of the relevant regulations prescribed by the Chinese government. To begin with, there are certain conditions one must meet to be able to register a company. Nevertheless, China has relentlessly introduced many reforms concerning private enterprises, and registering a company can get even better in time.
Have a look at our recent post on Private Enterprises to Expect More Business Reforms
If you are already familiar with the conditions for registering an enterprise in China, check out our 10 Steps to Open a Foreign Invested Company in China.
Scope of registering an enterprise
A legal person enterprise registration is necessary to open a company in China. This qualifies business owners for the protection of their economic activities and acquisition of civil rights and duties in accordance with China’s law. The enterprise legal persons come in different kinds of enterprises.
- State-owned enterprises
- Collectively-owned enterprise
- Equity joint ventures
- Wholly-foreign owned enterprises (WFOE)
According to the implemening regulations for registering a legal person enterprise, business entities engaged in business activities that are not funded by the state or scientific and technological social organizations shall apply for legal person enterprise registration. Such enterprises include:
- Associated enterprises;
- Branch offices affiliated to legal person enterprises;
- Branch offices established by foreign-funded enterprises;
- Other entities engaging in business activities.
The competent authority for registering an enterprise
China’s State Administration for Market Regulation is responsible for administering the registration for a legal person enterprise. Moreover, foreign-invested enterprises have the duty to report to the SAMR authorities regarding the registration.
Conditions before registering an enterprise
Foreign-funded enterprises must meet the following conditions in order to register as legal person enterprise:
- Its name complies with the relevant provisions;
- It has contracts and bylaws;
- It has fixed business premises, necessary facilities, and employees;
- Its registered capital complies with the relevant provisions of the state;
- Its business scope complies with the provisions of national laws, regulations, and policies;
- It has sound financial and accounting rules, is able to conduct independent accounting, is responsible for its own profits and losses, and independently prepares fund balance sheets or balance sheets.
On the other hand, according to the law, the legal person enterprise must indicate the following items when registering:
- Name and domicile;
- Economic nature;
- Amount of registered capital and its sources;
- Business scope and mode of operation;
- Organization and its powers;
- Procedures for the generation of the legal representative and scope of powers;
- Financial management rules and profit distribution forms;
- Labor and employment rules;
- Procedures for the amendment of bylaws;
- Termination procedures.
Meanwhile, the associated legal person enterprise must indicate the following:
- The methods, amount, and investment term of all parties;
- The rights and obligations of members of all parties;
- The conditions and procedures for participation and exit;
- The generation, forms, and powers of organization and management departments and their decision-making procedures.
The person registered with the confirmation of SAMR on behalf of the legal person enterprise becomes the legal representative. The legal representative is mainly responsible for keeping the company seal or chops safe which plays a huge importance in the overall conduct of business activities.
Read more on China Company Seals: Understanding Their Role in Business
When foreigners register for a foreign-invested company in China, the authorities will need the identity certificate and photo of the legal representative and a notarized passport. Moreover, the foreigner should pay in registered capital and employ a professional accounting firm to verify the capital and issue a capital verification certificate. Contact us if you need assistance in this regard.
Major documents required for registering an enterprise
- Application form for the establishment of a foreign-invested enterprise
- Feasibility study report
- Articles of Association for Foreign Investment Enterprises
- List of legal representatives (or candidates for the board of directors)
- Legal and credit documents of foreign investors
- A written reply from the local People’s Government at or above the county level where the foreign-funded enterprise is to be established
- List of materials to be imported
- Other documents.
Anyone interested in establishing a company in China should also identify the business scope which refers to the business activities he or she intends to undertake. Once these are identified and registered, it will be difficult to modify or change them later on.
Conclusion
It is not enough to know the conditions and steps of registering an enterprise in China. It is more important to first determine what type of business structure are you going to establish. Each business structure has its own advantage and limitations especially in terms of taxation and accounting. Thus, before beginning anything, it is best to consult with local experts to come up with a well-thought-out business plan.
Contact us
S.J. Grand can help you make a decision on what type of business is best suitable for your needs and objectives. We will also assist you during the registration process and ensure that you fully understand your tax liabilities. Contact us to get you started.
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