Setting up a subsidiary in China is not always quick and easy. It takes significant time, money, and resources to incorporate and grow your company. You can streamline the process by understanding...
Read MoreSetting up a subsidiary in China is not always quick and easy. It takes significant time, money, and resources to incorporate and grow your company. You can streamline the process by understanding China’s various subsidiary laws and regulations.
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Setting up a subsidiary in China is not always quick and easy. It takes significant time, money, and resources to incorporate and grow your company. You can streamline the process by understanding China’s various subsidiary laws and regulations.
China has various types of business structures for multinational companies; however, these are the 3 most common:
The process to set up a subsidiary in China depends on which option you choose.
WFOEs are typically the most popular business structure for international companies looking to establish a subsidiary in China. To set up a WFOE, you’ll need to prepare all legal documents — including articles of incorporation, audit reports, and letters of authorization — open bank accounts in China, and you will probably need to find a local legal representative for your company.
Although WFOEs generally do not require any minimum registered capital, specific industries may still need to meet these requirements. China subsidiary laws, including the minimum registered capital requirement also vary by city.
All international investors might need a China entity to act as a sponsor for the company. Because investors cannot directly apply for documents of incorporation, the China entity — such as a local designated Foreign Enterprise Service Company (FESCO) — would be in charge of the application process.
WFOEs have numerous benefits due to their structure. This structure gives the parent company greater control over the entire business and helps the company avoid any sticky situations with domestic investors in China, including:
The benefits of subsidiary setup extend to the parent company. As a subsidiary, the company in China can operate independently, which means that managers can choose their own business style to match China’s culture and differing needs. Subsidiaries also carry their own liability, so the parent company is typically not liable for any litigation, compliance issues, or other problems with the subsidiary.
WFOEs also have greater flexibility than other corporate structures. These subsidiaries can use local currency and directly control all day-to-day operations. They often operate under a higher degree of efficiency than JVs or ROs.
The China subsidiary setup process takes a significant amount of time and money when handled on your own. From start to finish, it can take months to incorporate your business and begin operations successfully. Since you cannot hire employees until you have officially set up the subsidiary, some employers lose talented candidates who cannot afford to wait around for a job.
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THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE LEGAL OR TAX ADVICE. You should always consult with and rely on your own legal and/or tax advisor(s). G-P does not provide legal or tax advice. The information is general and not tailored to a specific company or workforce and does not reflect G-P’s product delivery in any given jurisdiction. G-P makes no representations or warranties concerning the accuracy, completeness, or timeliness of this information and shall have no liability arising out of or in connection with it, including any loss caused by use of, or reliance on, the information.
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