Setting Up a Chinese Entity
Why Set Up an Entity in China?
Generally, setting up your own entity within China is a daunting task. However, if you manage it correctly, there is the potential of sustainable business growth within the Chinese life science market. Therefore, Western companies look towards setting up an entity in China as an option to overcome several difficulties. These difficulties can occur when carrying out cross-border trade transactions or additionally, when remotely employing staff based in China.
What Type of Entity Do I Need to Set Up?
First and foremost, before you register the new entity with the Chinese government, you will need to decide upon which type of business entity you wish to set up. The most common foreign business entities are:
A Representative Office
To begin with, the simplest way to set up an office in China is to register a representative office. The use of a representative office represents your offshore entity and therefore, allows you to build your brand name. However, this option then quickly becomes very limited. For example, with a representative office you cannot directly hire Chinese nationals or issue invoices. This lack of direct business does mean the representative office cannot generate any revenue, but it can be used to liaise with local contacts in China. Additionally, this office can conduct research for the parent company.
A Joint Venture
Secondly, a China joint venture entity is commonly a standard limited liability company. As a rule, the partnership emerges between a foreign business owner and a Chinese citizen. A joint venture can be used to manage different sales channels and therefore, generate revenue. Also, it can become too costly to manage your business with two sets of staff and business processes.
A Wholly Foreign Owned Enterprise (WFOE)
Finally, the third option for setting up an entity in China is a wholly foreign owned enterprise (WFOE). This option involves setting up a Chinese limited liability company wholly owned by foreign investor(s). Furthermore, a WFOE will allow you to generate income for the company by the trade of services or products but these will be subject to Chinese taxation. This option does provide business owners maximum control however, it is much more complicated to set up. The process is time consuming and requires large financial investment to establish the office. This is in addition to requiring a minimal capital investment placed into a Chinese bank.
Location, Location, Location
Once you decide which entity type you would like to establish in China, your next step will be to decide where to locate your new office. Three cities (Wuhan/YIchang/Xiangyang) in Hubei province are now the newest free trading zones in China providing benefits such as favourable tax policies. Several Bio-Med parks are also providing supportive services for new companies entering China, such as discount in office rental fees.
How Can Pivotal Scientific Help?
The above information provides a brief overview into the initial steps which require your consideration. The overall process is quite complex due to the several step application process, along with understanding Chinese policy agreements and license registration forms. By using our service, you will have someone on the ground who knows the culture, is fluent in the language and understands the rules and regulations. However most importantly, they understand the Chinese life science market.
Our service is made up of many parts, providing a one stop shop where you can pick and choose which aspects of our service best suits your business. Including everything from advice on the most suitable location for your new office to fully setting up your office and recruiting staff to run it.