Are you considering setting up a WFOE in China? WFOEs are the most preferred business structures for foreigners coming to China. The country’s economy has grown steadily over the last about 40 years, jumping to the second largest today. Indeed, the World Bank predicts that at the current economic growth rate, China is likely to surpass the US as the largest economy on the planet.
So, if you are planning to open a WFOE in China, this can be an excellent idea, especially when targeting a long term presence. Keep reading to learn more about WFOE incorporation in China and what you need to make it successful.
What is a WFOE?
WFOE, shortening for wholly foreign-owned enterprise (WFOE), is a type of company where the foreigner is allowed to hold 100% shareholding. This means that unlike a joint venture (JV) that requires you to enter into a partnership with a Chinese, a WFOE allows you to be in charge of all the decisions, from who to hire to company strategies.
Originally, WFOEs were designed for the manufacturing sector. However, their immense success, which resulted in transforming China into the largest manufacturing hub, convinced the Chinese administration to open the format for other industries. Now, you can open a consulting WFOE, manufacturing WFOE, or trading WFOE. So, no matter your area of interest, know that it is possible to open a WFOE to reach the large Chinese market.
The Benefits of Starting a WFOEs
Opening a WFOE in China comes with a long list of benefits that no investor wants to miss. The most notable benefit is that you are able to engage in profit-making deals in line with the selected company scope. Other benefits include:
- You do not have to share profits because no partners are required for the formation of WFOE.
- The company allows you to access a larger market and run just like a local company. This means that you have a level playing field to compete with others.
- Profits can be remitted back to the parent firm with limited restrictions.
- WFOEs take the form of limited liability companies, meaning that your personal assets are protected in the event of issues like bankruptcy.
The Main Requirements for Opening a WFOE in China
To incorporate a WFOE in China, there is a long list of documents and requirements. Remember that the process involves dealing with multiple departments, including the Ministry of Finance and Commerce (MOFCOM) and the State Administration of Industry and Commerce (SAIC). So, here are the main requirements:
- Company name.
- List of controlling partners.
- Registered address.
- Managerial structure.
- Articles of association.
- Registered capital.
- Feasibility study.
- Then, apply for company chops, bank accounts, and additional permits where necessary.
What do you Need to Run a Successful WFOE after Incorporation?
Registering a WFOE is only the first step when targeting international business expansion. Once the company is successfully registered, you will need the following to keep it profitable.
- Accurate Accounting: In China, you must follow the Chinese accounting standards for company accounting. Remember that accounting involves monthly bookkeeping, filing returns, and auditing.
- Payroll Management: Your company requires employees to implement its strategies. These employees have to be remunerated in line with the Chinese labor laws. When processing payroll, ensure to also make statutory deductions and remit them to relevant authorities.
- A Good Strategy for Growth: Your business can only grow and become successful if you have the right strategy. For example, do you use online marketing or television ads to reach targeted clients? Remember that your strategy should be reviewed regularly to ensure it is delivering the expected results.
Registering a WFOE in China is an excellent idea for entrepreneurs targeting rapid growth in this high-potential market. Remember that you will need to work with an agency of experts, such as Hawks ford, to help with company registration and post-incorporation procedures. Indeed, Hawks ford has more to offer, including data protection, tax compliance, and immigration services. Visit them now for all the help you want about WFOE.
Jason is the Marketing Manager at a local advertising company in Australia. He moved to Australia 10 years back for his passion for advertising. Jason recently joined BFA as a volunteer writer and contributes by sharing his valuable experience and knowledge.