China Company Formation: Which is the Best Business Structure?

Every time that an entrepreneur looks at other top-performing enterprises, the big question likely to linger in his/her mind is, “how can my business grow that big?” Whether you already have a business running back home or just an idea with huge potential for growth, there is one method that can help transform it into the multinational of your dreams:

China Company Formation

Most companies that have gone to China end up growing into multinationals, and you can follow in their footsteps. So, how exactly should you do that? This post is a closer look at the best business structures that you can select for your company in China. We will also tell you why it is advisable to work with an agency of experts in China.

Top Three Business Structures to Consider for China Company Formation

The three most notable business structures to consider when thinking of China company formation include a wholly foreign-owned enterprise (WFOE), a representative office (RO), and a joint venture (JV).

Let’s take a closer look at each of them:

Wholly Foreign Owned-Enterprise (WFOE)

This is a type of limited liability legal entity that is 100% owned by one or more foreign entities/ investors. Initially, WFOEs were designed to work only in the manufacturing sector, but their success was amazing and has now been extended to all other sectors. This means that apart from a manufacturing WFOE, you can also register a consulting WFOE or trading WFOE.

WFOEs are the most preferred business structures for foreigners coming to China. So, let’s look at the main benefits of a WFOE China company formation.

• You are allowed 100% ownership in your company in China.
• Registering a WFOE gives you total autonomy over all the decisions about the company.
• You can hire directly from the market to fill vacant positions in your company.
• You will not need to share profits with partners as it happens in Joint Ventures.

Joint Venture (JV)

This is another common type of business structure you can form in China. It requires you to enter into a partnership with a local Chinese to be able to register the company. Unlike WFOEs, joint ventures are more complex to form because you have to start by identifying a potential partner and agreeing on all the company’s operational logistics. Again, you have to be prepared to share your profits after a joint venture company formation in China

On the positive edge, joint ventures (JVs) can help businesses to grow faster by utilising the already established network of the Chinese partner. Also, JVs might help to raise more capital from partners compared to when working alone.

Representative Office (RO)

If you target fast China company formation, one of the best options might be a representative office. As the name suggests, this type of company represents a parent business that is already running back home. Therefore, the parent company bears all the liabilities, from debts to expenses incurred by its RO.

Although it is pretty faster to form compared to JVs or WFOs, a representative office (RO) comes with so many limitations. First, the parent company must be a limited liability company and have been in operation for no less than two years back home. Again, it is disallowed from carrying out profitable deals, which implies that you can only use it for purposes such as market research and reconnaissance. Furthermore, your RO will be disallowed from hiring directly in the Chinese market.

Now that you know the best business structures, are you ready for China company formation? We must say that the process, both incorporation and post-registration phases, can be pretty complex. The list of documents required is long, and you also have to deal with multiple departments. Instead of allowing all these challenges to stand in your way, the simpler method is working with an agency of experts.

Primasia, one of the top-rated agencies for China company formation, is ready to hold your hands. The agency’s experts will be there to assist with document preparation and even post-registration procedures. You can also count on them for accounting, filing tax returns, and payroll management.