Setting up a company in China is a complicated and governmental process, international investors have several selections for establishing a China enterprise. Including Representative Office;Service Company; and Trading Company.

These structures have different functions, so selecting a proper structure will be a good beginning for any investment’s long-term success.

Representative Office (RO)

ROs are allowed to participate in marketing research, display and promotion activities that associate with company services or products, contact activities relating to company sales of products or services, domestic procurement and investment. ROs don’t have legal status, just an extended presence of overseas parent companies. They don’t need any fund injections. But ROs are usually taxed high to 12 percent of total monthly expenses.

ROs are relatively easy been set up and maintained, but they can’t sign contracts or issue invoices. ROs’ 12 percent tax rate is much more than simply been taxed on profits as a company.

Service Company

A service company’s main activity is providing services. Foreign investors use this structure to provide market and supplier research, product development, quality control, design, and logistical support services. A service company is the simplest kind of limited liability company to set up, as it requires shorter time and lower capital compared to a manufacturing or trading company.

Service companies structure has been proved better than ROs, since service companies being taxed on profits, and China’s RO regulations are being more and more stricter, many foreign investors have upgraded from ROs to a service company to increase their operations’ flexibility.

Trading Company

To participate in importing and exporting in China, a trading company may be set up.

The process of setting up a company in china consists two stages: pre-registration and post-registration.

Pre-registration: Issuance of Approval Certificate and Business License after checking below documents:

  • Investor’s Business license
  • Bank statement of the investor’s credit worthiness
  • The legal representative’s passport
  • New company’s name, business scope,registerd capital.
  • The director’s CVs，passports.
  • Feasibility Report

The Ministry of Commerce will issue the Approval Certificate, then the SAIC (State Administration for Industry and Commerce) will issues the Business License.

Post-registration:

  • Carving chopsapproval issued by PublicSecurity Office (in China various chops are required for different aspects such as invoices and contracts).
  • Company code registration by the Technical Supervision Bureau.
  • Office inspection by local tax bureau.
  • Permit of opening RMB account by the People's Bank.
  • Registration under China’s Foreign Exchange Administration.
  • Opening Foreign currency bank account.
  • Approval for status of general tax payer.
  • Customs registration.

If you have made up mind to setting up a company in China, you should start Recruiting in China before registration.