Setting up a Wholly Foreign-Owned Enterprise (WFOE) in Guangzhou comes with numerous advantages. Guangzhou, one of the biggest commercial hubs in China, is a bustling metropolis that attracts businesses from across the globe. Here are some of the key benefits that foreign investors can reap by registering a WFOE in Guangzhou:
1. Complete Control and Independence
One of the most appealing aspects of a WFOE is that it allows foreign entities complete control over their business operations in China. As the name implies, a WFOE is wholly foreign-owned, meaning that no local Chinese partner is required. This autonomy can be essential in ensuring that business operations align with global strategies and standards.
2. Access to a Huge Market
Guangzhou is the third largest city in China and a major economic powerhouse. By establishing a WFOE in Guangzhou, companies gain direct access to the Chinese market, tapping into a vast consumer base.
3. Intellectual Property Protection
Establishing a WFOE can offer enhanced protection for intellectual property rights. While challenges remain, a WFOE structure can provide additional layers of control that help safeguard critical business assets.
4. Financial Incentives
Guangzhou, like many cities in China, offers various financial incentives to attract foreign investment. These can include tax breaks, subsidies, and grants, especially in encouraged sectors like advanced manufacturing, high-tech, and green industries.
5. Strategic Location
Located on the Pearl River and close to Hong Kong and Macau, Guangzhou has an advantageous geographical position. The city serves as a strategic hub for global logistics and supply chain management, with well-developed infrastructure and numerous ports.
6. Access to Skilled Workforce
Guangzhou is home to many universities and technical institutes, producing a steady stream of skilled graduates each year. By setting up a WFOE in Guangzhou, companies can gain access to this talented workforce.
7. Business-friendly Environment
Guangzhou has made great strides in streamlining the process of setting up a WFOE. The city has focused on improving its business-friendly environment, making it simpler and more attractive for foreign investors to establish their businesses.
Registering a WFOE in Guangzhou can be an effective strategy for businesses seeking to establish a strong presence in China. While there are many benefits, it’s crucial for foreign investors to thoroughly understand local regulations, cultural nuances, and market dynamics. As always, consider seeking expert advice to make the most informed decisions.
Remember, the choice to establish a WFOE should be carefully considered and be part of a well-planned business strategy. The benefits listed above make a compelling case for Guangzhou as a prime location for your enterprise, providing numerous opportunities for growth and success in the Chinese market.
1. What is the first step if I want to register a WFOE?
The first step towards registering a WFOE in China involves contacting a professional consultancy firm, such as JR & Firm, and signing a service agreement. In theory, the founders could handle the process themselves. However, since it requires an in-depth understanding of the company registration system and proficiency in Mandarin Chinese, it is generally more practical to hire a professional company to prevent potential mistakes during the process.
2. I have signed a service agreement with JR & Firm to register my WFOE, what's next?
After signing an agreement with our clients for WFOE registration in China, we issue a formal invoice. At this stage, we anticipate that our clients will make a payment for the service, allowing us to commence the process.
3. I have paid JR & Firm for the WFOE registration service, what should I do next?
Upon receiving full payment for the WFOE registration, we provide our clients with a detailed questionnaire. This document requests all the necessary information about the company, business activity, founders (shareholders), and executives (including the company director and supervisor). We request that our clients complete the questionnaire and return it to us via email.
4. What should I prepare for the WFOE registration questionnaire?
1. Company Name Choices: In China, WFOE names should follow this structure: [Place of Registration] + [Chosen Name] + [Business Direction] + Co., LTD. For example, Shanghai Silk Road International Trading Co., LTD, or for a consultancy company: Shanghai Silk Road Consulting Co., LTD. An alternative structure is: [Chosen Name] + [(Place of Registration)] + [Business Direction] + Co., LTD. For example: Silk Road (Shanghai) International Trading Co., LTD. Please note, in China, a company’s Chinese name is considered its main name. If our clients know Chinese, we ask for name choices in both Chinese and English, following the above structure. If not, English name choices will suffice, and we will select a corresponding Chinese name based on similar sounds. Avoid city, country, and historical names, as they’re typically disallowed. Also, we discourage direct translations of the English name due to high likelihood of them being taken. We recommend selecting similar-sounding Chinese characters to avoid delays. The Chinese name does not need to have a specific meaning, as meaningful characters are often taken.
2. Company’s Legal Person (Company Director): The legal person is an individual and cannot be a corporate entity. Please prepare their full name (as on the passport), a copy of their passport (not ID), along with their address, phone number, and email address.
3. Company’s Supervisor: The company supervisor is a separate individual from the company director, meaning they cannot be the same person. Please provide their full name (as on the passport), a copy of their passport (not ID), and their address, phone number, and email address.
4. Company’s Shareholder(s): Shareholders are the owners of the company and can be both individuals or corporate entities. Both the company director and supervisor can be shareholders. There can be up to 50 shareholders. Whether an individual or corporate shareholder, full information is required: full names, contact details, address, and either passport copies (for individual shareholders) or a full set of company documents (for corporate shareholders).
5. Company’s Business Activity: What products and/or services does the company plan to sell? Please prepare a detailed list.
6. Company’s Registered Capital: The registered capital is the amount the founders plan to invest in the company over a span of 30 years or more. The amount varies depending on the activity and place of registration. We recommend $300,000 for international trading companies and $100,000 for consultancy companies, as examples. The registered capital amount is usually suggested by the local government.
7. Full Contact Details for All Involved Executives and Shareholders: We need the complete contact details for all executives and shareholders. This includes addresses, emails, and phone numbers.
5. I submitted the WFOE registration questionnaire to JR & Firm via email, what's next?
Once we receive the completed WFOE registration questionnaire, we review it carefully and follow up with our clients accordingly. If there’s any missing information, or if the company requires additional permits or licenses based on its planned products or services, we will inform the client. If everything is in order, we prepare the application documents, attach our clients’ documentation, and submit the WFOE registration application. The estimated waiting period for feedback from the government on the registration application is approximately 10 business days. Please note that timeframes in China are approximate due to government bureaucracy.
6. How long does it take to get my WFOE license after the registration application is submitted?
Once the WFOE registration application is submitted, the government generally responds within 10 business days. If approved, they will issue the company’s structural documents, which the founders (shareholders) and executives (director and supervisor) are required to sign with a black gel pen and mail back to us (Note: In China, only black gel pens are acceptable for signing legal documents; other colors and ballpoint pens are not accepted). We then submit the signed documents to the company registrar and await the business license. The waiting period for the business license is roughly 10 business days unless expedited service was purchased. With expedited service, a business license can be obtained within 2-5 business days. Contact us for more details about the expedited service.
7. Great, I have obtained my WFOE business license, what is the next step?
Once we secure the WFOE business license, we will contact our clients and the bank to schedule an appointment to open a corporate bank account for the company. Please note, the company director must be present in China to open a corporate bank account and their citizenship should not be among the countries sanctioned in the bank’s system. Alongside being present, the director needs to provide a Chinese phone number linked to their passport and a second person’s passport and phone number linked to this second person’s passport. This second person can be anyone in China (provided their citizenship isn’t among the sanctioned countries) with a Chinese phone number. This requirement is due to the banks’ need to issue online banking devices that require two people’s information. Legally speaking, this second person doesn’t have any rights or obligations regarding the company’s finances or bank account. While this might seem unusual, it remains a requirement, so we advise clients to identify such an individual in China before opening a bank account. The bank account opening process takes around 5-6 hours, and we recommend our clients exercise patience during this process.
8. I have my WFOE bank account opened, what is the next step?
After your WFOE bank account is opened, we’ll proceed to contact the customs department to initiate the process for the e-port device (if you’re registering an international trading WFOE focused on import/export. Note that e-port isn’t required for consultancy or other types of companies). This process typically takes about 5 business days, and we’ll mail the e-port device to our clients once it’s secured.
9. I have obtained my e-port device, are there any other steps to be completed before I start my company’s operations?
Yes, following the acquisition of the e-port for the WFOE, we’ll register the company with the tax department. This process generally takes around 14 business days, and it requires the company director to visit the tax office in person for ID verification.
10. After the WFOE tax registration, are there any other steps involved before the company becomes active?
Indeed, the final step in the WFOE registration is the foreign currency permission application. This process typically takes around 7 business days and necessitates a visit to the relevant government department. After securing the foreign currency permission, the WFOE can commence its operations.
On the whole, the complete process for WFOE registration can span anywhere between 4 and 8 weeks. As we mentioned earlier, all timeframes are approximations due to the inherent unpredictability of government bureaucracy. Although these factors are beyond our control, we will do our absolute best to expedite the process.
11. What is a Wholly Foreign-Owned Enterprise (WFOE)?
A WFOE is a company in China fully owned by foreign investors, providing complete control over business operations, without the need for a Chinese partner.
12. Can a foreign student start a business in Guangzhou?
Yes, a foreign student can start a business in Guangzhou, but they need to comply with specific regulations, such as visa requirements before they can get paid through their company, i.e. to receive payment from any company (employer) in China, one must hold both a work permit and a residence permit that authorizes employment with the respective company.
13. What are the key advantages of setting up a business in Guangzhou?
Guangzhou offers access to a vast market, skilled workforce, financial incentives, strategic location, and a business-friendly environment.
14. How long does it take to establish a WFOE in Guangzhou?
The process varies, but it typically takes 1.5 – 2 months to fully establish a WFOE, depending on the nature of the business and other factors, however, JR & Firm can expedit the service for its clients.
15. What is the minimum registered capital to form a WFOE?
As of 2014, China has removed the minimum registered capital requirement for WFOEs, but investors must be able to fund their business plans.
16. Is it mandatory to have a physical office space to start a WFOE in Guangzhou?
Yes, having a physical office address in Guangzhou is a prerequisite for registering a WFOE.
17. Can a WFOE hire foreign employees?
Yes, a WFOE can hire foreign employees, but they must comply with Chinese labor laws and visa regulations.
18. Is it easy to find English-speaking employees in Guangzhou?
While Mandarin is the primary language, Guangzhou’s status as a global business hub means there’s a sizable pool of English-speaking professionals.
19. How are WFOEs taxed in Guangzhou?
WFOEs are subject to various taxes including corporate income tax, business tax, and value-added tax, among others.
20. Can a foreigner be the legal representative of a WFOE?
Yes, a foreigner can serve as the legal representative (managing director) of a WFOE.
21. What is the role of the legal representative?
The legal representative acts on behalf of the WFOE in legal matters and is responsible for the company’s operations.
22. How can I protect my intellectual property in China?
Registering a WFOE can offer enhanced control to safeguard your business assets, but it’s also crucial to register trademarks, patents, and copyrights with the Chinese authorities.
23. Can a WFOE in Guangzhou engage in import and export activities?
Yes, a WFOE can conduct import and export activities, but it must comply with China’s customs regulations and obtain the necessary licenses.
24. How can I close my WFOE if needed?
Dissolving a WFOE involves several steps including ceasing business operations, paying off debts, disposing of assets, and deregistration. Legal assistance is recommended.
25. Can a WFOE invest in other companies in China?
Yes, a WFOE can invest in other Chinese companies, but this may be subject to specific regulations and restrictions.
Jasur Mavlyanov, an experienced entrepreneur and legal expert, has built a notable career in international business, with a focus on China. With over 13 years of experience living and working in China, Mavlyanov has acquired valuable insights into the Chinese legal system and business environment.
As an entrepreneur, Jasur founded JR & Firm LLC, a company dedicated to providing legal services to global clients entering the Chinese market. His leadership has helped the firm become a reliable partner for businesses navigating the complexities of Chinese regulations and laws. READ MORE about Jasur.