Starting a Wholly Foreign-Owned Enterprise (WFOE) in China is a significant step for any international business looking to expand its operations. The process can often seem complex, raising numerous questions about costs, regulations, and best practices. To help you navigate this intricate landscape, we’ve compiled a list of frequently asked questions that have been posed by our clients, readers, and viewers across YouTube and other social media platforms. Read on to get the insights you need to make an informed decision.
Question: I plan to travel to Shanghai before the end of the year to open the bank account. Would you recommend setting up the WFOE now? Or waiting until our visit is scheduled?
Answer: I highly recommend initiating the WFOE setup process as soon as possible. This will ensure that by the time you arrive in Shanghai, your company license will already be in place, allowing us to proceed directly to opening a bank account. To start the process remotely, we would require legalized copies of passports for all company executives involved in the Shanghai entity, as well as legalized documents for your existing US corporate shareholder. These documents must be legalized through the Chinese embassy in the US or the nearest consulate.
Question: Will an initial investment be required to open the bank account? If so, can we wire this money from our US corporate account? Or will be need to travel with cash?
Answer: As of now, Chinese banks do not require an initial deposit or capital investment to open a corporate account. Therefore, you won’t need to travel with cash or wire money from your US corporate account for this purpose.
Question: What would be the best way to pay our Chinese manager for their services other expenses? Would it be best to pay from our American bank account as we do now to our manufacturers/suppliers? Or would it be better to pay them out of our Chinese bank account before the remaining balance is transferred back to our US account?
Answer: To simplify transactions and minimize transfer costs, it’s advisable to pay your Chinese distributor and Taobao store manager in RMB from your Shanghai company account. These payments will be recorded as expenses, reducing your net profit and, consequently, any potential corporate taxes. Corporate taxes in China are calculated quarterly based on net profits.
Question: What is the best way to transfer money back to our US bank account? Would you recommend Monthly/Quarterly or another way?
Answer: You have the flexibility to transfer funds back to your US account either monthly, quarterly, or annually. While there are no specific guidelines, the most practical and commonly used option is to transfer funds on a quarterly basis. This avoids the need for monthly bank visits. Note that any company representative can initiate the transfer, provided they have the necessary company documents and stamps.
In summary, starting a Wholly Foreign-Owned Enterprise (WFOE) in China can be done either from a distance or by visiting the country in person, and each approach has its own advantages and disadvantages.
Starting from a Distance:
- Time-Efficient: You can initiate the process while still attending to your business in your home country.
- Less Travel: Avoids the need for multiple trips to China, saving on travel expenses.
- Streamlined: With the right local partner or consultancy, the process can be managed efficiently.
However, you may face challenges such as:
- Limited Local Understanding: Not being in the country may limit your understanding of local business culture and regulations.
- Reliance on Third Parties: You’ll need to rely heavily on local partners or consultancies to navigate the process.
Starting by Visiting in Person:
- Local Insight: Being in the country can provide valuable insights into the local market and business culture.
- Direct Oversight: Allows you to be directly involved in the setup process.
- Networking: Opportunity to build local relationships which can be beneficial for your business.
However, this approach may be:
- Time-Consuming: Requires a significant time investment to stay in the country during the setup.
- Costly: Multiple trips or an extended stay can add up in terms of travel and living expenses.
JR & Firm LLC: Your Trusted Partner for Corporate Services in China
Navigating the business landscape in China can be challenging, but JR & Firm LLC is here to simplify the process for you. With over 15 years of experience in corporate consultancy, we specialize in a range of services tailored to meet your business needs. Whether you’re looking to form a company, draft contracts, structure your organization, or set up offshore accounts, we’ve got you covered.
Our Services in China Include:
- Company Formation: From selecting the right business structure to handling all the legal formalities, we make the process of setting up a company in China seamless and hassle-free.
- Contract Drafting: Our team of legal experts will draft contracts that are not only compliant with Chinese laws but also protect your interests.
- Company Structuring: We help you design an efficient organizational structure that aligns with your business goals and complies with local regulations.
- Offshore Accounts and Company Formation Globally: Looking to expand beyond China? We can assist you in setting up offshore accounts and forming companies worldwide.
- Consultancy Services: Benefit from our in-depth market insights and strategic advice to make informed business decisions.
For more information on how JR & Firm LLC can assist you in China, feel free to reach out to us at:
Trust JR & Firm LLC to be your reliable partner in China, offering comprehensive solutions for all your corporate needs.
JR & Firm LLC is also the proud owner of an international logistics company, JR International Logistics LLC. If you’re seeking a reliable logistics partner to transport your goods from any location worldwide to any desired destination, we invite you to explore our services. Please click here for more information.
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.
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.