Guangzhou Stuff

A friend asked me these and I was embarrassed to admit that after being here all this time I still did not know.  Can anybody here help?

I was wondering what type of company would you recommend I open?
Initially I was only going to have a WFOE but I do have a few Chinese friends I trust implicitly who have told me they would be willing to put their name down as my JV partner, and send all funds back to my account. (I also have Chinese friends who are professional French and English translators who have agreed to help me with any paperwork)

If I register the company in a 3rd tier city (Such as Huizhou, Guangdong) How much do you think that the min. registered capital would be?
I have also heard that if I register my company in some wasteland town the min. registered capital will be considerably cheaper- is this true?

As registering a company can take in excess of 8 months my plan was to enrol in a Chinese university for a year, is it possible to form a company while on a student visa?

And if so what visa will I receive? Business or Work?

How old do you have to be own a business in China?

I know that you're 'supposed' to be 24 to even get a work visa but it is China. (btw I can't find any information about this anywhere.)

Do you already have to own a registered company in your own country before you can start one in China?

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The first question you should ask yourself (or maybe you already have) is, why do you need a company in China? Do you actually want to use it for business (ie, to generate revenue), or some other reason, such as writing off expenses, channeling funds through it, etc. Of course you can do all these things with a company but there is a lot of paperwork involved. Unless you really need one to operate a business here, I would advise you to save yourself the trouble and not bother.

Assuming you really want to register a company, you should be aware that the steps involved are so cumbersome you could write a book about it. I'm not going to do that here so I'll just lay out a few points. First of all, I'm not an expert on this topic so these comments are not going to apply to all situations, but they are based on my experiences.

When I registered my company in GZ as a FWOE, I already had a company in Canada. In my case I had to get my lawyer in Canada to prepare a package of documents (all originals, no copies unless notarized) that certified that my company was held 'in good standing', meaning that it was a real company registered with the Provincial authorities with all annual reports filed dating back to the date of incorporation or a maximum of 3 years. I then had to get my bank to issue a letter certifying that it had funds in the account totaling X figures, and that all transactions within the past year were 'normal'. Then those letters had to be translated by a certified translation company, in simplified Chinese, with original seals.

Those documents then have to be delivered to the Chinese embassy in your country of origin where they do their due diligence. If everything goes according to plan, the Chinese embassy issues you a letter stating that there are no obstacles to registering a company in China.

You then take that letter to the government office (in GZ in my case) in charge of registering FWOE (I forgot the name of the government department) where you fill out more forms (in Chinese of course, don't even think of writing anything in English. I had my staff do this so it wasn't a problem for me but make sure you can address this issue). You need to declare the registered capital of the company, among other details. Oh, almost forgot, you also need to deposit the amount of registered capital into a Chinese bank account, and then get the bank to issue you a letter stating that you have these funds available to register a company. Bring this letter with you when you apply. As far as I know, it's cheaper to register in a third-tier city but the paperwork is the same so after reading all this you may want to reconsider the whole thing.

BTW, you also need to appoint a representative person to go to jail if your company ever runs afoul of the authorities. I'm only half joking here but if for any reason the government finds your company has, for example, not properly declared your taxes, the representative person is the one who will take the fall. It can be you or anyone you care to appoint (it's usually a foreigner but it can also be a local person, in which case you might as well register a Chinese company, but that's another topic).

Assuming all goes well without a hitch (lol, good luck with that), then you should have a company within 3 - 6 months. No you cannot do business until your company is registered. You may be able to apply for a work visa and as far as I know there is no age restriction to be an executive. However, you need to show (provide more documents) why you are qualified to be an executive within the company (ie, management skills). You can apply to register a company if you are a student but you may encounter some issues when trying to explain your qualifications to run a company.

At the same time, you will also need to apply to the Tax department to register a tax number so that you can issue VAT receipts. The VAT receipts also need to be printed on a special printer issued by the tax department so be ready when they spring that on you. You will also need to find a competent accountant to report your earnings and pay the VAT to the tax department on a regular basis. Make sure you can trust your accountant not to cook the books and to report on time or the tax department will come looking for the representative person.

Also, when you finally get the registration document of your new company, take it to the bank and open an account in the company's name (be prepared to fill more forms, a lot more). By this time, you should have two different chops (seals). One is for the company and one is for the bank account. Guard those two carefully. If they get stolen or lost, you will have major issues on your hands that no 1-800 number is going to solve.

So that's it. Simple, right? As I already mentioned, if you don't really need a company in China, save yourself the trouble and register one in Hong Kong instead. As I also already mentioned, I'm not an expert in this field so if you are serious about registering a company in China, or have other questions, find one of those law firms that advertise so prodigiously on this site and use their services instead. It's worth it. Good luck.

Many thanks for the long a detailed reply.  It is most appreciated.

So how is business going for you in China?

Was it worth registering?

Was it worth it?  If you mean was it necessary, then absolutely.  For my business I couldn't have gotten started without it.  Just a few more comments:

In my field of business, government grants and low-interest loans are available under certain conditions.  However, they are not available to FWOE's.  Only Chinese companies can apply for them.  For SME's, you will need to form some kind of partnership with a Chinese company in order to apply.  However, this can involve technology transfers that most FWOSME's may be reluctant to release, particularly if it involves proprietary technology. 

Also, while the representative person is held responsible for the operations of the company, they also hold the power to bind the company to deals that may not be consistent with the direction of the Board of Directors (don't forget that you will be dealing with Chinese law).  In other words, make sure the representative person is not someone who is going to sell you down the river.

Finally, the salaries of the executive positions within the new company need to be higher than others in order to justify the position.  If you appoint yourself as the GM or MD, the government wants to know you are being compensated adequately in accordance with your experience, skills and training, or they might smell something fishy.  This of course will impact the number of widgets or whatever that you need to flog in order to remain a viable concern. 

Thanks for the heads up Michael.

If anybody is interested in following this discussion at its source, it is cross posted from a new website that specialises on the topic of doing business in China.


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