China company incorporation and ongoing support
Horizons provides end-to-end expansion solutions that allow you to quickly and compliantly establish a legal entity in China. Our team of legal specialists, who have an intimate understanding of the Chinese marketplace, can provide guidance to help your business navigate internationally with strategies that allow you to retain the same quality of legal compliance as your in-country subsidiaries.
Through each stage of your China expansion, Horizons supports your business’s efforts to maintain employment compliance in accordance with China’s rules and regulations. This allows you to successfully navigate company registration, payroll services, and tax compliance.
Horizons will also help your business to begin operating in China before your incorporation is complete. Our China PEO pre-incorporation solution allows you to immediately connect with a global workforce and begin operating in China in a matter of days. This enables your company to test the Chinese market and quickly grow your business’s reputation in the country.
Flexible solutions to register and manage a company in China
Company Registration
Advisory Services
Local HR Department
Hire borderless talent with Horizons
Our approach to company registration in China
- Handling payroll setup and registration. Once incorporation is complete, we transition employees from their current employment status – under our PEO – into that of your company.
- Overseeing the same benefits your company has been providing to your foreign employees under the ownership of your new subsidiary.
- Gathering local employment contracts and legally mandated materials for the establishment of your new entity.
- Strategic guidance in matters concerning contract negotiations with employees
Types of Chinese business entities
China wholly foreign-owned enterprise (WFOE)
When targeting direct control over payments/invoicing operations in China, the type of structure required is a Wholly Foreign Owned Enterprise (WFOE, sometimes also referred to as WOFE).
This type of legal entity is structured as a limited liability company with foreign ownership. It allows a foreign company to locally conduct business activities in China with customers, clients, and partners. This provides the possibility of limiting the roles of third-party operators (such as distributors, importers, factories, etc.).
The primary advantage of a WFOE is its ability to incorporate employer of record duties and liabilities, as well as obtaining control over local operations. As a result, this structure maximizes flexibility for doing business in China. Namely, it enhances the parent company’s local autonomy and allows for increased profits.
In practice, Horizons can incorporate a WFOE on behalf of a foreign investor, while initial staff members are hired through our Employer of Record entity. This ensures a local presence throughout the entire incorporation process.
Once the company is incorporated and the business license issued, the staff employment ownership is transferred from Horizons umbrella company to the newly created WFOE.
China sales office
When a foreign company wants to maximize control of its staff via its own HR, legal, and administrative departments, the China Sales Office is the appropriate solution.
Utilizing a sales office is one of the best forms of gaining a local presence, due to the fact that most foreign businesses only need in-country representatives for business development, marketing, or brand representation. It is common practice to rely on local Chinese partners for import, export, trading, and logistics purposes, while all financial operations are controlled directly from the headquarters abroad.
The Sales Office set-up only requires a single collaboration agreement with Horizons as your onsite China Professional Employment Organization (PEO). This ensures a locally compliant Employer of Record services, as well as a registered office provider for the lease agreement in the preferred working location.
From a legal perspective, all the office and employment liabilities in China are transferred to Horizons, which reports directly to the foreign company’s headquarters.
China representative office
While the Representative Office (China RO) does not allow foreign businesses to conduct any business activity, it offers security when hiring and paying a local team. The office and employment liabilities are under the direct legal responsibility of the headquarters of the foreign company.
The representative office ensures the incorporation of all Employer of Record duties and liabilities, rather than relying on a PEO partner. Instead, Horizons offers incorporation, payroll, and tax services for both the RO and its staff. We also act as an external services provider.
Consequently, this service limits the flexibility of hiring staff in different cities, which is only possible through the opening of separate local branches, or via Horizons’ China PEO solution. In practice, it is widely used for the hiring of large teams for marketing activities in China.
China joint venture
A Joint Venture (JV) is the most complex form of organization in China, due to the necessity of partnering with a local Chinese company. Horizons can assist with legal support in all major cities in China.
While the incorporation process takes several months – following a round of negotiations that determine the final structure of JV ownership – a joint venture allows the foreign company to benefit from local partner experience and an in-country network.
The JV can conduct business in China as a regular Chinese company, under the terms and conditions of the partnership in regards to profit sharing, technology ownership, and operational control. This type of local presence is required when targeting a restricted sector of activity, or when the support or experience of an exclusive local partner is needed.
The management and performance of the JV requires a specific set of skills and experienced managers – from both the foreign company and its Chinese partner.
Horizons' pre & post-incorporation service with PEO
Horizons provides companies with both pre and post-incorporation services as part of our entity setup solution.
With pre-incorporation, you can use our China PEO & Employer of Record (EOR) service to immediately establish a global workforce in China while you await the completion of your company incorporation. Once the setup is complete, we will seamlessly transition your foreign employees from our international PEO directly to your company’s new subsidiary.
Our post-incorporation experts support ongoing monthly and annual compliance services in order for our clients to continue operating compliantly on-site, giving you the ability to primarily focus on local operations. We can also provide ongoing services for your local entity such as human resources, payroll, and benefits administration.
By partnering with Horizons for your company incorporation in China, you can save time and money while ensuring that the entire process will be handled efficiently, reliably, and with full compliance to local laws.
Local entity or PEO? Which is right for your business?
For many businesses, it often makes sense to engage a China PEO, rather than establishing a local entity in China. A PEO can handle your payroll and benefits in China, as well as HR duties, employment, and tax compliance. A PEO will act as your employees’ Employer of Record, which allows you to begin operating in China without a local entity.
Horizons provides a consulting service that enables you to decide if a PEO or entity is best for your business. Our experts will explain your legal options and responsibilities and support your business in designing an effective China strategy.
How to register a company in China
As discussed above, the most commonly used company registration tool in China is a wholly foreign owned enterprise (WFOE). Take a look at the 8 steps below which outline the process for registering a limited liability company in China.
1. Select an agency to assist you with the registration
Although the Chinese administration has placed a great deal of effort into supporting foreign businesses, it must be recognized that the process of registering a company is still complicated in application. In addition to preparing the necessary documents, there is also the interpretation of company laws that must be understood. While the task of registering a company can seem daunting, partnering with an agency will help you streamline the process.
In partnering with an agency, you benefit from the expertise of professionals who understand the intricacies involved in China company registration. These professionals will guide you on the best course of action to take during the registration process.
As a leader in China company registration, Horizons gives your business the advantage of being able to complete your company registration faster. In addition to guiding your company incorporation in China, Horizons will assist your business through matters of:
- Recruitment
- HR duties
- Tax compliance
- Payroll
- Financial audits
- Immigration & visa support
2. Choose the preferred company scope
The Chinese government has categorized business sectors and place an emphasis on areas that have the ability to quickly grow the economy.
To learn more about the country’s business landscape, we recommend viewing the Catalog for the Guidance of Foreign Investment Industries. This resource is regularly updated, with the China government encouraging investors that prioritize innovation. As an example, if you are a manufacturing business, your venture is likely to be heavily supported by the Chinese administration.
3. Prepare all necessary documents
To gain approval to begin operating your company, you first need to prepare and lodge a number of relevant documents. The following are the required documents:
- Company name
- To obtain a company name, we advise that you gain approval from the Administration of Industry and Commerce. This is a vital step to ensure that your business name does not conflict with any existing businesses. This approval process can take between 2 and 15 days, depending on the location in which you wish to operate.
- The details of controlling partners
- These are the details of the shareholders who hold the major shares in the company that you are incorporating. To avoid future complications, it is recommended you confirm that relevant business partners are able to hold shares in China.
- The management structure
- This is a comprehensive business operational profile. It should include the board of directors, general manager, supervisors, and legal representatives. This structure needs to be be accompanied by copies of the directors’ passports.
- The legal address
- This must be the official headquarters of the company. As such, it needs to be the address where authorities can seek answers to any any potential issues. The address needs to include information such as a phone number and email address of the property owner.
- Articles of Association
- This is an extremely important document to complete during your China company registration. This document contains crucial information detailing your business and the scope that you wish to operate in. To complete the document, you should provide an overview of your business, including the management profile and the methods that will be utilized to return profits.
- Registered capital and total investment
- The registered capital pertains to resources that are dedicated to meeting the expenses of running the company. The total investment is the sum of registered capital, as well as future loans from investors.
- A feasibility study
- To prove to authorities that your company is feasible, you should provide a detailed business plan that includes a budget. This will demonstrate that the registered capital can properly finance operations. If authorities have doubts over your feasibility study, your company registration will not be approved. This is why you should partner with an agency to draft a professional feasibility study document.
4. Apply for a certificate of approval
To be issued with a certificate of approval and operating license, you need to liaise with two departments: The State Administration of Finance (SAIC) and the Ministry of Commerce (MOFCOM). These authorities will review your application details and inform you if the certificate has been approved or declined.
5. Submit an application for a business licence
After you have received your certificate of approval, you will most likely require additional licenses. This will depend on the industry in which you are operating. In China, businesses that operate in construction, manufacturing, telecommunication, and hospitality require additional licenses.
6. Register your business with the Public Security Bureau (PBS)
This registration will enable your business to obtain company chops. In China, company chops are equivalent to the value of a signature in western countries. If you do not have a chop, you will be unable to validate any contract.
7. Open a bank account
8. Register with the tax bureau
In China, all businesses, including wholly foreign-owned enterprises, must comply with the relevant tax regulations. It’s recommended that you first register your company’s basic financial and operating information. This should include CFO verification and category. Additionally, there are separate tax obligations that include:
- Corporate income tax
- This is a tax of 25% on profits. However, if your business operates in an encouraged sector, this tax will generally be lower.
- Transaction Tax
- Also known as turnover tax, this tax is between 3-5% of the business sales.
- Custom duties
- These are charged on goods that are exported from, or imported to China.
- VAT (value added tax)
- In China, there are different VAT tax rates. These rates vary from between 3% and 13% – depending on industry.
- Individual income tax
- The individual income tax is placed on dividends that are levied by staff salaries and company partners.
