Non-residents can register a company in China in the form of a representative office of a foreign firm or as a local organization with joint or fully foreign capital. If an entrepreneur is focused on full-fledged income turnover, the first type will not be a suitable option. The freedom of representation is significantly limited, they cannot make a profit, since their work is aimed solely at establishing commercial relations, developing advertising strategies and conducting market research. Jurisdiction of China makes an exception only for airlines and some other companies.
To run a full-scale business, it is best to create a separate company through one of the following paths:
- all invested capital must be one hundred percent foreign origin, respectively, all founders are non-residents;
- unite the shares of participants in Chinese jurisdiction and foreign companies through joint contributions;
- cooperation of foreign representatives and local citizens the company created in this way will have a contractual status.
The form, which is 100% foreign capital, gives founders the opportunity to minimize the risks arising from conflicts of interest related to ineffective management or inconsistencies. In addition, such a structure is beneficial for foreign investors in terms of capital protection.
Organizational form for companies in China
Entrepreneurs who are not residents of the PRC can create a company there in the form of an LLC or a closed or public JSC. The second option is more complicated, since it is associated with tough conditions put forward by the Chinese jurisdiction. That is why foreign investors are more likely to lean towards the first type.
LLCs in China fall under the regulation of the Companies Act. In accordance with this legislative act, such structures, which include 1 participant or have state ownership, are obliged to fulfill certain requirements. In this regard, the best option would be to incorporate a company with several members and 100% private capital. The size of the charter capital is 30,000+ yuan. If the company is founded by one person, then this amount increases to 100+ thousand yuan.
It is necessary to determine the size of the initial capital before the process of registration of the organization begins. The same applies to the choice of the direction of activity for a non-resident company. The amount of capital must be prescribed without fail in the documents that give a legal entity the right to operate within the republic. This framework cannot be violated. This is regarded as an administrative violation, punishable in accordance with the laws of the PRC.
Certain types of commercial activities are not permitted for non-resident legal entities whose capital is 100% foreign investment. Such industries are included in the list compiled by the State body responsible for the development of the republic and the implementation of reforms, and the Ministry of Commerce.
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