Increased Importance of WFOE in China

Overseas firms set up wholly foreign owned enterprises or WFOE in China with the help of China lawyers. As the largest market in the world by the size of its population, it is an attractive place for setting up business. The good news is, the Chinese authorities have made the entire process easier for startups to set up a company by eliminating the complexities and streamlining the process.

The requirement for a minimum amount of registered capital has been eliminated, as have capital verification reports. Annual audits have been replaced by a system that lets the company send in its own financial reports.

To set-up a WFOE in China, foreign entrepreneurs must comply with the following requirements:

  • A local registered address (only commercial and not residential)
  • At least 1 director, unless the company forms a Board of Directors, in which case a minimum of 3 and maximum of 13 directors are required (directors need not be Chinese citizens or residents)
  • A minimum of 1 and maximum of 50 foreign shareholders (natural persons or corporates)
  • A legal representative (need not be a Chinese citizen or local resident)
  • A General Manager (need not be a Chinese citizen or local resident)
  • A supervisor; and a minimum registered capital that ranges from CNY 100,000 – CNY 1 million (depending on the nature of business and local authorities requirements)

Why foreign companies should go for WFOE in China

China is the land renowned for lower labor cost, lower rental costs, businesses-friendly corporate taxes for businesses and many other many financial incentives for businesses and individuals. In addition to it, if an overseas company forms a WFOE, it will prove immensely helpful as a WOFE in China enjoys the same rights as a Chinese-owned business. Most WOFE’s are LLCs, or Limited Liability Companies, in which partners only have responsibility for their own invested capital. Plus, with China now part of the World Trade Organization, WOFE’s can operate as trading companies or retail stores. A Chinese WFOE can conduct manufacturing operations in China, invest in other companies and it is also allowed to get involved in wholesale and retail trade with Chinese customers.

According to the China business lawyers, foreign entities interested in opening up a company in China need to make sure they have conducted a proper research and look at the five year plan of the Chinese government about what types of businesses they are encouraging more and more, and how you can get the maximum out of the facilities they are offering.

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