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Selecting the Right Company to Form in China

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Every time an investor looks at top brands globally, from Samsung to Barclays, he/she develops a burning urge to make his company equally successful. So, what is the best way to climb up the ladder? The sure way to achieve this is taking your firm offshore to a jurisdiction that can serve as a springboard to multinational status. One such jurisdiction is China. The first and most important thing is registering the company in China. In this post, we will tell you how to select the right company in China.

Benefits of Forming a Company in China

The most notable benefit of forming a company in China is the large market. China, being the most populous nation globally, provides a ready market for the products you are selling. Well, whether your company deals with industrial products or services, China has a place for you. When talking about the markets, China has more to offer. Having signed multiple trade agreements with most countries on the globe, from the EU to Africa and the rest of the Asian countries, the sky is the limit for your products. Other benefits expanding to China include:

  • World-class infrastructure.

  • A supportive administration.

  • A rapidly growing economy.

  • Favorable policies, especially if you locate the business in free trade areas.

  • Abundance of skilled talents.

  • Economic stability.

  • Multiple opportunities for growth.

What Company Should You form in China?

The benefits we have listed above are only a few of what to anticipate, but you need to select the right type of company to enjoy them. As we are going to highlight, some companies only allow you to remain passive without engaging in profitable activities. This is why you need to be extra careful and pick the right company for doing business in China. So, here are the main categories:

  • Representative Office (RO)

A representative office (RO) is the simplest type of company that a foreigner can establish in China. As the name suggests, this company is used to "represent" the mother enterprise back home. Therefore, all operations are controlled by the mother company. Although easy and fast to form, this business comes with major limitations in that it does not allow you to engage in profitable operations. So, unless you are looking forward to doing market research or scouting for potential partners, this company might not be a good idea when expecting to make profits.

  • Joint Venture (JV)

A joint venture (JV) in China takes the form of a limited liability company, and it requires the foreigner to enter into a partnership with a local Chinese. In this partnership, the Chinese partner is required to have controlling shareholding. This means that you do not have absolute control over the business operations. The main advantage of using a JV is that you can take advantage of the partner's already established networks to grow rapidly into the Chinese market.

  • Wholly Foreign-Owned Enterprise (WFOE)

This is the most preferred type of business formation in China because it allows the investor to have 100% shareholding in his/her company. This means that unlike a representative office (RO) or Joint Venture (JV), a WFOE gives you absolute control over the decisions of managing the company. You will be able to decide who to hire and there will be no sharing of profits. Most foreign companies working in China are WFOE.

This comparison shows that a WFOE is the best type of company for foreigners coming to China. However, it is pretty challenging to form because of the long list of the required documents and the need to deal with multiple departments. Therefore, you should go for a more convenient and cheaper method of working with a professional agent. These experts have helped other top brands you see in China and can also hold your hand and guide you to success.

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