WFOE stands for wholly foreign owned enterprise,
which is a limited liability company wholly owned by either a foreign
legal entity or a foreign natural person. The foreign investors may be
foreign enterprises or individuals
.
Wholly owned foreign entities (WOFEs) are the vehicle of choice for most people and companies doing business in China. It is less complex than a joint venture (JV) and allows you to concentrate on what your employees are up to as opposed to your partners. It is required to register as a legal person who is restricted to certain businesses. The enterprise is able to implement strategies that effectively conform to the interests of the parent company aboard. Moreover, technology and know-how are given better protection.
.
Wholly owned foreign entities (WOFEs) are the vehicle of choice for most people and companies doing business in China. It is less complex than a joint venture (JV) and allows you to concentrate on what your employees are up to as opposed to your partners. It is required to register as a legal person who is restricted to certain businesses. The enterprise is able to implement strategies that effectively conform to the interests of the parent company aboard. Moreover, technology and know-how are given better protection.
No. minimum registered capital is required for WFOEs with scope of business of consulting, Trading, retailing, information technology etc. in China. There are minimum registered capital still required for some industries for instance: Banking, Forwarding etc Since China still maintains foreign currency control policy, it's still advisable to choose registered capital within RMB 100,000 ~ RMB 500,000 as the minimum registered capital. Companies can now determine how much capital will be required to maintain their operations and must simply ensure that they meet those targets within a period of 10 years.
Advantages of WFOE
1. Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
2. Ability to formally carry on business rather than just a representative office function;
3. Issue invoices to their customers in RMB and receive RMB revenues. Convert RMB profits to US dollars for remittance to their parent company outside.
4. cheap labor, which can lower your cost;
5. not required to share profits with Chinese counterpart;
6. Greater efficiency in its operations, management and future development.
1. Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
2. Ability to formally carry on business rather than just a representative office function;
3. Issue invoices to their customers in RMB and receive RMB revenues. Convert RMB profits to US dollars for remittance to their parent company outside.
4. cheap labor, which can lower your cost;
5. not required to share profits with Chinese counterpart;
6. Greater efficiency in its operations, management and future development.
Shenzhen is the second largest city in Guangdong
province, a regional manufacturing and financial hub and one of the
richest cities in China. The city, originally a village north of Hong
Kong, was first developed as a special economic zone when economic
reforms were introduced in the late 1970s. After over 30 years of
sprawling, it has become one of China's top four first-tier cities along
with Shanghai, Beijing and Guangzhou. With a population of over 20
million, the city's GDP grew 10% to RMB1.3 trillion in 2012. The
Shenzhen Stock Exchanges, one of the only two on the mainland, focuses
on small and midsized companies as compared to Shanghai's where larger
state-owned companies are traded. With sound infrastructure and easily
recruited many talented personnel in Shenzhen, Foreign company can take
this advantage to set up WOFEs in Shenzhen as china market entry
strategies
Registration process
The application process to create a company in China generally takes three to six months. The establishment process varies based on the WFOE form and the planned business scope. For example, a Manufacturing WFOE will require an environmental evaluation report, and Trading WFOEs will need to undergo customs/commodity inspection registration. The application process can be divided into two parts:
• Pre-registration – what happens before the company formally exists
• Post-registration – what happens after the company formally exists
The application process to create a company in China generally takes three to six months. The establishment process varies based on the WFOE form and the planned business scope. For example, a Manufacturing WFOE will require an environmental evaluation report, and Trading WFOEs will need to undergo customs/commodity inspection registration. The application process can be divided into two parts:
• Pre-registration – what happens before the company formally exists
• Post-registration – what happens after the company formally exists
Pre-registration
1. Name registration
The company name can be translated from English by meaning and/or phonetically. Verification of feasibility of the proposed name by the AIC will take a few working days. Only the Chinese name will be legally binding – the English name is not legally relevant for Chinese authorities. Note that the words “China” and “International” cannot be freely included in the Chinese name, and are subject to further requirements.
1. Name registration
The company name can be translated from English by meaning and/or phonetically. Verification of feasibility of the proposed name by the AIC will take a few working days. Only the Chinese name will be legally binding – the English name is not legally relevant for Chinese authorities. Note that the words “China” and “International” cannot be freely included in the Chinese name, and are subject to further requirements.
2. Issuance of approval certificate and temporary business license
The authorities will issue the approval certificate and temporary business license after assessing the following documentation:
From the investor:
• Business license (certificate of incorporation – depending upon locations, this may need to be notarized in the investor country of origin, and then translated into Chinese);
• Bank statement to demonstrate credit worthiness (from relevant bank in country of origin and translated into Chinese); and
• Photocopy of passport of the legal representative of the investor company.
The authorities will issue the approval certificate and temporary business license after assessing the following documentation:
From the investor:
• Business license (certificate of incorporation – depending upon locations, this may need to be notarized in the investor country of origin, and then translated into Chinese);
• Bank statement to demonstrate credit worthiness (from relevant bank in country of origin and translated into Chinese); and
• Photocopy of passport of the legal representative of the investor company.
From the new company:
• About the new business – Name of the company, business scope, registered capital, business term, lease contract;
• About the legal representative – Photocopy of passport and passport-size photos;
• About the directors – CVs, photocopies of passports, and passport-size photos;
• Feasibility study report – Outlining the estimated cash flow for the next three years;
• Articles of association; and
• Environmental protection evaluation report (if applicable).
• About the new business – Name of the company, business scope, registered capital, business term, lease contract;
• About the legal representative – Photocopy of passport and passport-size photos;
• About the directors – CVs, photocopies of passports, and passport-size photos;
• Feasibility study report – Outlining the estimated cash flow for the next three years;
• Articles of association; and
• Environmental protection evaluation report (if applicable).
The approval certificate will be issued by the local office of the MOFCOM. Upon issuance, there is a 30-day limit for registering the company with the AIC, which then issues the temporary business license.
Post-registration
Following the issuance of the temporary business license, the WFOE would need to perform a number of formal registrations at various Chinese government entities, including applying for carving various seals (or chops) in order to authorize documents on behalf of the company, as well as opening an RMB account for managing daily operating expenses and a foreign capital account for receiving foreign currency.
Following the issuance of the temporary business license, the WFOE would need to perform a number of formal registrations at various Chinese government entities, including applying for carving various seals (or chops) in order to authorize documents on behalf of the company, as well as opening an RMB account for managing daily operating expenses and a foreign capital account for receiving foreign currency.
Summary
Compared to registering a business in most
Western countries, registering a business in China is challenging work
filled with paperwork and bureaucratic red tape. It is practically
impossible to properly complete the registration process without a
qualified agency. Be sure that the agency is qualified and the agency has good connections and relationships with the various local authorities, and that they possess comprehensive knowledge about the
numerous important aspects involved with legally and properly
registering a WFOE.
Contact Tom Lee now for setting up your WFOES in shenzhen
Email: tomlee@tommyconsulting.com,
tomlee_cn@163.com,
WhatSapp/Wechat/Cell Phone: +86 18926401128, Skype: tomleeli
Tel: 86-755-25809219,Fax: 86-755-83256658
WhatSapp/Wechat/Cell Phone: +86 18926401128, Skype: tomleeli
Tel: 86-755-25809219,Fax: 86-755-83256658
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