How to Set Up a Company in Shenzhen

Shenzhen, considered to be the silicon valley of China, is a major hub of startups.

It is a good choice for companies that are specialized in computer software, IT, microelectronics and components, video and audio products, electromechanical integration, and key projects of light industry and energy.

But other industries like pharmaceuticals, biotechnology, and medical equipment are also on the rise in Shenzhen.

When setting up a company in Shenzhen, there are numerous things to consider and hence it is important to seek appropriate legal help.

Registering a company in Shenzhen can also be referred to as Shenzhen company incorporation.

The following are the 4 steps needed to be taken while setting up a new business in Shenzhen:

1. Pick the right location/district

You need to pick the right location for your business. There are 7 administrative districts in Shenzhen – Futian, Luohu, Nanshan, Baoan, Longgang, Longhua, and Pingshan. Hence, it is really important to familiarize yourself with such a big city so as to have numerous options.

2. Find a representative

A representative is important and can help you while registering your company. This help could be with necessary documents and important information that is required.

3. Trademark your intellectual properties

This is a really important step as a grievous mistake you could make is not to trademark your intellectual properties before diving fully into your business. You need to know the agency that can help with this.

4. Hire a qualified staff

This is another important step as the person should be knowledgeable enough to operate the business. Again, you need to know the agency who can help with this as the expertise of staff from young & energetic to experienced will vary with industry type.

Can Foreigners Open a Company in Shenzhen?

Once your business goal is set and everything is planned and you decide to deliver a promising product in China’s market, foreigners can certainly set up branches in China which should be in accordance with the Companies Act and the Commercial Code.

Also, the important thing to note for the investors is that documents of the parent company are necessary for establishing a branch in China.

In China, you have four options to choose from for your company setup:

• Joint venture
• Representative office
• Wholly foreign-owned enterprise (WFOE)
• Umbrella company

Deciding to set up your business as a joint venture will have you to declare that you will run your company with a local partner from China. In this setup, the company is controlled by both foreign and Chinese partners.

The representative office is relatively simple to open than establishing a WFOE but having its own set of limitations as it doesn’t include the option of yielding the revenue as it is strictly for market testing or promoting the product or the service. Setting up an RO option does not yield any revenue because it is strictly for marketing and communication.

WFOE businesses take longer to set up than other options. The only way of paying expenses for such company type is to send money from abroad. Investors need to note that even though RO does not make any profit still they need to pay taxes which is usually calculated as a percentage of the company’s expenses.

A WFOE is a legal entity that is completely owned by foreigners. LLC (Limited Liability Company) is one of the most common type chosen by the majority of foreign investors to be opened in China. A WFOE is free to perform any kind of profit-making activity, pay tax in China and all the profits earned can be sent back to the home country of the investor.

An umbrella company, also called PEO/EOR, is a company that helps in hiring employees for your company in China, or in other terms, it hosts employees or teams for you. Umbrella companies do not actually create structures in China.