Differences Between 5 Types Of Business Presence In China

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Before you start a business in China, you have to know what the options are. Foreign investors usually establish a business presence in China in one of the following five ways:
 

  • Wholly Foreign Owned Enterprise (WFOE)
  • Representative Office(RO)
  • Partnership Enterprise (PE)
  • Joint Venture(JV)
  • Hong Kong company(HKC)


Here we have organized the differences between the five types of Chinese businesses for you:

Wholly Foreign Owned Enterprise (WFOE) is a limited liability company wholly owned by a foreign investor. A Wholly Foreign Owned Enterprise needs registered capital, and its liability is limited to its equity, it can generate income, pay taxes in China, and its profits can be repatriated to the investor's home country. Any foreign company, individual or company with 100% owned limited liability enterprise in China can be called as Wholly Foreign Owned Enterprise.

wfoe

Representative Office(RO) is the liaison office of its parent company. It does not require registered capital. Its activities are limited to: product or service promotion, market research of parent company business, quality control or contact liaison in China. A Representative Office is generally prohibited from generating any income and can not enter into contracts with local Chinese companies.

representative-office

Foreign Invested Partnership Enterprise(FIPE) is a new type of enterprise in China (since March 1, 2010). It refers to: 
a) 2 or more foreign companies or individuals establishing a Partnership Enterprise (PE) in China; 
b) a foreign enterprise or individual who establishes a Partnership Enterprise (PE) with a Chinese individual or company in China. 
It is a new type of commercial entity in China with very little capital, partners can easily conduct business in China, and FIPE does not require minimum registered capital. Like WFOE, FIPE can generate income, hire local and foreign employees, and sign contracts with local and overseas businesses in China.

Partnership-Enterprise

Joint Venture(JV) is a limited liability company consisting of Chinese corporate investors and foreign investors. Both parties agree to create an entity by contributing equity and then share the company's income, expenses and control. Joint Venture has usually been used by foreign investors to enter restricted industries such as Education, Entertainment, Mining, Hospital etc.

Joint-Venture

Hong Kong company(HKC) is often used as a Special Purpose Vehicle (SPV) for investing in Mainland China. Hong Kong is one of the fastest places to integrate into a business. Although Hong Kong companies are not legal entities in mainland China, many foreign investors, especially those from Europe and North America, would like to choose to form a Hong Kong company as a SPV to invest in China.

Now you have already known the differences between the 5 types of business in China, any idea about choose which one to start your business? If you choose Partnership Enterprise (PE) or Joint Venture(JV), there is another very important thing you have to do before you start your business - get a detailed report about your partner(s) first! How to do that? Visit ChinaCoCheck, an very professional Chinese Company Verification website which offers you the best services with the cheapest price and fast delivery!
 



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