CHINA COMPANY REGISTRATION - WFOE

A foreigner doing business in China registering a Chinese company can choose a  Wholly Foreign-Owned Enterprise (WFOE). This structure allows foreign parties (individuals or corporate entities) to incorporate a foreign-owned limited liability company, without the involvement of a Chinese investor.

The WFOE is currently the most popular form of incorporation for foreign corporations/companies, in Mainland China, and this structure allows the foreign company complete control of their business operations.

To set up the WFOE, in China,  you must arrange an agreed level of foreign capital for investment and register with the authorities. Depending on the type of business, you may also need a Business license to conduct your business legally, with approval of the Chinese government.

Advantage of the WFOE, include:

• Can uphold a company's global strategy free from interference by Chinese partners (as may occur in the case of joint ventures)
•  New, independent legal personality 
• Complete management control within the limitations of the laws of the PRC 
• Possibility to receive and remit RMB to the investor company overseas 
• Enhanced protection of trademarks, patents and other intellectual property, in accordance with international law
• Shareholder liability is limited to original investment
• Easier to terminate than an Equity Joint Venture 
• Simpler establishment than a Joint Venture
  

Disadvantages of the WFOE, include:

• Inability to engage in certain restricted business activities
• Limited access to government support and a potentially steep learning curve upon entering the mainland Chinese market
• Requires the injection of foreign funds to make-up the registered capital, which is unnecessary with a Representative Office
• Regional differences in regulations and practical differences in the application of Chinese legislation can also apply

Other Types of Business structures, in China are:

Joint Venture (JV)
Representative Office
State Owned Enterprise (SOE)
Private Enterprise
Individually Owned (Sole Trader)


VisaConnect: Migration Agents and Lawyers