China which is one of the most populated countries has a good economy. It also has a fast growing economy. One can observe that a lot of products from this country are being exported all over the world. For these reasons, a lot of businesses are being established of formed in this country. Setting up a business is not that complicated and people from other countries can consider setting up a business in China.
Wholly Foreign Owned Entity (WFOE) is the one which is most commonly used or formed by foreigners. A lot of businesses of such kind are being established as China’s economy continues to grow over the years. Many foreigners consider forming a Wholly Foreign Owned Entity as it the one which has the least complicated process of formation. The steps on forming a WFOE in China are stated on the following paragraphs. These steps can be one’s guide on forming a WFOE in China so that problems that you can encounter on such process can be minimized. Furthermore, one who wants to have his own business in China can also have a faster and easier formation of a company.
The first step on the formation of a WFOE is to determine the legal parts of your business. One shall be sure that the form and the business activities of your company are legal with regards to the government in China. You won’t want to establish an illegal company without you knowing it.
The owner of a WFOE on China is required to provide all the necessary documents. These include proper documentation from the owner’s country and also a document which will prove the financial capacity of the owner of the WFOE. Make sure to provide all of these documents.
Other necessary documents are the Articles of Incorporation or its corresponding document for other forms of business, a business license, a certificate of status, a bank letter with regards to the investor or owner’s company and a description of the company’s activities.Â
Make sure that you will be able to submit all of these documents on the right form. The first four documents shall be submitted in Chinese while the last one is not required to be in Chinese. Despite of this, it is required to have a summary of the letter in Chinese.
After this, one must have the approval of the Chinese government for the business. This is very important and one can do so by submitting the necessary documents which include the Articles of Association, Lease, Feasibility Study, proposed personnel salary and benefit budget and other necessary documents. Complying with all of these is very important because doing so is mandatory.

Before you embark in the incorporation of a business it is important to first know the type of business entities that you are entitled to open as a foreigner and also as a local investor. This will; help you analyze the advantages and disadvantages of each hence enabling you to make the right decision.

Types of business entities

Fully owned foreign enterprise is whereby a foreigner owns the company fully; this is most preferred mode of investment for international investors that are planning to invest in China. It entails manufacturing processing and assembling of parts in China. This type of enterprise does not require huge registered capital. This business is means for productions lines but with time it has proved itself that it can be of use for service a service industry. A manufacturing business entity stands to enjoy tax and incentives on export processing zones or free trade.

Representative offices (RO)

A representative office generally means that production takes place in a different place and this office is used as distribution point of these products in China. However, such offices have their own disadvantages such as:-

• They are not allowed to issue official invoice or receive revenue
• It cannot be termed as a legal entity operating in China
• It is not allowed to hire local Chinese staff
• The representative’s salary is taxed on a monthly basis
• All of their expanses are taxed.

Joint Venture

This is whereby two different parties come to an agreement of development at a given time, they establish a new entity, purchase new assets to develop an equity. Unlike other type of business, in joint venture both parties invest their money, effort and time to establish the original business goal. Joint venture is usually used for small projects but there are major corporations who prefer this method for diversification.

While working with joint ventures it is important to come up with a strategy on how you can sustain the future of this partnership. Most people focus on the short term benefits ignoring that the long term success is what really matters. It is vital for all the partners of the joint venture to have a common goal which is success; they should be honest, clear communication and integrity to achieve these goals.

Having had a review of the company’s that China allows for operation, it now become easier to make a decision on which one will best suit you and your time of business.