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.