BD IN CHINA BEFORE REGISTERING A LOCAL ENTITY – IT’S POSSIBLE!
Words provided by PTL Group
PTL Group provides management and operational support for international companies throughout their market entry and growth stages in China. For two decades, PTL Group has served over 300 clients as their local management and executional arm in China, supporting them in a wide range of disciplines and industries, helping to stabilize business infrastructures, reduce expenditures, tighten risk control and shorten time-to-market.
When considering its vast size and impressive economic growth, the Chinese market cannot be ignored as an essential business destination for companies with international ambitions.
Any company Starting a Business in China or seeking to enter the Chinese market has to decide which corporate structure is best suited to them. An accurate choice tailored to the company’s needs can minimize costs and alleviate unnecessary business restrictions.
Thus, the first questions you need to ask yourself are:
• Is it necessary for my company to establish a legal enity in China?
• And if so, when is the right time to set one up?
We will address these two commonly asked questions in this post and put forward some answers that may well surprise you.
Establishment of a local subsidiary in China – hold your horses
It is generally assumed that in order to initiate a business in China, a legal entity must be registered. But we’d actually recommend to start more carefully.
Setting up an entity in China is a major decision that comes with serious liabilities – it takes time and requires a planned out budget. Additionally, after these entities are established, their management poses an even greater challenge that requires China-specific knowledge and managerial expertise. So, in other words, business registration in China should only come after a thorough evaluation that it really is the optimal path for your business.
So how can I conduct business in China without an entity?
Simply by leveraging outsourced services. WFOE, RO and JV’s are passé. Operational support companies and service providers, like PTL Group, save you the hassle that comes with setting up an entity and enable you to handle almost any aspect of your business: recruiting employees, importing goods into China and storing in a warehouse, collecting payments, invoicing, accounting, reporting, and much more.
You do not need a WFOE to conduct the following activities:
• Hire local employees
• Employ foreigners and obtain visas and work permits for them
• Sign a leave, contract or obtain office space
• Manage HR: salaries, social benefits, expense management, etc.
• Register a WeChat account
• Set up an E-commerce store and conduct E-commerce activity
• Manage Chinese financial requirements
• Import products into China • Claim a VAT refund
• Store products in a warehouse or logistics center
• Sell products and issue RMB VAT invoices (known in Chinese as fapiao)
So when is the right time to establish a local entity (WFOE)?
• When you benefit from a decent market share and stable income through your China business.
• When you encounter a business acticity that requires you to possess your own business license.
• When you indentify a location where you feel a stronger presence is beneficial: near your clients, suppliers, competitors, etc.
• When your products require a complicated license that takes a long time or a lot of money to obtain.
• When you want to set up a comprehensive E-commerce infrastructure that requires you to register your own ICP. open your own local bank account and have the relevant license for payment collection in China and for transferring funds overseas.
When going through the process of company registration in China, many companies actually realize that it is not at all simple and should only come after considering all your options.
Contact us for more information.