In this article, we will elaborate on this list about the things you need to know when you would like to start a business in China:
- There are many ways you can present your business in China.
- You need be be clear about the scope and definition of your business and carefully put up your business at the right location in China.
- Know what your responsibilities are as an employer in China.
- Be cautious and do a thorough background check of your Chinese partners.
- Understand the basic requirements of putting up a business in China.
It is an achievement for a business to start in China as there are a lot of considerations to factor in and a different system of laws that one need to follow to have a smooth start of operation in this one of the world’s leading business country. Besides, there are things you need to know before you start to set up your business and operate in China without being stressed with all the technical details.
1.There are many ways you can present your business in China.
When you open a business in China, actually there are several options to get your business running. Depends on what type of business you have or what is the need of your business, you can do a research and try one of these following options:
1. A Contractual or Cooperative Joint Venture (CJV)
2. A Wholly-owned Foreign Enterprise (WFOE)
3. An Equity Joint Venture (EJV)
4. A Foreign Invested Partnership Enterprise (FIPE)
5. A Representative Office (RO)
2. You should be accurate with the scope and definition of your business.
China business laws are quite strict about defining the scope of business. The Chinese local authorities reserve the right to forbidden or restrict your business if your scope and definition of business does not align with rules and regulations in China.
It is important to know that they can give you permission and even encourage you to set up your business in China if the scope and definition have been laid out in a careful and accurate manner. To save your time and to not let your efforts go to nothing, you should make sure you set the scope of your business first, then you won’t run into complications with the laws of China when it comes to setting up a business.
3. Be careful about putting up your business at the right location in China.
Starting from 2008, China has stopped its preferential tax rates for foreign companies. However, you need to know that there are still preferential taxes for foreign investors with some business nature and geographical location. It is vital to know the right locations to put up your business to get away from extra costs that which can be avoided.
4. Know what your responsibilities are as an employer in China
Putting up a business in China means you would be a potential employer for a number of employees. In 2007, China has updated its Labor Contract Law and included clauses that addressed issues regarding employment contract and redundancy.
Being aware of the updated laws can help you save more money and be a better employer to your employees. The Termination of contracts with under-performing employees especially when the mistake were made at your end for drafting a wrong contract which can result in huge financial damage must be taken care of as soon as possible.
In addition, you need to know Chinese Labor Law so you can understand the mandatory benefits and employee welfare as you can include it when you are putting together a budget for your company set-up in China.
Did you know that actually you can hire an employee in China even before your business is set up in China? You can use an experienced and licensed employment service provider, like HROne, to help you to hire this employee through them.
In this way, the service provider acts as the legal employer for your employee in China when the employee is actually managed by the foreign company. There are many companies prefer this option as it enables the foreign company to test the waters before they establish their legal entity in China.
It also can be a very overwhelming and complicated task to set up your business, handling the employees’ payroll and statutory benefits in China, especially for foreign companies. In addition, policies are different in different cities in China and it is very important to adhere to them.
In order to ease the stress and minimize confusion in this process, it is a good choice for you to consult an experienced and licensed service provider about what is the best way for you to manage this process. Besides, it is quite common for foreign small and medium enterprises in China to outsource the administrative tasks to a local service provider with strong local know-how.
5. Be cautious and do a thorough background check of your Chinese partners.
It is a fact we can not deny that scams exist anywhere in the world, which China is not excluded. Therefore, It is very important that you need to be cautious and check your joint venture partner’s credibility. You should exhaust all approaches of research to know the truth behind your business partner before you even think of signing a contract with them.
It could be a real hassle and can bring complicated repercussions to you and your business as China is a foreign land and if you do business with an offshore partner carelessly.
6. Understand the basic requirements of putting up a business in China.
Following would be essentially helpful for those who are looking into having a Wholly Foreign-Owned Enterprise in China. You will need to submit as follows:
Articles of Incorporation or Organization for the investor entity
1. A certificate of good standing
2. Copies of applicable business licenses
3. A bank approval letter
4. A description of the investor entity’s business activities, along with supporting documents
This list about the things that you should know about China before starting a business can go on and on.
In fact, even when you’re already in the middle of operations in China, there would be new knowledge to learn and you will still need to know future developments in Chinese business laws.
The most critical thing is to be prudent and to be always aware of any development. You should always keep yourself updated with the new laws and regulations, then you can minimize the hassle and burden can happen to your business if you violate these simple business rules in China without being aware of.
Therefore, the best way is to have a trusted third-party company that will deal with all the technical details of a business set up in China for you , then you don’t have to worry about a lot of things. In this way, you can concentrate on a lot of more valuable things that you need to do when you are in the process of creating your presence in the business world of China.
If you have any interest to learn more details about payroll, recruitment or labor cost, please contact us for a free quote.