Among all other issues, the most frequently asked questions we received is: “Can you set up a company for us?”
Honestly speaking, if the field you want to invest in is not in the Negative List ( you may review our post: Newly Released Negative List for more information), it’s pretty easy nowadays to set up a company in China. Although, we understand that some overseas firms always emphasize how difficult and time consuming (in other words, costly) it is to set up a company here to justify such endeavor.
However, be that as it may, setting up a company in China is still worth considering over carefully. It’s not something that you can just start doing and drop when you think you don’t need it anymore ( you may review our post: Close Your Company Properly – Don’t Just Run Away! for more information) .
Here are some important questions you need to ask yourself before you make the final decision:
1. What’s the purpose for setting up a company?
There may be multiple reasons to set up a company. One common reason is that their clients need fapiaos (invoice issued by local tax bureau) for the service or products they have paid for. Then, there are some who would claim that their distributor didn’t do a good job in promoting their products; they believe a physical presentation in China is very important to do the marketing and interact with their customers directly.
Another common reason is: “ I need to apply for a work visa with this company”. Well, this is perhaps one of the worst reasons to have in setting up a company. Let me explain:
For a B type work permit, the applicant should be a bachelor degree holder with two years work experience related to the position he is applying for. If you are not qualified, then you just can’t. Even your own company can’t apply for a work permit for you. In other words, the fact you are the investor or legal representative of the company is not a guarantee that you will get a work permit. Application for work permit has its own requirements, being the investor or legal representative doesn’t matter at all.
2. Do you have enough funds to support the company’s operation for at least one year?
You need to have the funds needed to maintain the normal operation of the company, such as, rent, utilities, salaries and service fees for service providers like book keeping, advisements etc. In most cities, a virtual office is not allowed. It’s required that you sign an office least agreement for at least one year to proceed with the company incorporation procedure.
As to the source of the fund, it could be provided by a parent company expanding into China market, or revenue generated from your original business operation or savings. Whatever the situation is, make sure the fund is enough to maintain a normal operation even if you don’t make any money during the initial year. Of course, not making money during the whole first year is the worst case scenario, but operating a business under financial pressure is never a good idea. A careful calculation after a thorough research and planning is highly recommended.
3. Do you understand the employment law? (If you are going to hire employees)
This is important so that you can start your company on the right foot and avoid labor issues in the future.
4. Do you need a Chinese partner or not?
It may be hard to navigate the intricacies of managing a business in China so you may need a local partner. A right partner will make things easier, but sometimes cooperating with someone is not a good idea if done the wrong way.
5. Have you registered your IP yet?
6. Have you found a good company to do the company incorporation for you?
In most cases the company that helped you with the company incorporation can also help you with the book keeping later on. Though company incorporation is a one time job, book keeping is a long-term project. A terrible service provider will get you into tax trouble, so as we have mentioned in multiple occasion, when it comes to professional service, choose the best one instead of choosing the cheap one!
Once you are satisfied with your answers to those important questions then you are ready to make the final leap of starting your own company in China. Good luck.
