China Company Formation Law Guide for Foreign Businesses

1. Main entry vehicles

• WFOE (Wholly Foreign-Owned Enterprise) — limited company owned by foreign investor(s); most common operating entity.
• Equity or cooperative joint venture — shared ownership with Chinese partner(s); still used in restricted or relationship-driven sectors.
• Representative office — non-profit liaison activities only; cannot directly invoice customers or hire local staff in the ordinary way.
• Partnership / specialized vehicles — sector-specific (e.g., certain fund structures) with distinct rules.

2. Foreign investment access

Check the foreign investment negative list and any free-trade zone special lists. Encouraged industries may access incentives; prohibited/restricted sectors need restructuring or Chinese control. National security and merger-control reviews can apply to acquisitions.

3. Incorporation roadmap (typical WFOE)

1. Name reservation and business scope drafting (scope affects licensing).
2. Investor KYC documents (notarization/legalization or apostille as required).
3. Articles of association; legal representative, directors/supervisor, registered address.
4. Registration with market regulation authorities; obtain business license.
5. Company seals (company, financial, invoice/contract as applicable).
6. Tax registration, social insurance registration, bank accounts (RMB basic account; foreign exchange capital account processes).
7. Industry licenses (ICP, food, medical, education, payment, etc.) if required before trading.

4. Capital, governance, and chops

Registered capital is generally subscription-based under company law reforms, but banks, counterparties, and licensed sectors may still expect credible capitalization. Governance documents should clarify legal representative authority—the person who can bind the company in many third-party contexts.

Chop control is internal control: who holds seals, dual approval for payments, and specimen management. Lost chops require public notice and re-carving procedures.

5. Hiring and premises

Operating companies hire under labor law (see our employment guide). Leases for registered address must satisfy local requirements; virtual addresses face increasing scrutiny in some cities. FTZ locations can change practical licensing and foreign exchange workflows.

6. Post-incorporation compliance

• Accounting books in compliance with PRC standards; annual reporting.
• Corporate income tax, VAT, individual income tax withholding.
• Beneficial ownership and ultimate controller filings where required.
• Data, cybersecurity, and sector cybersecurity reviews for digital businesses.

7. Changing or exiting the structure

Equity transfers, capital increases, relocations, and liquidations each have tax and deregistration sequences (tax clearance is often the long pole). Plan exit clauses in JV contracts early—deadlock, put/call, and non-compete.

8. Common mistakes

1. Using an RO to run a full sales operation.
2. Copying a US/EU certificate of incorporation set without China-specific AOA.
3. Ignoring business scope when launching new product lines.
4. Underestimating time for sector licenses after the business license.
5. Weak chop and bank authorization controls.