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China is without a doubt a center of the world economy and a haven for investors. The nation has experienced exponential growth since implementing its economic reforms in the 1970s, making it the ideal starting point for companies looking to expand and make investments abroad. You must set up your IT company in China according to the correct procedures if you want to benefit from this tried-and-true offshore investment location.

Establishing a China-based IT company

The stages to start your IT firm in China are as follows:

Choose a business entity

Selecting the best business entity for your enterprise must be your first step. The wholly foreign-owned enterprise and the joint venture are the legal forms that an IT company may operate under in China.

Wholly foreign-owned enterprise (WFOE)

A WFOE is a limited liability corporation that is wholly owned by a foreigner or operated by a foreign firm under Chinese law. You have more influence over the company’s operations, financial goals, and revenue since you own the company outright.

Joint venture

Another business structure that resembles a limited liability corporation is a joint venture. You must locate and establish a corporation with a Chinese partner to do business under this structure. A noteworthy aspect of JVs is that the Chinese partner is required to own a majority of the company’s shares (more than 50%). This suggests that your partner will have more influence over the company’s everyday operations than the completely foreign-owned organization.

Prepare the necessary paperwork

You must compile some documentation and get permission before you can begin running your business. The necessary papers are listed below:

Name of the business

You should ask the Administration of Industry and Commerce for permission before using the firm name. Making ensuring that your name does not clash with any currently in use is crucial. 

List of partners

These are the shareholders in the business you are incorporating who own the majority of the company’s shares. It is necessary to ensure that the business partners are permitted to own shares in China to prevent future issues.

The organizational framework

The board of directors, supervisors, general manager, and legal representative are all included in the whole operational profile of the company. Copies of the directors’ passports must be submitted with this structure.

The physical location

This serves as the company’s official headquarters where the government may get answers to any questions concerning the corporation. The owner of the property’s phone number and email should be included in the address.

Governing documents

These include crucial details about your intended operating area as well as the company description. You include the management structure and the procedures to be followed for redistributing earnings as part of your description of the essential elements of the company in the paper.

Total investment and registered capital

The registered capital represents the funds set aside to cover the costs of keeping the business afloat. On the other side, registered capital plus potential investor loans make up the overall investment. 

A feasibility analysis

You must provide a thorough business plan and a budget to demonstrate to the authorities that the firm is viable beyond any reasonable doubt. In this case, you must show that the registered capital can support the business. Your business registration will not be granted if the authorities are not persuaded by the feasibility assessment. 

Request an approval certificate

The State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM) are the two organizations where you get an approval certificate and an operating license. After reviewing your application, these organizations will let you know whether the certificate has been accepted or rejected.

Request a business license

You will need an extra license for your IT firm after receiving a business certificate.

Make an account with the Public Security Bureau (PSB)

This registration helps you to get the company chops. Company chops are the equivalent of a signature in western nations in China. It is difficult to verify any contract if you don’t have a chop.

Set up a bank account

Your company needs a bank account before it can start doing business. The business will be able to pay its invoices and receive payments through the Chinese bank account. When submitting taxes, the bank account will also be helpful.

Register with the tax office

All businesses in China, including those that are 100 percent foreign-owned, must abide by the tax laws. As a result, you must first register the company’s fundamental financial and operational data, including CFO verification and categorization, among others. The different taxes obligation is corporate income tax, individual income tax, VAT, customs duties, and transaction tax.