Comparison of China Company Formation

Foreign Investors generally establish a business presence in China in one of five ways: 1. WFOE, 2. Representative Office, 3. Joint Venture, 4. Partnership Enterprise (PE) and 5. Hong Kong company.

WHOLLY FOREIGN OWNED ENTERPRISE (WFOE) is a limited liability company wholly owned by the foreign investor. A WFOE requires registered capital and its liability is limited to its equity , it can generate income, pays tax in China and its profit can be repatriate back to the investor's home country. Any limited liability enterprise in China which is 100% owned by a foreign company, individual(s) or companies can be called as WFOE.

REPRESENTATIVE OFFICE (RO) is a liaison office of its parent company. It requires no registered capital. Its activities are limited to : product or service promotion, market research of parent company's business, quality control or contact liaison in China. A RO is generally prohibited from generating any revenue nor entering into contracts with local businesses in China.

FOREIGN INVESTED PARTNERSHIP ENTERPRISE (FIPE) for foreign investor is a new type of business presence in China (since March 1, 2010). It refers to: a) 2 or more Foreign enterprises or individuals establish a Partnership Enterprise (PE) in China; and b) Foreign enterprise(s) or individual(s) with Chinese individual or company establish a Partnership Enterprise (PE) in China. It's a new type of business entity in China, and with very little capital, partners could start a business in China easily, there's no minimum registered capital required for FIPE. Same as WFOE, FIPE could generating revenue, hire local and foreign staffs and entering into contracts with local and overseas businesses in China.

JOINT VENTURE (JV) is a limited liability company formed between a Chinese company investor and a Foreign investor. The parties agree to create a entity by both contributing equity, and they then share in the revenues, expenses, and control of the enterprise. A JV has usually been used by foreign investors to enter the restricted in industries such as: Education, Entertainment, Mining, Hospital etc.

HONG KONG COMPANY it's often be used as a Special Purpose vehicle (SPV) to invest in Mainland China. Hong Kong is one of the quickest locations to Incorporate a business. Although a HK company is not a legal entity in mainland China, many foreign investors, especially investors from Europe and North America choose to form a Hong Kong company as a SPV to invest in China.

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