What’s a WFOE in China?
A Wholly Foreign Owned Enterprise (or WFOE for short) is a type of limited liability company registered in China that is wholly owned by one or more foreign investors. This type of business entity ensures that foreign investors have complete control over the company with full ownership of their business operations. Forming a WFOE in China can bring you the following major advantages:
- Independent operation: With a WFOE in China, foreign investors do not need to cooperate with a Chinese business partner for shared ownership, meaning that they can make independent business decisions.
- Simplified registration: The process and documents for registering a WFOE in China are simpler than those for other types of business entities, allowing foreign investors to launch their businesses in a short time.
- Protected intellectual property: setting up a WFOE in China makes it possible to apply for a patent or trademark under your company’s name, ensuring that your valuable IPs are well protected.
As long as your company will not be engaged in industries listed in the ‘Market Entry of Foreign Investment (Negative List)’ published by the Chinese government, you will be allowed to operate with 100% of foreign capital. WFOEs can be generally classified into the following types:
- Consulting WFOE: A consulting WFOE is the simplest foreign-owned legal entity to set up and is usually used for marketing, consulting, staff training, software development, international logistics, and financial services.
- Trading WFOE: A trading WFOE is chosen by foreign investors hoping to engage in trading activities. In addition, when it comes to importing goods from abroad or exporting goods from China, an ‘Import/Export License (link to import/export license service page)’ will be compulsory to legally conduct international trading activities.
- Manufacturing WFOE: A manufacturing WFOE mainly focuses on producing goods in China for domestic consumption or international export. By setting up a manufacturing WFOE, foreign investors can fully control their production processes, quality standards, and supply chain management.
How to Register a WFOE in China?
Documents Required for a WFOE Formation in China
To register a WFOE in China, you need to prepare the following documents. No worries, Hongda will guide you through these!
- Legal representative’s identification information: passport (for foreigners) or national ID card (for Chinese citizens).
- Shareholders’ identification information (the shareholder can be either an individual or an enterprise).
- Proof of operation address: a lease rental contract or house ownership certificate. Or you can choose Hongda’s affiliated registered address service to save more budget!
- A company name in Chinese.
- Description about the company's business activities and operation scope.
Please note that the identification documents of the shareholders (such as passports or incorporation certificates) must be notarized by the local notary office and authenticated by the Chinese embassy or consulate abroad. You may also apply for an Apostille Certificate instead if it is applicable to your country.
Steps to Register a WFOE in China
For you to understand what we are doing, we will report different steps and stages to finally set up your WFOE. Our thorough WFOE checklist will also guide you in every process.
Step 1: Company Name Pre-approval
The first step in establishing a WFOE in China is to come up with a name for your company. According to the regulations in China, you need to follow a format when giving your company a name. You can read more about ‘how to name a Chinese company (for foreign investors)’.
Step 2: Application Materials Preparation
After the company’s name is pre-approved, you will then need to prepare the registration materials and documents. Hongda will help you prepare the documents and guide you through all the difficulties while gathering the materials.
- Shareholders' passports or the copies of overseas company registration documents (required the foreign company serves as the investor). The passports or incorporation documents need to be certified by either consulate authentication or Hague authentication. You can click on this blog to learn more about Hague authentication.
- Company director’s passport copy;
- Company office lease rental contract: the office will be used as the 'registered address’ shown on the business license. Hongda also provides affiliated registered address services to save your budget by cutting the fees of renting physical offices.
- Company’s information description: the registration information of the company, including the business scope, investment capital, operation period, and the holding ratios of shareholders.
- Supportive documents: Hongda will prepare a series of documents for the director and shareholders to sign (black ink signatures in hard copies).
Among all the information mentioned above, the most important item might be the investment capital of your company. It is important to note that the Chinese Company Law has been revised in 2023, introducing significant changes to the investment capital system. To read more about the changes brought by the revised Chinese Company Law, please click our latest blog: the key changes by the Revised Chinese Company Law.
Step 3: Obtain License and Apply for Company Seals
After successful application, the business license of your WFOE will be issued within 5 working days, followed by an application of the company seals. If you are not familiar with the management of the company seals, you can choose Hongda’s company seal management services for an easier operation
Step 4: Tax Registration
Tax registration is the legal registration process that must be completed within 30 days since the issuance of your company’s business license. This process is designed to ensure that enterprises legally pay taxes and comply with Chinese tax laws.
Step 5: Open Corporate Bank Account
For normal operations in China, you need a company bank account to manage your daily income and expenses. You may go through various steps such as on-site visits, submission of documents, and account activation. Depending on the requirements of different banks, you might need to submit various application materials. Hongda's China Bank Account Opening service will assist you in selecting the most suitable bank and support you through the entire account opening process. You are welcome to visit our bank account service page to learn more about the relevant information.
Step 6: Obtain Work Permit and Employment Residence Permit
According to Chinese legal regulations, foreigners residing or staying in China are required to hold the corresponding type of visa. This means that if you want to work legally in China, you need to apply for and hold a work-type work permit and residence permit, otherwise, you may face penalties from the Chinese immigration authorities. Applying for a work permit is a relatively complex process, requiring the preparation of many documents and taking about 1.5 months. Let Hongda assist you in applying for a work permit and residence permit to comply with the regulations of Chinese immigration law. Please click here to learn more.
Step 7: Hire Qualified Employees
Depending on the needs and scale of your enterprise, you may need to recruit employees to support the operation of your business. Before hiring employees, you need to clarify job requirements, develop a recruitment plan, and conduct recruitment according to local labor laws. Hongda now provides comprehensive HR services, including EOR, PEO, and headhunt to find the ideal candidates for you! We are also happy to support your employees with our payroll services. Please read related service pages or book a free meeting with us to know more!
Step 8: Ongoing Compliance
Now your WFOE is ready to start operation. However, during this process, you will still need to face several compliance affairs throughout the life cycle of your WFOE.
- Bookkeeping and tax report: Bookkeeping involves the systematic recording, organizing, and maintaining of all financial transactions of a company. This practice is fundamental for tracking income and expenditures, financial analysis, and strategic planning. Outsourcing bookkeeping to Hongda will help you save money while enjoying high-quality services. We will provide daily transaction recording and a monthly tax report for your company!
- Annual Maintenance: Annual Maintenance refers to a series of tasks performed yearly to comply with legal, regulatory, and operational requirements. These tasks may include renewing licenses and permits, completing annual filings with regulatory bodies, updating corporate records, and performing financial audits. By choosing Hongda’s yearly maintenance service, you will easily pass the annual inspection process without any stress!
Factors to Consider When Setting up a WFOE in China
When registering a WFOE in China, there are several important factors you should consider during the forming process for a smooth formation.
WFOE Registered capital
The registered capital of a WFOE is the total amount of capital contributed by the shareholders to form the company, either in the form of cash, land use right, intellectual property, equipment, and/or other assets. A WFOE’s registered capital needs to be declared in the Articles of Association and submitted during the registration process. In 2024, the revised China Company Law was put into effect, in which the regulations regarding registered capital changed.
Business Location
A careful consideration of the business location of your WFOE in China is crucial, as it can influence the administrative and tax policy incentives you can enjoy from the local government. Within a specific city, the policies may also vary depending on the districts where your WFOE is registered. To find an ideal address for you, Hongda offers an affiliated registered address service for you to locate your company. Please click to see more about our registered address service page.
Special Licenses and Permits
Some business activities in China may require additional permits and licenses for a legal operation. For example, if you want to open a restaurant in China, you need to apply for a Food Operation License in addition to a company Business License.
