Hainan business setup (WFOE) is one way to do business in Hainan. For foreigners interested in establishing a business presence in China, there are a few options, and incorporating a wholly foreign invested enterprise is a good choice for foreign investor wishing to manufacture, process, or assemble in China. WFOE is a limited liability company with fuller foreign ownership. This is the optimal structure for companies that plan to have long-term business interests in China while seeking to maximize control and flexibility in business decision-making.
Common structures of WFOE
There are three distinct WFOE structures:
(1) Service (or Consulting) WFOE;
(2) Trading WFOE; and
(3) Manufacturing WFOE.
While all three structures share the same legal identity, they differ significantly in terms of setup procedures, costs and the range of commercial activities in which they are allowed to engage. Trading WFOEs and Manufacturing WFOEs must derive the majority of their revenue from that main business, but can also provide associated services. Meanwhile, some service WFOEs can also conduct trading activities related to their services.
Business scope
A WFOE’s business scope is a one-sentence description of the company’s activities within China. Once written and approved, it’s printed on the company’s business license. A business scope answers questions like the number of employees, the nationality of the employees, the kind of work that they will perform, activities of the business, who are the target customers of the business, where the income will go, among others.
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Registered capital
Registered capital is the initial investment into a company that is required to fund its business operations until it is in a position to fund itself. The absolute minimum capital requirements under Chinese law are RMB30,000 for multiple shareholder companies and RMB100,000 for single shareholder companies. In practice, however, the official requirements for registered capital vary by industry and region. With Manufacturing WFOEs, for example, the minimum registered capital is RMB1 million, subject to considerations such as factory size and equipment costs. Meanwhile, Service WFOEs generally require above RMB100,000 and FICE require above RMB500,000 for value-added tax purposes.
Company members
In any WFOE, the shareholder(s), who raise the capital, form the company’s highest authority. A WFOE should either have an executive director or a board of directors, who set the company’s agendas per the decisions of shareholders.
According to Company Law, all WFOEs should have at least one supervisor who oversees the performance of company duties by its directors as well as top management personnel. To avert any conflict of interest, all directors and the senior management personnel are not allowed to concomitantly act as supervisors. A relatively small company with a few shareholders can have one or two supervisors. However, bigger companies are required to have a board of supervisors of not less than three members.
General registration process
The application process to create a company in China generally takes three to six months. The establishment process varies based on the WFOE form and the planned business scope. For example, a Manufacturing WFOE will require an environmental evaluation report, and Trading WFOEs will need to undergo customs/commodity inspection registration. The application process can be divided into two parts: pre-registration and post-registration.
Contact Us
If you have further inquires, please do not hesitate to contact Tannet at anytime, anywhere by simply visiting Tannet’s website www.tannet-group.net, or calling Hong Kong hotline at 852-27826888 or China hotline at 86-755-82143512, or emailing to tannet-solution@hotmail.com. You are also welcome to visit our office situated in 16/F, Taiyangdao Bldg 2020, Dongmen Rd South, Luohu, Shenzhen, China.
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