Posted: Mon Apr 21, 2008 3:34 pm Post subject: Different Business Formation Options for Foreigners
Chinese companies have many options in starting business operations in China, whereas foreign companies are more restricted to the THREE most common business vehicles:
1) Representative Offices (RO)
RO's are the fastest and easiest method for a foreign company to establish a presence or ‘footprint’ in China (setup time in some cases less than a month). RO's are however not permitted to conduct direct profit-making activities (cannot earn income), and really is meant for marketing of the parent company.
2) Joint Ventures (Cooperative and Contractual)
The Joint Venture is a registered legal entity cooperation between at least one foreign investor and Chinese investor. It has been falling out of favor, primarily due to the WFOE option, its inflexibility and lack of autonomy from the Chinese investor. Though some may still have no choice but the JV option when entering restricted industries that require a Chinese investor.
3) Wholly Foreign Owned Enterprises (WFOE)
For WFOE’s, the investors are purely foreign are quickly becoming the most popular method of foreign investment in China. While foreign companies once thought that a local partner was required by law to operate business in China, this is not increasing not the case in a wide range of industries, with its many advantages, including: a) Management control; b) Simpler establishment procedures; c) Easier to terminate; d) Easier to increase investment; e) Protection of intellectual property. _________________ www.chinawfoe.com
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