How to set up a WFOE in China – the six most important steps

A WFOE is the most popular legal form for foreign businesses in China. Here are the most important steps for setting up your own Chinese company.

When starting a business in China, many choices have to be made. One of the first tasks is to determine the entry strategy and decide on the legal structure. Do you want to enter China with a Joint Venture, a Representative Office, a Wholly Foreign Owned Enterprise (WFOE) or will you choose to trade?

Regardless of your choice, the set-up procedure can be a lengthy and complex process and many procedures and documents need to be prepared. Due to its independent character, the WFOE has established itself as one of the most popular vehicles for doing business in China. Compared to the other strategies, the WFOE is the only one where the founder can be 100% in control.

Before we take a look at how to set up a WFOE in China, know that there are three different types of WFOEs, as mentioned in one of our previous blog posts: a consulting WFOE, a manufacturing WFOE, and a trading WFOE. On average, a WFOE set-up takes up three to six months. However, the length of the registration process varies depending on the choice of WFOE. A consulting WFOE, for instance, takes considerably less time than a manufacturing WFOE. In this article, we will give an overview of the most important steps.

Pre-license procedure of setting up a WFOE

Step 1

First and foremost, it is important to file your official Chinese business name. In order to pick an acceptable business name, there are many fixed guidelines that need to be followed. Furthermore, a lease contract of the rented office space or building must be provided.

Step 2

Secondly, you should draft all necessary documents in Chinese for the company registration at the proper premises. The Articles of Association for example, which have to be made up in this step, are often overlooked as a formality. However, these documents are critical to the future success of the company. Other documents include the rental contract, the Feasibility Study Report (FSR) and the bank reference letter.

Step 3

Furthermore, you should apply for a business license at the local authorities. These include the Ministry of Commerce (MOFCOM) and the Administration for Industry and Commerce (AIC).

Post-license procedure for WFOE

Step 4

After receiving the business license, it is crucial to register for taxes at the State and Local Tax Bureau. Please keep in mind that multiple documents, the business license, for instance, need to be provided. Furthermore, during this step, you must have your official company chops. In China, official documents are only valid when they are chopped. Therefore, the company’s chops – for example, the company, financial, legal representative and invoice chop – function as a signature. For internal control purposes, we advise you to disperse the chops to avoid one person having all control.

Step 5

The next step in the process is to register the company with other relevant authorities. In total, a company has to register at 12 different government offices. These authorities include the Technology Supervision Bureau, the  State Administration and Foreign Exchange, the  Financial Bureau and the Statistical Bureau.

Step 6

The last part of the registration process includes the opening of an RMB bank account. Moreover, you have to open a foreign currency bank account for the contribution and verification of the foreign-invested capital.

All these steps require a lot of preparation and paperwork, therefore it is important to be aware of the 10 most likely mistakes while setting up a WFOE. After completing the steps above, your company is officially established and fully operational, congratulations!

If you have any inquiries about setting up a WFOE in China, don’t hesitate to contact us! Call our office at +86 10 6561 6609 or write to service@ecovis-beijing.com