What is a wholly foreign-owned enterprise in China?

A wholly foreign-owned enterprise (WFOE) is a limited liability company registered in China, wholly owned by one or more foreign investors. This type of corporate entity ensures that foreign investors have complete control over the company and full ownership of its business operations. Establishing a wholly foreign-owned enterprise in China can bring you the following main advantages:

• Independent operation: In the case of a wholly foreign-owned enterprise in China, foreign investors do not need to cooperate with Chinese business partners to share ownership, which means they can make independent business decisions
• Simplified registration: The registration process and documents for wholly foreign-owned enterprises in China are simpler than those for other types of business entities, allowing foreign investors to conduct business in a short period of time
• Protected intellectual property: Setting up a wholly foreign-owned enterprise in China allows you to apply for patents or trademarks in the name of the company, ensuring that your valuable intellectual property is well protected

As long as your company does not engage in industries listed in the Chinese government’s “Negative List for Market Access for Foreign Investment”, you can operate with 100% foreign investment. WFOE can usually be divided into the following types:

• Consulting foreign-funded enterprises: Consulting foreign-funded enterprises are the simplest legal entities for foreign investment, usually used for marketing, consulting, employee training, software development, international logistics, and financial services
• Trade oriented wholly foreign-owned enterprises: Foreign investors who wish to engage in trade activities choose trade oriented joint ventures. In addition, when importing goods from abroad or exporting goods from China, legal international trade activities must hold an “Import and Export License (Import and Export License Service Page Link)”
• Manufacturing foreign-owned enterprises: Manufacturing foreign-owned joint ventures mainly focus on producing goods for domestic consumption or international export in China. By establishing a manufacturing wholly foreign-owned enterprise, foreign investors can fully control its production processes, quality standards, and supply chain management

How to register a wholly foreign-owned enterprise in China?

Documents required for establishing a wholly foreign-owned enterprise in China

To register a wholly foreign-owned enterprise in China, you need to prepare the following documents. Don’t worry, Simon will help you get through this difficult time!

• Identity information of legal representative: passport (foreigner) or identity card (Chinese citizen)
• Shareholder identity information (shareholders can be individuals or companies)
• Proof of Business Address: Lease Agreement or Property Ownership Certificate. Alternatively, you can choose Simon’s affiliated registered address service to save more budget
• The Chinese name of the company
• Describe the company’s business activities and scope

Please note that the identity documents of shareholders (such as passports or company registration certificates) must be notarized by the local notary office and authenticated by the Chinese embassy or consulate abroad. If the certification certificate is applicable to your country, you can also apply for a certification certificate.

Steps to register a wholly foreign-owned enterprise in China

To help you understand what we are doing, we will report on the different steps and stages to ultimately establish your wholly foreign-owned enterprise. Our thorough WFOE checklist will also provide guidance for you in every process.

Step 1: Pre review of company name
The first step in establishing a wholly foreign-owned enterprise in China is to name your company. According to Chinese regulations, a format must be followed when naming a company. You can read more about “How to Name a Chinese Company (for Foreign Investors)”

Step 2: Preparation of application materials
After the company name is pre approved, you need to prepare registration materials and documents. Simon will assist you in preparing documents and guide you through all difficulties while collecting materials.

• Copy of shareholder passport or overseas company registration document (investors must be overseas companies). Passports or company documents need to be authenticated by consulates or Hague authentication. You can click on this blog to learn more about Hague certification
• Copy of passport of company director
• Company Office Lease Agreement: The office will be used as the “registered address” as shown on the business license. Simon also provides affiliated registered address services to save budget by reducing the cost of renting physical offices
• Company Information Description: Company registration information, including business scope, investment capital, operating period, and shareholder shareholding ratio
• Supporting documents: Simon will prepare a series of documents for directors and shareholders to sign (hard copies with black ink signatures)

Among all the above information, the most important may be your company’s investment capital. It is worth noting that China’s Company Law has been revised in 2023, resulting in significant changes to the investment capital system. To learn more about the changes brought about by the revised Chinese Company Law, please click on our latest blog: Major Changes in the Revised Chinese Company Law

Step 3: Obtain the license and apply for the company seal
After successful application, the business license of your wholly foreign-owned enterprise will be issued within 5 working days, and then the company seal will be applied for. If you are not familiar with the management of company seals, you can choose Simon’s company seal management service for easier operation

Step 4: Tax Registration
Tax registration refers to the legal registration process that must be completed within 30 days after the issuance of your company’s business license. This process aims to ensure that enterprises pay taxes legally and comply with Chinese tax laws.

Step 5: Open a company bank account
In order to operate normally in China, you need a company bank account to manage your daily income and expenses. You can perform various steps, such as on-site visits, submitting documents, and activating accounts. According to the requirements of different banks, you may need to submit various application materials. Simon’s Bank of China account opening service will help you choose the most suitable bank and provide support throughout the entire account opening process. Welcome to our bank account service page to learn more about related information.

Step 6: Obtain work permit and employment residence permit
According to Chinese laws, foreigners living or staying in China must 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 permit and residence permit, otherwise you may face penalties from the Chinese immigration authorities. Applying for a work permit is a relatively complex process that requires preparing many documents and takes approximately 1.5 months. Ask Simon to assist you in applying for a work permit and residence permit to comply with Chinese immigration laws. Please click here to learn more information.

Step 7: Hire qualified employees
Based on the needs and scale of the enterprise, you may need to recruit employees to support its operations. Before hiring employees, you need to clarify job requirements, develop a recruitment plan, and recruit according to local labor laws. Simon now provides comprehensive human resources services, including EOR, PEO, and headhunting to help you find the ideal candidate! We are also pleased with our payroll service. Please read the relevant service page or schedule a free meeting with us to learn more information!

Step 8: Continuous Compliance
Now, your wholly foreign-owned enterprise is ready to start operating. However, during this process, you still need to face some compliance matters throughout the entire lifecycle of a wholly foreign-owned enterprise.

• Bookkeeping and tax reporting: Bookkeeping includes the systematic recording, organization, and maintenance of all financial transactions of a company. This approach is crucial for tracking income and expenses, financial analysis, and strategic planning. Outsourcing bookkeeping to Simon will help you save money while enjoying high-quality services. We will provide your company with daily transaction records and monthly tax reports
• Annual maintenance: Annual maintenance refers to a series of tasks performed annually to comply with legal, regulatory, and operational requirements. These tasks may include updating licenses and permits, completing annual filings with regulatory agencies, updating company records, and conducting financial audits. By choosing Simon’s annual maintenance service, you will easily pass the annual inspection process without any pressure

Factors to consider when establishing a wholly foreign-owned enterprise in China

When registering a wholly foreign-owned enterprise in China, in order to establish it smoothly, you should consider several important factors during the establishment process.

Registered capital of wholly foreign-owned enterprises
The registered capital of a wholly foreign-owned enterprise refers to the total amount of capital invested by shareholders in the form of cash, land use rights, intellectual property, equipment, and/or other assets to establish the company. The registered capital of a wholly foreign-owned enterprise needs to be declared in the company’s articles of association and submitted during the registration process. In 2024, the revised Company Law of China came into effect, and the provisions regarding registered capital changed.

location of an enterprise
It is crucial to carefully consider the business location of a wholly foreign-owned enterprise in China, as this may affect the administrative and tax policy incentives you can obtain from the local government. In specific cities, policies may also vary depending on the region where the wholly foreign-owned enterprise is registered. In order to find an ideal address for you, Simon provides an affiliated registered address service to locate your company. Please click to view more information about our registered address service page.

special license
Some commercial activities in China may require additional permits and licenses to operate legally. For example, if you want to open a restaurant in China, in addition to the company’s business license, you also need to apply for a food business license.

Why choose Simon?

Rapid Processing

With experienced team members, we can handle your project faster than others.

Unsuccessful, no charge

Simon promises that we will only charge after your project is successfully completed.

Tailored services

We will provide the most suitable business plan based on your situation.

Traceable process

Simon has an online system for you to track any updates to the project.

Frequently Asked Questions

Do you have any further questions? don’t worry! We are happy to answer!