Starting a Business in China
By Doing Business Team – Worldbank Group
This table summarizes the procedures and costs associated with setting up a business in China.
STANDARDIZED COMPANY
Legal Form: Limited Liability Company
City: Shanghai
Registration Requirements:
Procedure 1.
Obtain a notice of Pre-Approval of the Company Name
Time to complete:
1 day
Cost to complete:
RMB 80
Comment:
The applicant picks up the application form of company name pre-approval from the local Administration of Industry and Commerce (“AIC”) or downloads such form from AIC’s website. With the form, the applicant files the following documents: Application Form of Company Name Pre-approval signed by the applicant, who shall be one of the shareholders of the company; and b. Identity Card of the applicant. Effective from July 1, 2004, enterprise name registration must follow the amended SAIC rules, i.e., the new Enterprise Name Registration Administration Implementing Measures ( Qi ye ming cheng deng ji guan li shi shi ban fa). According the to new registration rules, if the applicant goes directly to the AIC, the approval or rejection of name shall be given on the spot. This is newly regulated by Article 24 of the Enterprise Name Registration Administration Implementation Measures. This rule is effective since July 1, 2004 and is implemented in practice.
Procedure 2.
Open a preliminary bank account; Deposit fund in the account and obtain the certificate of deposit
Time to complete:
1 day
Cost to complete:
no charge
Comment:
The Company Law was modified on October 27th, 2005 and became effective on January 1st, 2006. Art. 26 lowers the minimum capital requirement to RMB 30,000, and also provides that the shareholders, after paying the required amount of initial capital contribution (at least 20% of the registered capital of the proposed company and shall not be lower than the legal requirements for the registered capital for certain industries), may pay off their remaining capital contributions, if any, within 2 years after the establishment of the company. Art.27 provides the form of the capital contribution. According to it, if the initial capital contribution is in the form of cash, the shareholders need to open a preliminary bank account in the bank after obtaining the pre-approval of the company name and shall deposit the initial capital contribution into the bank account. If the initial capital contribution is in form of non-monetary assets, the shareholder shall transfer the property title of the assets to the company and the value of such assets shall be appraised. The initial capital contribution shall be verified by legally established verification institutes. The revised Company Law enables shareholders to contribute up to 70 per cent of registered capital of a LLC in “non-monetary assets which can be monetarily valued and legally transferred”.
Procedure 3.
Obtain registration certification “Business License of Enterprise Legal Person” with SAIC or local equivalent
Time to complete:
1 day (if done in person); 14 days if by mail
Cost to complete:
0.08% of registered capital (registration fee) + RMB 10 for copy of Business License + RMB 500 for public announcement (see comment)
Comment:
Company needs to file (1) Notice of Approval of Company Name, (2) lease or other proof of company office, (3) Capital Verification Certificate or Appraisal Report, (4) the filled-out application form, (5) articles of association executed by each of the shareholders, (6) representation authorization,(7) identity cards of shareholders; identification documents of officers; (8)the documents certifying the name, address of the directors, supervisors and officers and their appointment documents; (9) identification documents and appointment documents of the company’s legal representative; (10) if the initial contribution is non-monetary assets, the document certifying transfer of the property title of such assets; (11) and other documents as required by the authorities. Within 15 working days from receipt of all the documents, AIC should decide to approve the company registration or not. After the company registers, it can have its seal carved, open formal bank accounts, and apply for taxation registration. In accordance with the new administrative rules, application forms may be downloaded from websites of local government authorities. Statutory time limits were introduced for acceptance of application documents and decision on registration, which are different depending on the form of application. In practice, normally the decision will be made within 15 days of receipt of the application. Documentation requirements for company registration were standardized. Now the documentation requirements are required to be publicly displayed by the registry. Art.52 provides that as to an application that is filed in such forms as letter, telegraph, telex, fax, electronic data exchange or email, the company registry shall, within 5 days as of receiving the relevant application documents and materials, decide whether or not to accept the application; where the application documents and materials are not complete nor meet the statutary requirements, the registry shall within 5 days, inform the applicant of all the contents subject to supplementation and correction Art.54 provides that where the organ in charge of company registration needs to carry out any verification on the application documents and materials, it shall decide whether or not to approve the registration within 15 days as of acceptance; where in other cases, the organ shall decide to approve the registration on the spot or within 15 days as of acceptance. Art.55 provides that Where the organ decides to approve the registration of a company, it shall produce a Notice on Approval for Establishment Registration and inform the applicant to collect its business license within 10 days.. Art.59 provides that from March 1 to June 30 each year, the organ in charge of company registration shall carry out an annual examination of companies. Publication fees depend on the size and place of announcement. Small businesses may only spend RMB 320, while big companies my pay around RMB 1,250 for their public announcement.
Procedure 4.
Obtain the approval to make a company seal from the police department
Time to complete:
1 day
Cost to complete:
no charge
Comment:
If all the shareholders are individual investors, the registration file shall include the duplicate of business license (original and one copy) and the ID card of the legal representative. If approved, a notice to make the company seal will be issued to the company.
Procedure 5.
Make a company seal
Time to complete:
1 day
Cost to complete:
RMB 300
Comment:
Company shall have the seal carved at the seal company (the seal company should hold a Shanghai Special Industry Permit (company seal carving) (《上海市特种行业许可证》（公章刻制业）). It costs RMB 70-300, depending on the design and quality.
Procedure 6.
Obtain the Organization Code Certificate issued by the Quality and Technology Supervision Bureau
Time to complete:
5 days
Cost to complete:
RMB 148
Comment:
Company files the following documents with Shangai Organization Code Management Center (a branch of Quality and Technology Supervision Bureau) to apply for Organization Code Certificate within 30 days of obtaining the business license: 1) business license (original and 1 copy)；2) Identity card of the legal representative (1 copy);3) filled-out application form.
Procedure 7.
Register with the local statistics bureau
Time to complete:
1 day
Cost to complete:
RMB 50
Comment:
Company shall apply for statistics registration within 30 days of obtaining the business license. To apply for statistics registration, company shall submit the following documents to local statistic bureau: business license (one copy), organization code certificate (one copy) and the filled-out statistics registration form.
Procedure 8.
Register for both State and local tax with the tax bureau (开业税务登记)
Time to complete:
10 days
Cost to complete:
RMB 100
Comment:
The procedures for tax registration have been simplified since 2004 with the implementation of “Administration Measures of Tax Registration”, issued by the State Taxation Bureau. While there are still two separate taxation authorities, namely the state taxation bureau and local taxation bureau, company founders are only required to file tax registration once to either of these two authorities. Statutory time limit is 30 days from the date of receiving the registration application. The company needs to fill up tax registration form and initial tax reporting forms. Together with the said forms, the company submits for review the following documents: the duplicate of business license (original and one copy); organization code certificate (original and one copy); ID card of the legal representative (original and one copy); ID card of the taxation personnel (original and one copy); company seal and financial seal; office lease agreement and receipt for rent paid; article of association (original and one copy) and account opening certificate issued by the bank (original and one copy). A hotline by Shanghai Taxation Bureau started working on January 1, 2006, telephone number is 12366. Concerns and questions can be put forward through this hotline.
Procedure 9.
Open a formal bank account of the company and transfer the registered capital to the account
Time to complete:
1 day
Cost to complete:
no charge
Comment:
The procedures and documents for a bank account may vary depending on each bank’s practice.
Procedure 10.
Apply for the authorization to print or purchase financial invoices/receipts (发票购用印制簿)
Time to complete:
10 days
Cost to complete:
no charge
Comment:
After state /local tax registration and obtaining tax registration certificate, company shall apply to relevant taxation office (state/local taxation separately) for approval to purchase and issuance of financial invoices. The taxation authority will issue the Invoice Purchasing Book if it agrees to grant the company such qualification. The following documents shall be submitted for the book: i) tax registration certificate (1 copy); ii) Identity card of taxation personnel (1 copy); iii) application forms; iv) models of invoice seal
Procedure 11.
Purchase uniform invoices (申请领购发票)
Time to complete:
1 day
Cost to complete:
RMB 1.05 – 1.67 per invoice book
Comment:
Obtain and fill out the application form for purchase invoice (购用统一发票申请单). Submit the form and the authorization book (from previous procedure) to the tax office. In China, the VAT and ordinary invoices are published by the tax authority for anti-forgery reasons, with a few exceptions. Tax payers normally buy VAT and ordinary invoices from the tax authority.
Procedure 12.
File for recruitment registration with local Career Service Center (招工登记备案)
Time to complete:
1 day
Cost to complete:
no charge
Comment:
The local Career Service Center is sponsored by the local government. A new company shall register within 30 days of recruiting employees. The following documents shall be submitted: business license (original and copy); organization code certificate (original and copy); company seal; Identity cards of employees and their employment agreements (copies)
Procedure 13.
Register with Social Welfare Insurance Center (社保登记)
Time to complete:
1 day
Cost to complete:
no charge
Comment:
The company shall register for the payment of social insurance for their employees with local social insurance office within 30 days of establishment. The registration package shall include: the filled-out social insurance registration form, duplicate of business license (original and one copy), organization code certificate (original and one copy) and the company seal. After all the abovementioned documents have been verified, the authorities will issue a notice to open a social insurance account for the company and the company shall then apply to open a special account at the bank designated. The local social insurance office will issue the social insurance registration card to the company upon the bank’s notification that the account has been opened.
Doing Business – The Worldbank Group
13 Comments » 13 Answers » 
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January 13th, 2008 at 7:11 am
Hi Some of the procedures that mentioned in this article has been changed since last Year.
For instance:
A. Procedure 1.Obtain a notice of Pre-Approval of the Company Name. Now it will take you about 5 working days to get the name certificate instead of 1 day.
B. Procedure 8. Register for both State and local tax with the tax bureau (开业税务登记)
It’s 21 working days now instead of 10 days.
For anyone who want to exporle more updated information about starting a business in Shanghai, I would sugget that you could contact Path To China, here’s there website: http://www.pathtochina.com
David.
January 14th, 2008 at 6:14 pm
Can a foreigner set up a company like this?
January 15th, 2008 at 2:03 pm
While I appreciate this attempt to bring some clarity to this process, it should come with some warnings.
(1) This summary makes the establishment of a company in China seem simple. Trust me when I say that it is by no means simple. Every establishment has its own problems, and companies are rarely equipped to deal with these problems themsleves. Foreign investors that establish their subsidiaries without any professional knowledge will very likely run into problems later on.
(2) Much of the above information may be applicable some districts / municiaplities / provinces, but definitely not in all (and not even in all of Shanghai). Authorities of every jursidiction – and even different officials in a same jursidiction – have their own interpretations. requirements and policies on what documents are needed in what form and format. Companies need to check this out first.
(3) Some of the information provided above is clearly wrong. To give just one example, while Chinese-invested companies indeed need to contribute their capital before the business license is issued, foreign investors can only contribute their capital AFTER the business license is issued, bank accounts are opened, SAFE registration is completed, etc. Temporary bank accounts are only used to cover (pre-) establishment costs, but are extremely rare as they are very impractical. Another example, it is absolutely unnecessary for froeign-invested enterprises to recruit through a “Career Service Centre”. I presume the author refers to the so-called FESCO’s which are only compulsory for Rep Offices.
Hope this is helpful to our readers.
January 15th, 2008 at 3:42 pm
sorry my question was not all together clear. Is it possible to set up a company as a foreigner that isn;t a wholly owned foreign entreprise and therefore not need the offshore company?
January 15th, 2008 at 5:15 pm
This post ought to be subtitled “The Fantasy Edition” as it has virtually no connection to reality.
January 16th, 2008 at 9:13 am
This article is quite misleading as it appears to outline steps for setting up a local Chinese company with local Chinese shareholders. It certainly doesn’t seem applicable to foreigners, which is the audience I thought this site would be targeted at,looking to setup a company structure such as a WOFE that they can be a shareholder in.
January 16th, 2008 at 10:25 am
[…] This article is among the most helpful I’ve ever seen if you are considering starting a business.
Some of the requirements may seem novel to outsiders unfamiliar with the process. For example, you must have a company seal made, and you have to obtain permission from the police department before you get the seal made.[…]
January 17th, 2008 at 6:01 pm
Thank you for the comments. To answer some of your questions, the procedures above are only for a domestic limited liability company fully owned by nationals. For starting a business, the standard case used in the Doing Business report across 178 economies is the following.
The business:
-Is a limited liability company. If there is more than one type of limited liability company in the country, the limited liability form most popular among domestic firms is chosen.
-Information on the most popular form is obtained from incorporation lawyers or the statistical office.
-Operates in the country’s most populous city.
-Is 100% domestically owned and has 5 owners, none of whom is a legal entity.
-Has start-up capital of 10 times income per capita at the end of 2006, paid in cash.
-Performs general industrial or commercial activities, such as the production or sale of products or services to the public. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily polluting production processes.
-Leases the commercial plant and offices and is not a proprietor of real estate.
-Does not qualify for investment incentives or any special benefits.
-Has at least 10 and up to 50 employees 1 month after the commencement of operations, all of them nationals.
-Has a turnover of at least 100 times income per capita.
-Has a company deed 10 pages long.
For more information on the report and on the methodology, kindly visit: http://www.doingbusiness.org
January 19th, 2008 at 1:59 am
[...] Here’s the article from China Success Stories. [...]
January 22nd, 2008 at 1:36 pm
Thank you for that clarification, which indeed confirms that foreign companies are NOT to use this as a general guide. There is much better information out there – at least on the basics of establishing a company. People are advised to look around, or ask the experts!
May 1st, 2008 at 2:21 pm
Hi,
It is very useful article for me.Can you please guide me abt AIC’s website.Do you have its URL?
Regards,
June 19th, 2008 at 2:02 pm
Daer Sir,
We are treading company in Iran& want to set up & register a new treading company in China with just one director or manager with 2 or 3 personals.
Please let us know if you can help us & informed us the regulars &laws we must respect & how much invest we need to pay for establishment under administration Chinese laws & all information we must know.
Thanks a lot in advance.
Faithfully yours,
Hamid Hassanzadh
Manager Director
June 9th, 2009 at 7:50 am
The most important information I learned from the post and comments is it is wise to research the current laws and requirements in the province you will start a business. I’m a retired executive in Chongqing and I’ve found that current, detailed and correct information has been a mystery to locate. I had planned to start a foreign based consulting corporation in CQ and realised after 8 months of visits to attorneys, Government offices and start up consultants that there are risks and must be willing to learn as you go. I finnally decided to join a newly formed Chinese corporation as the director with an agreement or corporate charter outlines my role in the management of the company. Yes, it has it’s own set of risks but the process is clear enough to build a business instead of managing the process for another 6 months. I believe in China you do it with the best available information and manage the surprises as you go. Best of luck to all!