US Business & Chinese Staff
Dear China Success Stories Viewers:
I’m creating a new online business here in the States. I plan to register the business here, and likely register it in China at some point in the next several months as I will plan to relocate there by year’s end. The website will be in English and in Chinese version so I hope to have clients from the States, and clients from China.
So ultimately, I suppose it makes sense to have the business presence in both places.
I have a good friend whom I’ve known for years as my base in Beijing right now — so this is already something of a partnership. I also have several friends, most of whom are in China, that would like to work together and be part of the team. And of course we’ll recruit people to work with us as needed.
So mainly, what I’d like to ask you is as follows:
1. Should I register both in the States and China, and what may be the complications or implications of such a set up? Does it make sense to formalize the same business in both places?
2. How would you deal with staff / freelancers from China that you hire or source to work with you? For example, I’m still in the States the next six months. When the site is running and we get clients contacting us from China, I assign work to our Chinese staff. What’s the best way to deal with paychecks, taxes, etc.?
To be clear, I may register the business both in the States as well as China, but right now, most of my help by way of employees or freelancers are based in China. Paying employees or taxes in the States for a local business is simple enough, but what about handling such things for using international talent?
Sorry, I know this probably sounds tedious, but I’m really hopeful you can share some insight, or perhaps know others that have gone this route and know what they’re talking about.
Thanks!!
Vinnie
June 5th, 2009 at 12:33 pm
Good questions. I am placing a comment here as I’d like to follow the posts that you receive in reply.
June 5th, 2009 at 9:30 pm
Hi Vinnie,
Does you business just concern advertisements? not export or import?
If your Chinese partners know how to open market and are good enough, you needn’t worry about these stuffs.
I came from China, but I am at Norman, OK now.
If you will, you can contact me:hitechzhou@gmail.com
Good luck!
Mr.Zhou
June 5th, 2009 at 11:40 pm
Vinnie:
If your company is first registered in the US, and you subsequently open in China, for IRS tax purposes all of your world-wide income will still be treated as if it all originated in the US. I strongly discourage you from going that route, particularly since you plan on being based in the states for the next 6 months, at least. You must be legally registered to do business in China, or you will find yourself in a heap of trouble legally with the Chinese government. You also need to do so in order to receive payments in Chinese rmb. Additionally, as a small foreign firm in China you will in all likelihood (like in 99.9% of the cases) not actually be able to pay Chinese citizens directly; rather, it will be done by Chinese entities like Fesco. You will also need to have a solid IP strategy in place – IP law is dynamic and changing in China – as well as have a solid understand of Chinese labor law. In many areas concerning employee rights, and IP assignments and ownership, the laws and rights of Chinese citizens are entirely different than rights of US citizens. You may be a lot better served by setting up a Caymans corporation, which is the legal headquarters of your firm, and the layer at which your IP lives at, and setting up a WFOE in China. The tax advantages, ease of setting up operations on the mainland, and more flexible exit strategies make an offshore registration a much more solid choice.
At any rate, while it’s good that you are asking these important questions, it appears, frankly, that you haven’t consulted with competent legal council that specializes in US and China capital structure yet. China is a great place to do business, but if you don’t feel you need to spend the 5000 US or so to get solid, clear legal council, then you are taking an extremely risky chance. Good luck with your venture.
June 9th, 2009 at 5:20 pm
Vinnie,
The most common option is to setup up a rep office in China. This requires you setup a company in your home country. This is the least painful company for a non-Chinese to setup. It allows you complete control and the cost of setting up is the lowest.
There are many options but it is hard to discuss in a post. I have 6 years experience helping US companies in succeed in China. You are welcome to contact me if you want some practical advice.
Michael
2615 michaelbadali dot com
June 10th, 2009 at 3:53 am
The biggest factor is your structure is whether you are going to invoice customers in China for payment in China – if that is the case then a rep office is unsuitable and a JV or WOFE are the options.
A rep office is a good idea if you are just using CN to look after clients there or use as a buying office.
Without knowing what business you are in it is difficult to comment further but good luck.
June 10th, 2009 at 4:09 pm
Mark brings up a good point. However, it can be difficult to get your money out of China if you accept payment in China. At the least you will have to pay a painful % (2% total if memory serves) to bet your money to the US.
June 14th, 2009 at 11:20 pm
Thanks to everyone for your responses to my query. It was all very helpful and definitely gave me more to think about. Regarding legal council, part of my dilemma is that since I’m now between jobs, I have more time to pursue my own business endeavors, but at the same time, do not possess several thousand extra dollars to spend on an attorney. That said, it’s something I likely will check into in the future. For now, I feel that I’m accumulating good information and have enough Chinese-based resources that an appropriate set up will materialize as we go along.
Thanks again for all who took the time to respond. And for anyone that’s got something to add, please feel free.
Vinnie.
March 17th, 2010 at 6:22 am
Hello Vinnie,
I am a business registration consultant in Beijing
Basically ,there are three options for foeigners to setup a business in china：WFOE, Joint venture, representative office.
Before you can establish a company in the US and then setup a representative office(which requires no capital investment and easy to setup) in china. However, Since January 15, 2010: According to State Administration of Industry and Commerce’s file: Gong Shang Wai Qi [2010] No.4, To set up a Foreign Representative office in China: PARENT COMPANY must be established for more than 2 years.
You said you may form a partnership with your friend, then a joint venture is a good choice. But if your friend is a Chinese, he/she has to be a legal entity to invest in your business in China.
About tax filling and accounting, you can delegate to some agent in china, we can also provide this kind of service.
I hope you have already established your business successfully, if not, please contact me for more information, I would happy to answer all your questions.
Email: beijingcorporationsetup@hotmail.com
Warm regards,
Amy