China, a country with a population of 1.4 billion people has transformed the way the world does business. Often touted as the hub for production, China not only leaves its mark when it comes to mass-scale production but also the innovation across different sectors and industries.
Wholly Foreign-Owned Enterprise (WFOE) is a form of business entity in China where a foreign investor is allowed to have a 100% stake in the company. As the name suggests WFOE is a fully foreign-owned organizational setup.
China has become a lucrative investment destination for investors and entrepreneurs across the globe and the WFOE form of entity is widely used by the investors as it gives them the flexibility to enter the Chinese market without any dilution in the ownership of the company.
With the motive of encouraging manufacturing and investment in China, the WFOE concept came into existence.
WFOE gives the investors flexibility to operate profit-oriented businesses with a stronghold on the HR practices and expansion plans like the creation of wholly-owned subsidiaries.
Generis Global takes you through the whole process rather smoothly while taking care of your enterprise requirements from company incorporation to legal assistance while taking care of regulatory compliance like taxation, audit, etc.
What is the minimum capital requirement to start WFOE in China?
Apart from the cost of the company registration, the capital you need to inject into your company is $0. The Government of the Peoples Republic of China has eliminated the regulations pertaining to registered capital and starting capital which puts the capital investment at almost zero.
Though authorised capital shown on the paper records for the smooth approvals is shown at 1000000 RMB. (The investor doesn’t need to inject this capital to the company in beginning or at once, this has to be generated by the WFOE in the span of 29 years.)
TYPES OF WFOE
A WFOE once registered under specific business activity can only undertake that very activity and the scope of activities is limited to the business license as duly explained. If the WFOE wishes to undertake any other activity which falls out of the scope of the business license, Prior approvals from the relevant departments have to be taken.
• Service / Consulting WFOE
• Manufacturing WFOE
• Trading / FICE WFOE
• Minimum of 3 individuals as directors.
• Legal Representative who has to be either a director or a GM or both.
• Annual Audit report has to be filed by WFOE in addition to the filing of taxes.
• Office Address (Plant location/ Office Space) – Depending upon the nature of the business activity.
• Virtual Office is allowed only in services sector companies and in specific cities only.
• Name of the company in the Chinese language.
Note: The company name follows a specific structure where the first word has to be company/product, the second word would be the business activity, the third word has to be the Location of Business Establishment and the fourth word should specify the company structure.