If you are planning to expand your business to China, there are a number of formations to consider, such as a wholly foreign-owned enterprise (WFOE), a joint venture (JV), and a representative office (RO). Although a representative office comes with major limitations on what you can do, it is very popular because of the ease of setup and entry into the market. This post takes a closer look at RO to help you answer the question, “Is it a good option for you?”
What is a Representative Office (RO)?
As the name suggests, a representative office does just that, representing the parent company in China. It is considered the simplest and fastest type of company you can form in China. However, you cannot use it for profit-making activities.
Although a WFOE allows you to legally carry all the activities within the scope of the company operations, it requires a lot of time, and registration can also be pretty complicated. This is why you should consider starting with an RO. Here are the main benefits of opening a representative office in China:
- The cost of maintaining the company is lower compared to a WFOE.
- You do not require capital to open an RO.
- An RO can be set up faster than a WFOE or Joint Venture.
- You are allowed to employ both local and foreign employees.
- It is a great way to enter China fast and then convert to a WFOE later.
Registering a Representative Office in China: Here are the Main Steps
After making the decision that an RO is the right business option, the process of incorporation can get started. Although it is simpler compared to that of a WFOE, it still requires you to prepare a number of documents and deal with several departments. This is why you should consider working with an agency of experts for assistance.
Here are the main steps required when registering a representative office in China.
- Get approval for the company name: This is done through an application to the local Administration of Industry and Commerce (AIC).
- Get a rental lease for the business space: This has to be done in the city that the company’s offices will be located. The lease has to be of no less than 12 months.
- Apply to the AIC for registration: Armed with the company’s lease and name, go ahead and apply for registration at AIC.
- Develop company chops: Like other companies in China, an RO also requires its seals. So, make sure to apply through the Public Security Bureau.
- Apply for Organization Code License.
- Register for tax payment with a local tax bureau.
- Open a bank account.
Although a representative office in China is not allowed to get involved in profit-making activities, investors find it a great option for research and rapid entry into the high-potential Chinese market. Consider working with an agency of experts to register your RO in China faster and optimize its benefits for your parent company.