INCOMPORATION

IN CHINA - WFOE

The most obvious way for foreigners looking to do business in China 
is to set up a Wholly Foreign Owned Enterprise, abbreviated as WOFE or WOFE.

What is a China WFOE?

The most obvious way for foreigners looking to do business in China is to set up a Wholly Foreign Owned Enterprise, abbreviated as WOFE or WFOE.

A Wholly Foreign Owned Enterprise is a limited liability company, also know as LLC, that is fully owned and capitalized by foreign investors. A Chinese WFOE does not required a local Chinese partner to operate, for this reason, it provides you with greater control over your businesses operations. A WOFE is a favorable option for both individuals or overseas companies willing to enter the Chinese market.

No matter which location you decide to register a WOFE, Shanghai, Guangzhou, Shenzhen, Beijing, or any other city China, it will give you full autonomy to operate and expand your business in China.

The WFOE Categories

A WFOE is the most common investment option used by mainland China-based businesses and it can be roughly classified into:

1. China Trading WFOE

  • Importing and Exporting
    Purchasing Products for Export
  • Selling in China Local Market
  • Claiming VAT Tax Back

2. China Consulting WFOE / China Service WFOE:

  • All types of Consulting Services
  • Overseas Investment Consulting
  • Issue “Fapiao” Tax Invoices

3. China Food & Beverage WFOE

  • Coffee Shop or Restaurant
  • Food Import & Export
  • Wine or Alcohol Import & Export
  • China Local Food sales

4. China Manufacturing WFOE

  • Set up a Factory
  • Manufacture products for export
  • Assemble Products
  • Engineering Factory

What are the Advantages and Disadvantages of a WFOE?

In one hand, the majority of companies coming to China focus a lot on building strong sales strategies and expanding into such huge market that is China. On the other hand, some might overlook the fact that in order to successfully operate the new company, choosing the right structure is crucial to truly achieve a solid expansion.

To better help on your decision process, here is a list with some of the key points why a WOFE is one of the best options in China.

  1. Independence and freedom to implement the worldwide strategies from its parent company without having to consider the involvement of a Chinese partner; Take control, be the boss.
  1. Ability to formally carry out the business rather than just function as a representative office and with the ability to issue invoices to customers in RMB and receive revenues in RMB;
  1. Capability of converting RMB profits to US dollars for remittance to its parent company outside China; Working in China and not being able to enjoy the outcomes of your work out of China? Not what most would prefer;
  1. Protection of intellectual know-how and technology in China;

Imagine you start operations in China and suddenly realizes that someone else holds the trademark of “your” brand. Don’t let that happen to you. Register trademarks using your local company to so.

  1. For Manufacturing WFOEs, there are no special requirements to Import or Export its own products; Always good to save time and efforts.
  1. Full control of human resources, greater efficiency in management and development plans of your company;
  1. No need of minimum registered capital, no need of physical office rental, and no need to physically come to China to incorporate the company.

These are some of the possible disadvantages:

Setting up a WFOE does not mean you can engage in any type of business activity. In China, WFOEs can only operate within the business scope initially approved by the authorities. Business operations other than those initially authorized are subject to further approval by the relevant authorities. Hence, it is vital to determine what you want to do from the onset.

Choices made during the registration of your business carry significant implications to the overall tax liability of your business and your ability to operate.

Setting up a WOFE can take from 2 to 3 months.