How to Set Up a Company in China: A Founder’s Guide

Roman Verzin · June 15, 2026 · 14 min read

Setting up a company in China is not like setting one up in Hong Kong or Singapore. In Hong Kong you register remotely, and once the certificate arrives – in a week or two – you start invoicing. China asks for more, and it asks before you earn your first yuan.

China is a large market, and it runs on substance. A Chinese company needs a real office, with local staff on the payroll and books that match what it does. Register the company and ignore the rest, and the structure breaks.

USG has watched entrepreneurs from more than twenty countries register a Chinese company and shut it down a year or two later. Not because China is impossible, but because the setup never matched how the business worked. This guide walks through getting that match right from the start – the entity, scope, people, and the substance that keeps the whole thing standing.

Step 0 – do you even need a Chinese company?

Before any registration step, there is a question most agents skip, because the answer can lose them a sale: do you need a Chinese company at all?

Most founders who come to us are better served by Hong Kong, which covers both trade with China and international banking. A mainland company pays for its overhead only when the business operates inside China.

We use one number for this. A Chinese trading operation starts to make sense at around $2 million a year in turnover. Below that, the fixed cost of substance – office rent, local salaries, the VAT you pay up front and reclaim slowly, monthly accounting – is usually more than the structure gives back. Count it against your own margin before you decide.

Run it against your annual turnover:

• Under $1 million a year – a Chinese company loses money. The fixed costs eat the margin.
• $1 to $2 million – you can break even, but you do a lot of extra work for an outcome a leaner structure gives you anyway.
• $2 million and growing – now the company makes money and opens doors Hong Kong cannot.

At that volume the balance changes. A Chinese company reaches suppliers who do not export at all, and gives you a contract you can enforce in a Chinese court if a supplier fails you. But only at that size.

For the first ninety per cent of the way, the right answer is Hong Kong, and we will tell you so even though we register companies in both. If you want the full picture, we have a separate piece on a Hong Kong company versus a China company. The rest of this guide assumes you have crossed that line and a Chinese company is the right tool – often for an entrepreneur expanding an existing business into China.

Choosing your entity – WFOE, joint venture, or rep office

China gives foreign entrepreneurs three options, and one of them fits almost everyone reading this.

The WFOE – a wholly foreign-owned enterprise – is a limited company you own 100%, with no local partner required. It can trade, import, hire and bank on its own. Since the 2020 Foreign Investment Law it is also simpler to set up than it used to be. For most, this is the answer.

WFOEs come in a few types, and the type drives your capital and paperwork:

• Consulting or service WFOE – the lightest. Lowest practical capital, and a virtual office is usually accepted. The most common choice among our clients.
• Trading WFOE – needs an import-export licence, and once you want VAT refunds, a real office.
• Manufacturing WFOE – the heaviest. Real factory space, an environmental assessment, and the highest capital.
• Technology WFOE – if you do R&D, it may qualify for High and New Technology Enterprise status, which cuts corporate income tax to 15% from the standard 25%.

A joint venture brings in a Chinese partner as co-owner. It makes sense in two situations: when your industry is restricted to foreigners and a local partner holds the licence you cannot, or when a serious partner brings market access you cannot get on your own. Weigh the risks before you sign. If your partner holds 51%, your partner controls the company, and unwinding a JV that has gone wrong is slow and expensive. Pick the partner far more carefully than you pick the structure.

A representative office is not a company. It is a local base for an existing foreign business – market research, supplier relationships, quality oversight, a legal home for foreign staff. It cannot earn money inside China: it is not allowed to sign revenue contracts or to issue invoices. If you need people on the ground but not a trading entity, it fits. For anything that earns, you need a WFOE or a JV.

Business scope – your permission to operate

In Singapore you can write “any lawful business” and move on. China does not work that way. Your business scope (经营范围) is a specific list of what your company is allowed to do, and it controls more than it looks like it should.

Your scope decides which invoices you can issue and which licences you can hold. And it decides whether your bank lets a payment through. Say your scope is “consulting” and a buyer wires you a large payment for goods – expect a question from the bank, because the money does not match what your company is licensed to do. A scope mismatch is one of the ways founders end up with a payment held or an account frozen.

Scope also sets your tax classification. Services and traded goods sit in different VAT bands – roughly 6% on most services against 13% on goods – and if your invoices drift from your scope, the tax bureau can reclassify you or add penalties.

Two rules keep you out of trouble. First, match the scope to the business you run: broad enough to grow into, narrow enough that it does not read like a shell with no specific business. Second, get it right at registration, because changing scope later is a formal amendment that can take anywhere from two weeks to two months, and a licence can hinge on it. When we draft a trading scope, we usually add consulting to it, so the company can take the occasional non-trade payment without extra compliance questions.

The registration process, step by step

Once you know your entity and scope, the registration itself follows a set order. The sequence below is the WFOE route. A joint venture takes the same steps with a heavier document load; a representative office has a lighter procedure of its own. In a standard city like Shenzhen, Guangzhou, Shanghai or Beijing, the filing takes about fifteen business days once your documents are ready. If your shareholder is a foreign company rather than an individual, add one to three weeks for legalising the corporate documents back home on the apostille route, or three to six weeks where the shareholder’s country needs consular legalisation.

1. Name approval. Submit three to five Chinese names to the AMR (Administration for Market Regulation). The format is region + your unique name + industry + 有限公司. Names are checked in Chinese only, usually in one to three days.
2. Legalise your documents. An individual shareholder legalises a passport; a corporate shareholder legalises the whole chain – certificate, articles, board resolution, incumbency – notarised in the home country. This is the slow part of the whole process.
3. Lock an office address. A registered commercial address is mandatory. A virtual office is usually fine for a consulting WFOE; trading and manufacturing need real space. Before you sign anything, confirm the landlord can give you the registered lease certificate, the 红本 (hóngběn).
4. File with the AMR and collect your business licence. The 营业执照 carries your unified social credit code, legal rep, capital, scope and address. This is the document everything else hangs on.
5. Carve your seals. A Chinese company runs on its seals the way a Western one runs on signatures. You get a set of official chops – company, finance, contract, invoice, legal rep. Whoever physically holds them controls the company, so keep them secure.
6. Register with the tax bureau. This activates your tax accounts and the device that issues fapiao, China’s official invoices. You choose general or small-scale taxpayer status here.
7. Register with SAFE. The State Administration of Foreign Exchange. Without this, foreign money cannot legally come in or go out, so it gates both your capital injection and your cross-border payments.
8. Open your bank accounts. A basic account first, then a capital account to receive foreign investment. The legal rep has to appear in person.
9. Inject capital when you are ready. There has been no statutory minimum since 2014, and you have up to five years to pay it in. Many delay it and fund early operations with a director’s loan instead, which is a normal, legal entry on the books.

The people – key roles and the smallest workable team

China makes you name specific people before it lets you register, and two of those roles carry personal responsibility. Get them wrong and the cost lands on a person.

The legal representative (法定代表人) is the company’s official face. They sign the contracts and deal with the government. They also answer for the company’s compliance: if the company falls into tax arrears or breaks the rules, the legal rep can be personally barred from leaving China until it is sorted. This can be you or someone you appoint, a foreigner or a Chinese national. Choose carefully.

The finance officer (财务负责人) is the person the tax bureau talks to. They sign off on filings and manage the device that issues fapiao. This role almost always sits with a Chinese national who lives in China, and for most of our clients it is filled by someone from the accounting firm.

The supervisor (监事) is an oversight role unique to China, and it cannot be held by the legal rep or a director. Since the 2024 Company Law reform, smaller companies have room here – a single supervisor, or in some cases none at all.

So you name two people at a minimum: a legal representative and a finance officer. Everything else depends on how complex the business is – with one exception worth knowing early. Chinese law splits the money work in two: a bookkeeper cannot also handle cash and primary documents; that belongs to a separate person called the treasurer (出纳). A one-person finance setup does not pass, so the finance side is two people even in a small company.

Office and substance – what an inspector looks for

A registered address lets you incorporate; a real office is needed the first time you claim a VAT refund.

For a consulting company, a virtual office is usually enough to register, and often enough to open a basic bank account. A co-working space works too in the big cities. The one thing to check before you sign is the registered lease certificate, the 红本 – without it from the landlord, you cannot complete tax registration or prove your presence later, and you may have to move and redo that part.

For a trading company the requirement is stricter. When you claim an export VAT refund, the tax bureau can send an inspector to the door. They check three things before they release the money:

• a real office at the address that an inspector can walk into;
• at least one employee on the payroll with social insurance paid;
• a few months of real accounting behind you before the first claim.

A company that files for a refund the week after its first shipment gets looked at hard. With only a virtual office, the odds of a clean refund are roughly even at best; with a real office and staff and some history behind you, they climb. The office is more than an address – to a bank or a tax official, it is the signal that the business is real.

After registration – the licences and filings you cannot skip

Some businesses need extra licences on top of the business licence. Import and export means customs registration. An online service usually needs an ICP filing, and regulated sectors like food or medical devices each carry their own permit on top. Writing the activity into your scope does not replace the licence – you need both.

Then there is the annual cycle, and this is where neglected companies get into trouble. A Chinese company files VAT monthly and corporate income tax quarterly, is audited each year by a licensed Chinese accounting firm, reconciles its annual tax by 31 May, and files an annual report to the AMR by 30 June. Miss that 30 June report and the company lands on the “abnormal operations” list (经营异常名录), which can freeze the bank account. Removal from the list requires the late report and a formal application. A Chinese company is never idle: if it exists, it files.

Getting profits back out to the parent or the shareholder has rules of its own on dividends and foreign exchange, which we cover separately in how to legally move profits out of China.

Is your sector one Beijing backs?

One more thing worth checking before you pick a city: whether your industry is one the government actively supports. China publishes its priorities openly. Right now they centre on technology self-reliance and the green transition, with high-end manufacturing close behind. Semiconductors, AI, electric vehicles and batteries, renewables, biotech and a dozen similar sectors get government backing.

The 15% tax rate that comes with High and New Technology Enterprise status is part of that backing – though the status is hard for foreign-owned companies to get – and some districts grant a window of very low or zero tax in the early years. There is subsidised space and faster approvals, sometimes direct funding. That support goes to companies that add value on the ground through research or production. A trading or consulting shell does not qualify, however the scope is written. And almost none of it is listed on a website – it moves through local officials and the relationships you build with them, which is why you do not chase it alone or send your accountant to do it for you. If your business fits, it is worth a conversation with the right local bureau.

The traps that catch foreign founders

A few mistakes come up again and again. All of them are ordinary, and easy to make when you are setting up from abroad.

• Getting the business scope wrong – too narrow to operate, or so broad it triggers extra licensing and bank questions.
• Treating the legal rep as a formality – it is the name that gets barred from leaving China if the company owes tax.
• Losing control of the seals – whoever holds the chops runs the company, so they do not belong with a departing employee.
• Setting registered capital too low to look credible, or so high that you are legally obliged to pay it all in.
• Missing the 30 June annual report and ending up on the abnormal-operations list.

The entrepreneurs who do well in China put the substance in place before they lean on the structure, and they treat compliance as part of running the company from day one.

Need help with this?

USG handles company setup in China from start to finish – and tells a founder when Hong Kong is the wiser first step. To judge whether China fits the business you are building, we go through the specifics on a 30-minute call.

Book a call with USG