Welcome to the Latest Instalment of our Entity Essentials series!
Welcome back to our series of blogs exploring the challenges and complexities of managing your entity in China. At Kinyu, we have firsthand experience in setting up entities in China, thanks to our provision of turn-key HR solutions through The China Desk. Through this process, we’ve discovered that while information on entity setup is widely available, the subsequent costs and administrative burdens only become clear after you’ve committed to the endeavor. In this post, we’re looking at shared office choices in China!
Office Address Debacle: Navigating Office Choices in China
Like every country, your entity in China must have a registered address. When setting up an entity in China, this means you’ll need to rent office space. To prove the address, you’ll typically need to provide a one-year rental contract and building blueprints to the local authorities.
A flexible option that many businesses find appealing is using a shared co-working space like WeWork. In such spaces, you can set up a single desk, which is often sufficient for the entity setup procedure.
If you continue to use that co-working space, that’s perfectly fine. However, it’s worth noting that such spaces can be expensive and may not be the most efficient way to expand your operation. If you decide to leave the shared office for a more affordable long-term solution, you’ll need to change the registered address of the entity. And that’s not cheap!
What are the Costs?
This process is both expensive and time-consuming.
Time Cost – This process can take up to three months to complete, especially if you include the necessary bank changes. The legal representative will need to visit offices in person. If you change districts within a city, you must first de-register with one district bureau before registering with another.
Advisory Fees – The process is not straightforward, so we recommend seeking professional assistance. If you engage a Chinese accountant or lawyer, they will charge fees for this service. Kinyu received quotes ranging from $1000 to $5000 USD. Additionally, changing details at the bank can be complicated, with procedures varying from bank to bank.
Travel Fees – As previously mentioned, the legal representative must be present at many stages of the process. If you are the legal representative and are not based in China, you’ll need to plan for at least two trips or one extended trip to handle this.
Virtual Office Fees – Ideally, your registered address should be the same as your operational address to avoid excessive costs and administrative burdens. Virtual office locations are available, but it’s crucial to work with a trusted partner, as many virtual offices may not have the proper setup to provide a compliant solution.
Considerations for Choosing an Office in China
So to summarise – think carefully about your choice of office before setting up an entity. Ask yourself these essential questions:
- Is it a long-term and scalable location?
- Do I need to be in the center of town?
- Where are my employees going to work most of the time?
Another question you should ask yourself: Do I really need to set up an entity in China?
Exploring Alternatives: Hiring a Team Without Setting Up an Entity in China
If you are simply looking to hire a team to manage your supply chain, setting up an entity in China might not be the right option for you. There are various alternatives that can simplify the process – you can read more about them here.
This is where The China Desk by Kinyu can add tremendous value. The China Desk offers a workspace for your team members and provides a compliant hiring solution.
If you want to learn more about how The China Desk can work for you, feel free to book some time with one of our team members!
