Launching Your Business: Navigating Entity Setup in China
Setting up an entity in China can be exciting. You’re building a new operation on the ground in a country that you enjoy visiting. Yes, the process may be laden with administrative tasks such as signing documents, interacting with various government departments, and so on. Yet, amidst these complexities, there is a palpable sense of optimism as you build your China team – a team that could be the cornerstone of your company’s growth.
Engaging with professional services such as accountancy or law firms is often the first step, guiding you on registered capital, location, and beyond. These experts will guide you through the initial complexities. However, what will not be apparent at first, are the ongoing costs of maintaining your operation.
Unforeseen Challenges in China’s Business Landscape
In promoting The China Desk by Kinyu, we’ve encountered numerous business leaders who have faced challenges and regrets after opening their entities in China. And since we’ve established our own entities in Hong Kong and Guangzhou as well as a branch company in Tianjin, we’re well-positioned to shed light on the often-overlooked operational admin that is not clear from the outset.
These unexpected hurdles include:
- Profit Handling: Many overseas firms setting up in China aim to just cover costs without posting a profit, risking an official audit. China’s strict regulations require even profits earned abroad to be taxed.
- Capital Controls and Reporting: Unprepared companies may stumble on China’s capital controls and regular tax reporting.
- Fragmented Social Insurance policies: Hiring and paying mandatory social insurance in multiple locations in China cannot be done with a single entity – every city has their own rules.
- Changing Office Address: Registering a new office address? In China, it might take three months and cost up to $5,000.
Introducing the Kinyu Entity Series
The path to successful business operations in China is riddled with both expected and unexpected challenges. This guide aims to shed light on both, providing you with the tools and insights needed to thrive in one of the world’s most dynamic and intricate markets.
From the seed of initial setup to cultivating a robust, united team, this series explores every twist and turn.
- Entity Setup the Chinese mainland vs Hong Kong – What’s the Difference?
- The legalities, benefits, and challenges of both regions
- Comparing tax systems, laws, and business regulations
- Beware of the Shared Office as Registered Address
- The risks and regulations regarding shared office spaces
- How to choose the right location for your business
- China Permanent Establishment
- Understanding what constitutes a permanent establishment
- The impact on taxation and regulatory compliance
- The Role of the Legal Representative
- Duties, responsibilities, and liabilities
- Choosing the right legal representative for your business
- Hiring Across Multiple Cities in China
- The implications for foreign companies hiring across multiple cities in China
- China new employee management policy
- The Different Options for Hiring Your Team on the Ground
- Contracting vs. full-time hiring
- Navigating labour laws and cultural nuances
- China HR – Perpetual Attention Required
- Common HR challenges, from recruitment to retention
- Building a strong, cohesive team within the Chinese business landscape
- Exiting China – Key Things to Consider
- Closing an entity in China is just as cumbersome and expensive as setting one up.
- Advanced planning to manage redundancies and severance payments.
Many companies jump straight into setting up an entity. However, the aim of this series is to allow you to pause and ask yourself: do you really need to set up an entity? We hope this series will help you find answers to common questions and insights into challenges that might not be readily apparent!
Look out for regular updates to this series, and feel free to contact us or download a case study to learn more about The China Desk!
