Business registration type
1. Limited Liability Company
Established by less than fifty shareholders, each shareholder is liable for the company's debts to the extent of their paid-up capital, and the corporate legal person is fully liable for the company's debts with all its assets. This is an economic organization.
Note: For startups, a "Limited Liability Company" is currently the most suitable type of enterprise, for the following reasons:
(1) Shareholders of a limited liability company only need to bear "limited liability" to the extent of their capital contribution. This legally separates the company's and individual's assets, preventing entrepreneurs from bearing unnecessary financial risks.
(2) Limited liability companies have low operating costs, few organizational structures, and a simple structure, suitable for the initial development stage of an enterprise.
2. Joint Stock Company
Composed of 2 or more but less than 200 initiators. The company's total capital is equally divided into shares, and shareholders are liable for the company's debts to the extent of their shareholdings.
Applicable situations: Suitable for mature, large-scale companies. The establishment process is relatively strict and complex, and is not very suitable for start-ups and small and micro-enterprises.
3. Limited Partnership
Composed of general partners and limited partners. General partners bear unlimited joint and several liability for the partnership's debts, while limited partners bear limited liability for the partnership's debts to the extent of their paid-up capital.
Applicable situations: Suitable for venture capital funds and corporate equity incentive platforms (employee stock ownership platforms).
《中华人民共和国合伙企业法》 (The Partnership Enterprise Law of the People's Republic of China)
“Article 9: To apply for the establishment of a partnership enterprise, the following documents should be submitted to the enterprise registration authority: registration application form, partnership agreement, and partners' identity certificates.”
4. Wholly Foreign-Owned Enterprise
An enterprise established in China by a foreign company, enterprise, other economic organization, or individual in accordance with Chinese law, with the entire capital invested by foreign investors.
Applicable situations: Enterprises whose shareholders are foreigners or foreign companies. The process is more complex and the supervision is stricter than that of domestic companies. The name is consistent with that of a limited liability company.
《中华人民共和国外商投资法》 (The Foreign Investment Law of the People's Republic of China): Foreign investment as referred to in this Law means investment activities directly or indirectly conducted in China by natural persons, enterprises or other organizations of foreign countries (hereinafter referred to as foreign investors), including the following situations:
(1) Foreign investors establish foreign-invested enterprises in China alone or jointly with other investors;
(2) Foreign investors acquire shares, equity, property shares or other similar rights in Chinese enterprises;
(3) Foreign investors invest in the construction of new projects in China alone or jointly with other investors;
(4) Other forms of investment as stipulated by laws, administrative regulations or the State Council.
Basic Steps for Establishing a Foreign-Invested Enterprise:
The process of establishing a foreign-invested company may vary by region, but generally includes the following key steps:
a. Name Approval: First, it is necessary to obtain company name approval from the local market supervision department, ensuring that the name is not already in use and complies with relevant regulations.
b. Document Preparation: Prepare the necessary documents, including but not limited to the company's articles of association, shareholder meeting resolutions, board of directors resolutions, investor identification documents, appointment documents for legal representatives, description of business scope, and registered capital declaration.
c. Submission of Application: Submit all necessary documents to the local market supervision department or relevant approval authority.
d. Obtaining Approval: Wait for the approval authority to review the submitted documents. Once approved, you will receive the corresponding approval certificate.
e. Registration: After receiving the approval certificate, apply for registration with the registration authority within the prescribed time limit, submitting all necessary documents and certificates.
f. Obtaining License: After registration approval, obtain the “Business License of the Enterprise Legal Person of the People's Republic of China”
g. Follow-up Matters: Including engraving seals, opening bank accounts, tax registration, and accounting and tax reporting.
Notes: Since January 1, 2020, China has cancelled the "Approval Certificate for Foreign-Invested Enterprises" and the "Acknowledgement of Filing for the Establishment of Foreign-Invested Enterprises" and instead adopted direct registration.
- The registered capital of a foreign-invested company can be expressed in freely convertible foreign currency.
- When setting up a company in China, foreign investors need to conduct notarization and authentication. The specific requirements depend on the investor's country.
- The business scope of a foreign-invested company should be clearly defined and must not exceed the approved scope.
5. Sole Proprietorship
An enterprise that is individually funded, owned, and controlled by an individual, and where the individual bears all the operating risks and enjoys all the operating profits. The investor is infinitely liable for the debts of the enterprise with their personal assets.
Applicable situations: Suitable for small-scale individual workshops, small restaurants, etc.
《中华人民共和国个人独资企业法》(The Sole Proprietorship Enterprise Law of the People's Republic of China)
“Article 9: To apply for the establishment of a sole proprietorship enterprise, the investor or their designated agent should submit an application for establishment, investor's identity certificate, proof of use of production and operation premises, etc., to the registration authority at the location of the sole proprietorship enterprise.”
6. State-Owned Sole Proprietorship Company
Refers to a limited liability company with sole investment from the state and where the State Council or local people's government authorizes the state-owned assets supervision and management institution at the corresponding level to perform the duties of the investor.
7. Other Types
In addition to the common company types mentioned above, there are some other types, such as joint ventures, enterprises established in the mainland by investors from Hong Kong, Macao, and Taiwan, and joint-stock cooperatives. These types of companies differ depending on their specific operating models and ownership structures.
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