Registering a company in China is complex and risky. In this guide, we’ll walk you through everything involved in choosing a business structure and forming a company in China—without risking a problem.
We will look at the four critical steps in forming a company without problems, and introduce case studies of what happened to other companies. These five steps are: 1. deciding on a business structure, 2. drafting effective corporate governance documents, 3. uploading legally compliant business disclosures, 4. getting regulatory permitting for your type of business, and 5. fulfilling financial requirements such as registered capital. All companies formed in China are required to achieve these four steps to be in good standing.
Making mistakes at any step could result in significant legal risks and liability, possibly resulting in fines or a business shutdown. We’ll provide strategic recommendations so you can sail through without problems.
Contents
1. Business structures, cost, and timeline for company setup
2. Necessary legal documents for corporate governance
3. Information disclosure requirements
4. Permitting process required prior to incorporation
5. Registered capital, bank loans, and foreign exchange
1. Business structures, cost, and timeline for company setup
Available business structures
Foreign individuals and organizations can form a business in China, and these can include a limited liability company (LLC), Corporation, Limited Partnership (LP), or a Joint Venture (treated as a GP). The certificate of information is included in the business license, which qualifies you to do business anywhere within China. There are some exceptions, for example, opening an office in a jurisdiction and hiring full-time employees there will require a separate local division registration. The LLC structure is the dominant form used by foreign businesses in China, because it places few limitation on operations, capital ratios, and profit repatriation.
These are the foreign business registration options:
Foreign Owned Company: an entity that has the advantages of separate legal personality, carry on business in China, and with limited liability for shareholders. LLCs are almost always used, but corporations and limited partnerships are also an option. However, it pays a separate corporate income tax, must file foreign investment information reports, and is subject to foreign investor restrictions, such as the list of exceptions to foreign investor access. (see also, Foreign Investment FAQ). They are also subject to industry-specific registration requirements.
Joint Ventures: similar to a general partnership, a joint venture between a local Chinese partner and a foreign investor does not have separate legal personality, but is an organization that can act in its own name as a party, and hire employees in the same of the joint venture. The foreign investor can be fully liable for the acts of the joint venture. Thus, a partially foreign owned LLC as a vehicle for the joint venture is often preferred.
Representative Office: a less expensive option than incorporation is to register a company representative office, which allows you to obtain visas for foreign employees and hire local staff to represent your company in China, except for anything that would be politically sensitive or implicate national security. The main limitation of a representative office is you cannot undertake any for-profit activities or market transactions. Representative offices are provided for in detail by the China Companies Act, because they function just like an unlimited liability company that has a small range of permitted business activities.
Regional Divisions: a broad equivalent of US out of state registration, aka “foreign qualification for corporations,” when operating in a region outside your jurisdiction of incorporation, you need to register a regional division (in China English, called a “branch”). This is mandated for carrying on certain kinds of business locally, such as operating factories or distribution warehouses. There are numerous restrictions when registering a regional division, such as requiring obtaining a separate business license and meeting local operations regulatory requirements.
A regional division is not a separate legal entity but rather a division of an existing company, thus there is no limitation of liability as if you were to form a separate company locally. You don’t need to register one for each branch office; it allows operating anywhere within the jurisdiction.
The process, cost, and timeline
There are several steps involved with forming an entity. First, you’ll need to choose a business entity name, and the “distinctive element” of that in China is a unique intellectual property asset that is different from but subordinate to a trademark. Since the distinctive element of your business name is commercial brand intellectual property and regulators want to avoid risk of confusion among consumers, the name selection process can be challenging. The name also needs to localized in Mandarin, a stumbling block that has cost companies like New Balance heavy losses; read China Brand Name Selection Legal Risks to know about the branding legal strategies.
Upon name approval, basic information is uploaded about the business to the system and a written filing is made with the market regulator to obtain a business license. Since this is for a foreign business, you must file a foreign investor information report, which will allow the Ministry of Commerce to make its national security review. For more information about foreign investor information reports, take a look at the official government guidance we’ve translated to English here.
Finally, you’ll get approval to open a bank account and remit capital funds to start business.
How secure are your deposited funds in China?
Under China’s foreign investment law, arrival of capital funds in the bank triggers the “establishment of the investment” status under China’s foreign investment law even if the company itself hasn’t been formed, which immediately entitles you to protection from asset seizure or discrimination. (see our Foreign Investment FAQ) Some approvals related to the company must be in place prior to formation, for example the company name, whereas some approvals are obtained after formation. The entity formation is complete on the day the market regulator issues a business license, which is the document containing the certificate of incorporation information, and this is therefore the date on which the entity may have separate corporate personality.
How long to complete?
The incorporation process in China is currently averaging 15 days from initial company registration filing to obtaining the business license; there is significant variation depending on the region and the permitted activities sought for the business. The timeline can be delayed significantly because the foreign investor must document that they have legal capacity to form a company, which involves providing identifying documents and a power of attorney to form the entity.
These documents typically must be notarized in the jurisdiction of the investor’s residence, and then legalized by their diplomatic service, which can add additional processing delays. Some additional delays can occur unexpectedly, for example some business registrars in Chinese regions have requested that the power of attorney signing be videotaped.
How much will it cost?
No-frills company registration in China by minimally trained agents will usually cost around 15,000RMB-20,000RMB as of 2025, but this does not include any legal advice or expertise that would come with a lawyer. For complex registrations requiring sophisticated legal advice, the costs could reach 200,000RMB.
The no frills would be appropriate for a smaller consulting or services business without a lot of financial exposure. For more complex business, less qualified agents may also make mistakes or cut corners when registering the company, resulting in lack of qualification to carry on the intended business. For example, qualification to do pharmaceuticals research or operate schools involves complicated regulatory issues. Thus, the amount of legal advice sought should be proportionate to the scale and risk exposure of the business. The government fees for a registration are minimal, usually 1,000 to 3,000RMB for a registration. There are some other costs however, for example registration will usually require an office lease which can be expensive, but some jurisdictions allow registering in a free virtual office that minimally satisfies regulatory requirements.
2. Necessary legal documents for corporate governance
Your representative will need to prepare the standard LLC formation form, identity verification documents for the investor, power of attorney, and business organization documents such as articles of incorporation. Shareholder cooperation agreements and operating agreements don’t need to be filed separately with the government. Nonetheless, a joint venture requires a separate joint venture agreement to be signed between the parties.
If other parties participate in the entity being formed, corporate governance documents are necessary to effectively control legal risks. Read on to see how to control these risks, but sole investors can jump to the section on information disclosures.
Risks: disputes between shareholders & partners
Bad Articles of Association
The Articles of Formation for an LLC defines the rights and obligations of shareholders, directors and officers. Ambiguities or conflict with statutory law can sow chaos in corporate governance and even shareholder disputes. Mitigate risks by having your attorneys use an Articles that complies with the China Companies Act of 2024, and clearly express the shareholder rights such as dividends, and corporate governance matters such as board of directors composition.
In a common scenario, a venture capital backed startup was formed with an Articles of Formation that lacked an effective provision for shareholder exit. When the investor sought to exit, the company refused, leading to a corporate governance deadlock and a dispute over shareholder exit. (Case described in a Chinese-language law firm article here)
Bad partnership agreement
When partnering with another investor, lack of foresight in the contract with other investors can result in disputes or inability to carry on the business.
Take control by having your attorney draft a partnership agreement that describes capital contribution, management responsibilities, voting rights, dividends, and exit. Clearly communicate with your attorney about your business plan and what you need to accomplish, ideally using a written memorandum format prepared by a translation expert.
Serious mistakes by investors have been described by Beijing Justice Department—they constantly see partners enter into agreements with bad partnership agreements that don’t describe who does what work and how profits will get distributed or will be retained. As a result, the partnership enters deadlock and the business is paralyzed. The problem is so severe they warn about it on their website (in Chinese here). It’s a justice department matter because angry disputes can disrupt China’s much-valued “social harmony.”
No shareholder cooperation agreement
In China, you need a shareholder cooperation agreement if involving other shareholders, otherwise you will encounter disputes over unclear obligations, share transferrability, exit, and profit distributions.
Avoid this mistake by having a separate shareholder cooperation agreement in place prior to company formation that describes what will happen with issues such as profits, voting, investment lock-up, and exit. The Articles of Formation for the LLC must be prepared according to what the shareholder agreement says.
A common disaster scenario is where the parties don’t sign a shareholder agreement but attempt to exit the company by demanding a share repurchase. This results in deadlock and costly litigation for the shareholder to exit.
Nominee shareholders
Many international companies are interested in using nominee shareholders to disguise their nationality as Chinese, thus evading discrimination. (see strategy article) When using a nominee shareholder, you may need to disclose the beneficial owner’s identity to the business registrar in some cases, otherwise they will lose their shareholder rights.
To control risks when using a nominee shareholder, consult with your attorney to see to what extent beneficial owner identity should be disclosed, and direct the attorney to draft a thorough nominee shareholder trust agreement covering those shares.
Theft of shares by a nominee shareholder can occur when they exploit legal loopholes to seize ownership from the beneficial owner. To arm yourself with powerful China law knowledge, see our article about nominee shareholder legal risks.
3. Information disclosure requirements
All of the relevant information about the business entity then must be uploaded to the National Business Credit Lookup System, so that your information can be disclosed to the public. (online in Chinese) During due diligence investigations, a counterparty may view all of the business filings you make with the market oversight agency, and you definitely should get a translated copy of that report for your in-house team to review.
Not all information is made public; similar to the US Securities Exchange Commission process, sensitive information can be redacted or viewed only by authorized government personnel, with only relevant summary information available online.
Required initial disclosures:
- Business Name
- Shareholder Identities
- Registered Capital
- Permitted Business Activities
- Statutory Representative
- Directors
- President
- History
- Security Interests & creditor enforcement
- Regulatory penalties
Immense confusion occurs when discussing these matters with ESL-speaking China attorneys. The reason is, some of these native English terms above are totally different from China English. For example, the word “lookup” as used in other countries in China English is termed “publicity,” whereas in native English “publicity” is a public relations term used for getting media coverage, and is a legal term in defamation law for negative PR.
Additionally, the chief executive of an LLC, the “President,” is called the “General Manager” in China English, the reason being US LLCs in the early 1980s adopted for the China LLC statute, at that time, did in fact more often than not call the President as a “General Manager.”
China’s universities have gotten in touch to say they are extremely interested in hiring American attorneys to teach legal English at law schools, so clients can begin to understand their otherwise valuable legal advice.
Required periodic information disclosures
A China LLC must file an annual report every year by June 30. You must include this information:
- Company details
- Investors
- Control of the company
- Assets & liabilities
- Permitting status
- Foreign investment compliance
These will be disclosed directly to by the government business credit platform after you update it in the online portal. A company has some discretion in declining to disclose some financial information.
Monthly tax filing is required. In China, business tax filings are prepared and submitted monthly, but there is also a quarterly report option. This is not a quarterly tax prepayment obligation, rather you must do a full tax filing every month, with detailed schedules including images of all tax receipts and bank transaction records.
An annual tax filing is also required every year. Value added tax rates and processes are determined by your total revenues; the business will be classified as a large or small taxpayer. Large taxpayers typically pay VAT monthly, and small taxpayers remit it quarterly. An accounting firm will make tax filings on your behalf.
How your confidentiality is protected
Under the PRC Foreign Investment Act of 2019, if the business registrar needs access to trade secret related information in order to process the registration, they have a duty to ensure the material remains protected and confidential. Government officials may be held personally liable for disclosing the secrets of a foreign investor.
Risks during information disclosure filing
Simply filling in business formation filings in China can be very high risk because China’s laws that incorporate smart best practices from the Revised Uniform Deceptive Trade Practices Act added several highly aggressive provisions.
Possibility of unlawful consumer confusion
The China Competition Act references its Trademark Act to prohibit having or using a business name that could cause confusion among the consuming public. Fundamentally, a business name in China is intellectual property parallel to trademark rights. If the business name you register could cause confusion among the consuming public due to conflict with a registered trademark or another business name, you can be liable for a deceptive trade practices violation under the China Competition Act. You are liable even if the market oversight regulator approves your business name.
Case Studies on Business Name Infringement
Volkswagen
In cases about Volkswagen’s Chinese name “Dazhong Qiche,” in Baidu v. Dazhong Qiche and Dazhong Qiche of China v. Dazhong Qiche of Henan, a company that registered a business name to Volkswagen’s trademarked was liable for infringement on the Chinese version of the trademarked Volkswagen name because the two names were similar. As a search engine, Baidu itself was also liable for selling advertising to the Volkswagen lookalike company.
Siemens
This case shows allegations of trademark infringement due to use of your business name can cripple your operations, because even printing the name of your company on product packaging violates the China Competition Act. Siemens obtained a 100 million CNY judgment against a company for registering and using its Mandarin business name, Ximenzi. (see a translated government overview here)
But this is not always illegal. Canon Cameras and Clorox’s Glad bags both use the same exact Chinese name, Jianeng, but without causing consumer confusion.
New Balance
The company New Balance launched operations in China without registering defensive marks for its Chinese names; the company failed to notice that a Chinese shoe salesman’s personal name from birth was coincidentally very similar to the Chinese name for New Balance, Mr. New Balance trademarked his own name, and as a result New Balance LLC was sued by Mr. New Balance—and lost. (see in-depth article here)
Bad company address
A company registration agent could register your address somewhere different from your place of business, or the address used doesn’t satisfy regulations for its business license type. This can result in fines or even being shut down. Make sure that your company’s address satisfies all regulatory requirements, and if your place of business changes, make sure to get your address changed as well.
In a real-life case, a cheap company registration agent used a residential address to form their client’s company, which was unlawful under the regulations. When the company started operating, the market regulator discovered the discrepancy and fined the company 30,000CNY, and filed negative information on its business credit report.
Inaccuracies in registration filings
The market oversight regulator will invalidate the business license and impose a fine if it believes your filings constitute misrepresentation or deception. When forming a company, your lawyer should check closely that all information in the filings is genuine and true, and you should update relevant information when it changes.
In serious cases publicized by the government, false information about registered capital and business address was discovered leading to a fine, further the government placed the perpetrator on a blacklist so that they could not obtain bank loans or other financing in the future.
Perform due diligence when registering a company in China by having someone experienced in intellectual property run a check for trademarks that conflict with yours; if you have a significant brand, register your trademark, including both English and Chinese names, and defensive trademarks. Otherwise, a trademark troll could notice your interest in China and register a trademark under your company’s name.
4. Permitting process required prior to incorporation
In a typical case, the foreign business will form an LLC which will involve consolidated filings at the local government’s department of market oversight or at a local district office. The certificate of incorporation will be included as part of the business license. Chinese regulators impose two layers of permitting requirements, and in most cases the market oversight regulator will add a number of permitted business activities to your business license based on your declared business purpose and whether you meet certain regulatory conditions for that business.
For example, a consulting company can use 100% remote workers, but temporary employment agencies must have a physical office location and capital. In some cases, you will be required to obtain a permit from the industry’s regulator before the permitted business activity appears on your business license.
For the 20% of our readers who are Chinese lawyers using Google Translate to identify reliable legal memorandum material, machine translation tools such as Youdao Dictionary calls “permitted business activity” by its China English name, “business scope.” Here, the Chinese phrase (经营范围), literally meaning ‘the limits/boundaries of the business operations (impliedly: by the government, not board of directors)’ in native legal English is referred to as “permitted.”
A different regulator’s permit may be required
Below we’ll cover the additional permits and in some cases regulatory reviews required prior to entity formation.
An industry-specific permit is required for anything restricted by the Foreign Investment Access Exceptions List. Common examples include printers, critical electronic technologies, and waterway shipping. Industry-specific permit examples include schools, health care facilities, and insurance. Anything that affects national security required special approval, for example investment management or engineering projects.
Regulatory review may be required by the Ministry of Commerce or one of its component administrative agencies organized as a department of local government, and in particular an economic review by the NDRC. When a foreign corporation participates in a joint venture with a local Chinese partner, the market concentration and governance structure may implicate anti-trust law and therefore require a regulatory review before the joint venture is formed.
Risks during the permitting process
An attorney should review your business plan to check what kind of industry specific permits you will need, and perform follow-up reviews periodically to see if your operations have changed in a way that requires different licenses.
In a publicized case, China’s market oversight regulator discovered that a company was providing financial services without the required permit, and consequently imposed a massive fine, suspended their business license, and shut down their business. They even placed adhesive paper seals on the doors of all places of business, so that unlawful entry could be detected and matched to CCTV footage.
5. Registered capital, bank loans, and foreign exchange
Registered capital is essentially a kind of deposit the investor is asked to pay, to provide payment security to anyone you do business with. It’s different from authorized capital, which is a separate system that exists under Chinese law. A German legal concept, registered capital was adopted as an integral part of its debtor-creditor law, and is a direct continuation of the ancient Qing Dynasty guild security deposit rules it replaced about a century ago.
As in ancient times, these numbers can be bizarrely high, and as a result compliance is very poor in China. In fact, the highest traffic corporate law related pages at PRC law firms on Baidu, is articles about how to to circumvent or get around registered capital. (Baidu keyword data, January 2025). In practice, registered capital non-compliance is largely a civil matter, where under Chinese debtor-creditor law, an LLC’s liability limitation excludes unpaid registered capital (see article here).
Under the revised China Companies Act, despite the nominal value and nominal due date, often an unreasonably high amount, there is in practice no regulatory minimum capital contribution requirement or payment deadline, unless you are in a small number of industries that has requirements.
How registered capital works in practice
Registered capital is designated on the business license when the business entity is formed, and is a number that can be increased or decreased with regulatory approval. The rules nominally state that subscription to registered capital must be completed by the deadline shown in the articles of formation.
For example, if you have $200,000USD of unpaid registered capital, and your supplier sues your LLC and obtains a $100,000 judgment in a contract dispute, then you as a shareholder are personally liable for the $100,000 registered capital contribution, which is enforced by naming you a debtor in execution. Suppose as a debtor in execution, you can’t pay the $100,000, then the supplier can obtain an exit ban against you to block exiting China and add your name to government business blacklists.
Personal bankruptcy is not allowed in China. There are PRC nationals who founded companies who are prohibited from taking planes or trains due to the high expectation of personal liability. The basic reason is, they are personally liable to pay back their registered capital to creditors, and cannot discharge that obligation because there is no bankruptcy process. However, as we wrote about here, the government has been gradually winding down personal liability for business debts.
Financing eligibility
The foreign investor can also provide personal cross-border loans to the company, which are subject to foreign exchange and foreign loan rules; if not followed, the bank will reject the remittance. A foreign company can take out loans from a Chinese bank or other third parties, or accept private equity placements. Banks will typically perform due diligence into real assets and capital when deciding whether to make a loan, as sham registered capital is so common in China as to not be a realistic measure of default risk.
On the investment banking side, a foreign owned corporation is allowed to do an IPO in China. While not currently common, policymakers are working hard to make this a more attractive option for foreign firms.
Foreign exchange & capital control privileges
A foreign owned company also has some privileges under China’s foreign exchange regulations as to paying for imports, services, dividends, or to withdraw funds when the company is wound up. Typical cross-border payments require a relatively quick foreign exchange filing to complete. However, capital account transactions will require making a both business registrar change filing and a foreign exchange filing, and processing these can be expensive and time consuming to complete.
Risks in financial compliance
Not contributing the required registered capital
A new company in China has a legal obligation to subscribe to its registered capital, and while this is treated as optional, many legal due diligence processes in China focus on it. Business partners and financial institutions see failure to deposit those funds on time as a sign of poor management.
Alibaba Tmall ecommerce for example, has a due diligence checklist for registered capital specifically as part of its commitment to consumers. Public institutions in China love to buy from foreign brands, such as Otis escalators in subways, Juniper networking equipment in universities, and GlaxoSmithKline medicines in public hospitals. However, failure to meet your registered capital deadline can disqualify you from many opportunities to submit bids for these opportunities.
Strategically approach registered capital to avoid these problems, starting by setting a reasonable registered capital amount for your industry, so that you can avoid the above kinds of consequences. Joint ventures or companies involving other shareholders should have their lawyers draft a Shareholder Cooperation Agreement that describes timelines for capital contributions and ensures the compliance requirement.
In a textbook case, a company failed to meet its declared 10 million CNY registered capital level, the lack of subscriptions was discovered by a Big Four auditing firm, and as a result, subsequent investors concluded that this company would not be a reliable investment partner. Private equity firms’ concern was focused on the financial compliance failure; if the company declared a lower registered capital amount, they would have not raised this red flag The startup ran out of funds and went out of business.
Illegal registration of capital
Circumventing registered capital law is a hot topic in China, but non-compliance with capital contribution requirements can lead to significant civil liability. A common tactic among shareholders is to contribute sham registered capital. This creates a lot of risks for the foreign investor not just as to their own compliance, but also when working with partners.
If you’re a minority shareholder, have directors perform due diligence to verify the capital was actually deposited. Don’t allow use of virtual assets for capital contributions, and real estate or intellectual property assets being contributed should have a third-party appraisal completed.
In classic cases, majority shareholders illegally manipulated the board of directors to allow them to use round-tripping schemes to deposit registered capital, filed with the government as paid, but then used various schemes to remove those funds from the company. Read more about sham registered capital and these cases here.
A more common trend is for shareholders to contribute intellectual property assets such as patents as their registered capital, but appraisal reports reveal that the registered capital contributions declared for the asset are grossly inflated compared to the appraised value of the asset. When sued in court by creditors under the China Companies Act of 2025, a shareholder in these cases is personally viable for the shortfall in registered capital, and other shareholders, directors, and executives may also be personally liable if they show “conscious disregard” towards the non-compliance. (In-depth discussion here)
Conclusion
In this article, we’ve learned that there are five big steps you need to take when forming a company in China. Let’s recall key action items within each of these five steps:
- Business structure: Choose between LLC, Corporation, Limited Partnership, Joint Venture (treated as General Partnership), or Representative Office?
- Governance documents: foresee and resolve potential partner disputes before they happen.
- Business registration disclosures: avoid intellectual property infringement due to business name, and avoid fraud or misrepresentation liability in business disclosures. Register defensive trademarks in advance.
- Regulatory permits: check if a second government agency needs to green light your planned operations before the business registrar.
- Financial requirements: make strategic choices about your registered capital declarations, and get banking set up appropriately to exercise your foreign exchange rights.