Incorporating a Company in China: What Option Do Canadian Entrepreneurs Have?
Are you a Canadian entrepreneur and wondering how to grow your investment into a multinational? One of the methods that you should consider is incorporating your business offshore, and one of the top jurisdictions in China.
China is one of the fastest emerging markets, and it offers a number of opportunities for Canadian investors. The jurisdiction’s fast-growing economy and huge market are just two of the primary reasons why you should consider opening a business in China as a Canadian entrepreneur. To take advantage of this high-potential jurisdiction, the first step is company incorporation. So, what options for company incorporation do you have?
Wholly-Foreign Owned Enterprise (WFOE)
As the name suggests, a WFOE is a type of business formation that allows 100% ownership by foreigners. Unlike other types of business formations, such as joint ventures (JV), a WFOE does not require you to get a local Chinese partner. Because of this, it is the most preferred business formation by Canadians and other foreigners running businesses in China. Here are other advantages of registering a WFOE in China.
- Gives you total control over your business.
- Decision making in a WFOE is faster compared to joint ventures.
- You do not have to share profits with a local partner.
Joint Ventures
Another common type of business formation that a Canadian entrepreneur might consider is a joint venture (JV). If you opt for this model, it implies that you need to get a local Chinese partner before registering the company. Note that the Chinese partner is required to have a bigger shareholding, meaning that you will have less control over the business decisions. Furthermore, you will also need to share profits with the Chinese partner. However, there are unique benefits that come with opening a joint venture.
- A joint venture might allow you to get access to the restricted industries.
- With a joint venture, it is easy to penetrate the Chinese market by taking advantage of the already established networks of the local partner.
- Because you are pooling resources together with the Chinese partner, it means more funds will be there for research & development and marketing. These two attributes might be all that you need to grow your business to the next level.
NOTE: Investors are being encouraged by the Chinese administration to shift their joint ventures into WFOEs.
Representative Office (RO)
A representative office (RO), as the name suggests, is only opened to represent your Canadian parent company in China. This means that it is pretty simple to incorporate and does not need a registered foreign capital. However, a RO comes with major limitations, including the following.
- The company cannot conduct business deals.
- Cannot directly employ staff.
- It is not allowed to collect money from clients.
Nevertheless, a RO is considered a good option, especially if you are looking for business partners, suppliers, brand marketing, and market research.
Once you have identified the preferred company formation as a Canadian entrepreneur, the next step is incorporation, which we must say can be pretty complex. However, this should not stand on your way to getting into this lucrative market. The best way to register a company in China faster and more conveniently is through an agency.
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