If you want to set up an enterprise in China, or doing business with a company in China, you have to know the typical types of enterprise for Foreigner in China. WFOE, Joint Venture company, Foreign Liability Limited Company, Foreign Partnership Enterprise, etc. What is the difference? In this article, we want our readers to know the differences of foreign enterprises when investing in China.
Wholly Foreign-Owned Enterprise(WFOE)
Firstly, WFOE company is very popular. Wholly Foreign-Owned Enterprise (WFOE or WOFE) refers to foreign enterprises, corporations, economic organizations or individuals which are 100% owned and capitalized in China by foreign investors. WFOE is not included the branches of foreign companies, enterprises, other economic organizations located in China, such as branch offices, representative offices, etc. The unique feature of a WFOE is that involvement of a mainland Chinese investor is not required, unlike most other investment vehicles (most notably, a Sino-foreign joint venture).
WFOEs are limited-liability corporations or proprietorships organized by foreign nationals and capitalized with foreign funds.
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Secondly,Joint venture (JV) is a business entity set up in China, by one or more enterprises, corporations, or economic organizations cooperating with Chinese enterprises, corporations, or economic organizations, namely investors from two or more nationalities, in accordance with the Company Laws in China, characterized by shared ownership, shared returns and risk, and shared governance. The contribution of capitals shall be converted to a certain proportion, and the proportion of the foreign investors shall be no less than 25%.
Foreign Liability Limited Company
Thirdly,it is the Foreign Liability Limited Company, internationally known as Limited Liability Company (LLC) is a business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. In a LLC, the total capital consists of equal shares. Shareholders use their subscribed shares undertake liability for the company, the company with all their assets to bear the liability for the debts of the company. The Chinese and foreign shareholders jointly hold shares in the company.
Foreign Partnership Enterprise
Fourthly,Foreign Partnership refers to a partnership set up by two or more foreign enterprises or individuals in China, and a partnership are set up by a foreign enterprise or individual with Chinese natural persons, legal persons and other organizations in China. Foreign Partnership includes General Partnership and Limited Partnership. General Partnership is a partnership in which partners share equally in both responsibility and liability. A Limited Partnership is a form of form of partnership similar to a General Partnership, except that where a general partnership must have at least two general partners, a Limited Partnership must have at least one general partner and at least one limited partner.
Fifth,Representative Office (RO) allows a foreign company to hire staff in China through their own legal entity, for the sole purpose of company representation.The main difference is that a representative office can’t issue official invoices, nor receiving payments from it’s clients.