WFOE Organization: Wholly Foreign Owned Enterprise (WFOE)
Our company in Shenzhen serves as regional headquarters. The bulk of of clients are foreign companies and individual investors setting up WFOEs (wholly foreign owned enterprises), representative offices and joint ventures in Shenzhen. In the last 15 years, we help our clients register thousands of Shenzhen WFOE successfully.
The registered capital of a Wholly Foreign Owned Enterprise (WFOE) should be subscribed and contributed solely by foreign investor(s). A WFOE does not include branches established in China by foreign enterprises and other foreign economic organizations. The Chinese Laws on WFOE do not have a clear definition of the term of "branches". The term of "branches" should include both the branch companies engaged in operational activities and representative offices, which are generally not engaged in direct business activities. Therefore, branches and representative offices set up by foreign enterprises are not WFOE.
Different Types of Shenzhen WFOE Setup
Following are different types of WFOE. Commonly,
- If the WFOE only be allowed to manufacture here. We can say it's manufacturing WFOE.
- If the WFOE is allowed to do Consulting & Service, we call them Consulting WFOE.
- If the WFOE is allowed to do Trading, Wholesale, Retail or Franchise in China, we call them Trading WFOE or FICE (Foreign-Invested Commercial Enterprise)
Advantages of Shenzhen WFOE Setup
The advantages of incorporation a WFOE, compared with other types of enterprises, include, but not limited to:
- Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the Chinese partner;
- Ability to formally carry out business rather than just function as a representative office and being able to issue invoices to their customers in RMB and receive revenues in RMB;
- Capability of converting RMB profits to US dollars for remittance to its parent company outside of China;
- Protection of intellectual know-how and technology;
- For Manufacturing WFOE, no special requirements for Import / Export license for its own products;
- Full control of human resources
- Greater efficiency in operations, management and future development.
Business Scope of Shenzhen WFOE Setup
According to WFOE regulations, "Foreign investors are permitted to setting up a 100% foreign owned enterprise in industries that are conducive to the development of China’s economic benefits, and not prohibited or restricted by China government." In China, Business scope of a business is a "one sentence description" covering all of the present and future activities of the WFOE; it is essential this encompasses every envisaged scope of future activity. The WFOE can only conduct business within its approved business scope, which ultimately appears on the business licence.One of the most important issues in WFOE application is business scope. Any amendments to the business scope require further application and approval. Business scope of a company in China is not as broad and general as in other countries. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. After China's entry into WTO, more and more business is open to WFOE especially in Trading, Wholesale and Retail business.
Registered and Paid up Capital of Shenzhen WFOE Setup
Registered Capital: USD$140,000 is a good idea for all kinds of WFOE, with USD$ 140,000 investment it's easy to get approved. Initial Paid-up would be 20% of the registered capital, the balance should be remitted within 2 years.
Registered capital is the amount that it's required to run the business until it can break even - the 'registered capital' is a guideline only. If you do looking for a minimum registered capital, for instance RMB 30,000 (which is impossible to establish a WFOE in China) this means you will run out of money pretty soon, which leads to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business licenses and so on. The WFOE needs funding via it's registered capital until it's about to support itself from it's own cash flow.
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