Most Americans doing business in China choose one of three business forms. One is to operate as a joint venture with a Chinese partner. Another is to open a registered office to represent your business, though this doesn't let you offer services or products in China. The most popular approach is to set up a wholly foreign-owned enterprise, or WFOE. This takes the most time and the most money.
Have a Business Plan
A business plan in the United States is smart; in China it's vital. You have to draw up a plan and submit it to the government as part of your registration. The plan includes your location, projected revenues, products, budget and your expected number of employees. Your business plan defines what you're allowed to do in China. If you decide later you want to introduce a service that's not in the plan, that won't be allowed. The safest bet is to make the description of your goals as broad as possible so you have wiggle room down the road.
Stockpile Your Cash
Registering in China isn't cheap. WFOE owners have to put up registered capital -- cash the company deposits with the government, over and above money for permits and incorporation fees. Most companies can register their capital gradually, over two years, rather than all up front. The law firm Lehman, Lee & Xu says you should anticipate spending $140,000 in registered capital. Some companies -- those that want to use "China" in the company name, for instance -- have to register much more.
Collect the Paperwork
Before approaching authorities in China, contact the Chinese embassy or consulate in the U.S. and present your articles of incorporation or equivalent governing documents for your business. Show the embassy the passports for any major investors in your China project and letters from a bank confirming the investors' financial worth. Later in the process, Chinese authorities will want more information, such as your office address in China and the name of your legal representative there.
WFOEs don't register directly with the Chinese government. Instead, you find a sponsor, a company authorized by the People's Republic to handle registration and submit the paperwork. You'll work with your sponsor to get your company name registered, then apply for the various slips of paper that make you legal, including a business license, a certificate of approval, an organization code license and a tax certificate. If you're importing or exporting from China, you'll need a license for that, too.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.