The registration of a company is not complicated. After determining the company type, company name, registered capital, shareholder and contribution amount, registered address, business scope and company executives, registration can be completed in the industry and commerce and taxation departments. Next SMEsChina will introduce the core elements one by one:
For start-ups, the ‘limited liability company’ is the most suitable type of enterprise at present. The reasons are as follows:
- (1) Shareholders of a limited liability company shall only bear ‘limited liability’ on the basis of the amount of capital contribution. The company property and individual property are separated at the legal dimension, which can prevent entrepreneurs from undertaking unnecessary financial risks.
- (2) Limited liability companies have the features of low operating costs, few departments and simple structure, which are suitable for the initial development stage of enterprises.
- (3) At present, almost all mature angels and VCs are designing investment schemes based on ‘limited liability companies’. The direct registration of a ‘limited liability company’ will also facilitate the process of introducing investment in the future.
The registered capital does not need to be paid in one time.
Our country currently implements the registered capital subscription system. Subscription system means that the registered capital does not need to be fully paid in the beginning, but only within the time limit of the commitment (usually 10-20 years), which greatly reduces the capital pressure of the company’s registration.
The amount of the registered capital of a company should refer to the industry qualification requirements
For example, when an Internet company applies for ICP business license, the ICP business license requires the company’s registered capital to be more than 1 million; Tmall also has such requirement standard of more than 1 million for most categories of entry businesses. In application for other qualifications, the enterprise should refer to the general practice of the industry.
The greater the registered capital, the greater the risk / responsibility a company share bear.
For example, a company with a registered capital of 1 million owes 10 million foreign debts due to bad management, and the shareholders will only use its 1 million capital contribution to assume liabilities. The extra part has nothing to do with it. But if the registered capital of this company is 10 million, then it shall bear 10 million of the total responsibility.
So, the registered capital is not the more, the better. Most Internet entrepreneurs go on the way of equity financing, so the most important thing is equity ratio, not registered capital. Therefore, setting up a reasonable amount of registered capital according to actual situation is the most rational choice.
Company executives
The company executives mentioned here are quite different from what people usually understand. They mainly refer to the company managers registered in the Industry and Commerce Bureau. It is generally recommended that the position should be held by the core founder or the major shareholders to strengthen the management and control of the company.
Directors / Chairman / Executive Directors:
The board of directors consisting of directors and a chairman is responsible for the command and management of a company or enterprise and business activities. It is responsible for and report to the shareholders’ meeting of a company or the general meeting of the shareholders of an enterprise.
The chairman is the leader of the company’s board of directors and the highest leader of the company. His duties are organized, coordinated and representative. The chairman’s power is within the scope of the board of directors and does not manage the specific business of the company. Generally, the chairman does not make personal decisions. He only has the right to vote during a board meeting or the meeting of special committees of the board of directors. When a company is relatively simple in the earlier stage, a board of directors is not necessary. The company can set up an executive director who acts on behalf of the board of directors.
The legal representative:
At the legal dimension, the behavior of a legal representative is equal to the behavior of a company. The legal representative embodies the will of the company. It is held by the chairman / executive director or the manager, and is responsible for all the actions and results of the company at the legal level. A natural person can act as the legal representative of several companies.
The supervisor:
Because the company’s shareholders are scattered, their expertise and ability vary greatly. In order to prevent the abuse of power by the board of directors and the manager which may damage the interests of the company and the shareholders, it is necessary to select the supervisor at the general meeting of shareholders. The supervisor will perform the supervisory function on behalf of the shareholders’ meeting, and he/she must be a sole candidate. The director or manager cannot hold a concurrent post.
Step-by-step to Learn
The purpose of this guidance is to help foreign business entities, brands, companies getting more useful information to start the procedure of forming a company smoothly and comfortably. Before your decision on launching a business in Chinese market, you have to understand the key requirements, such as: naming rules, business scope, registered capital, corporate structure, required documents. You can learn everything from below guidance.
