The Most Popular Business Types in China 2019
If you have read our previously guidance for How Selecting a Company Type , you can get more details on different requirements of company structure.
Registered capital and foreign company registration process will be different because of the different types of companies. Therefore, you also need to understand the types of foreign companies in order to choose the most appropriate form of enterprise formation and capital contribution. Then, what are the specific types of foreign companies registered in Shanghai? Let’s answer what types of foreign companies are popular in China.
1. Sino-foreign cooperative enterprises
A Chinese-foreign cooperative enterprise is a contractual enterprise that is established in China by foreign companies, other economic organizations or natural persons and domestic enterprises, or other economic organizations. The cooperation conditions, income distribution, risk and loss sharing, investment recovery and management methods of the parties involved and the ownership of the remaining assets at the time of termination of the cooperation are all stipulated in the contract. The most important difference between Sino-foreign cooperative enterprises and Sino-foreign joint ventures is that the conditions for investment or cooperation of the parties may not be converted into equity or, although being converted into equity, the distribution of income, risk, debt sharing, and allocations of the remaining assets of the company at the time of termination, etc., may be determined entirely or not entirely in accordance with the status of the equity of their investments. Investment recovery methods and management methods can also be different from joint ventures and have greater flexibility.
2. Sino-foreign joint ventures
Sino-foreign joint ventures are equity-type limited liability companies that are jointly invested, jointly operated, profits and risk sharing by Chinese and foreign companies, other economic organizations or natural persons. All parties to the investment share profits, risks and losses according to the proportion of registered capital investment (equity). In May 2010, Shanghai Pudong New Area (including Nanhui) launched a pilot project for Chinese-foreign natural person joint ventures.
3. Foreign-owned enterprises
A foreign-owned enterprise is an enterprise that is established in China by foreign companies, other economic organizations or natural persons, of which the entire capital is contributed by foreign investors. The profits earned by enterprises are all owned by foreign investors.
4. Foreign investment companies limited by shares
A foreign-invested company limited by shares is composed of shares in the same numbers; shareholders assume responsibility for the company with their subscribed shares; the company assumes responsibility for its debts with all its assets. Among them, the legal person purchased and held by foreign shareholders is more than 25% of the registered capital of the company. The establishment of companies can adopt sponsorship or fundraising methods.
5. Foreign-invested companies
Foreign-invested companies are companies set up by foreign investors in China in the form of a wholly-owned venture or a joint venture with Chinese investors to make direct investment in the form of a limited company.