Sole Trader & Self Employed Business

What is a self employed business or sole trader

–  Working for yourself and setting up a Sole Trader in Mainland China

Sole traders known as sole proprietor-ships, it is a legal business entity operated by self employed and invested and owned by an individual ( personal property ). The most important difference with LLC ( limited liability company ) and LLP ( limited liability partnership ) include structure ( only one individual can the the owner ) and take responsibility for unlimited liabilities. Yes, we are correct, sole trader ( self employed business ) is an entity of unlimited liabilities, opposite viewpoint is that only one owner can keep all profits ( income derived from production and business ) after paid tax.

  • No needed registered capital
  • Do not need hiring local employees
  • Lower taxation and running costs

You do not need investment capital ( depending on proprietor’s needs and running operations to transfer payments flexibly ), this is the key advantage for starting Chinese business with a self-employed business ( sole trader ).

It is not to be denied that a sole proprietorship needs to take responsibility for unlimited liabilities, this is a main reason why so many entrepreneurs prefer to start businesses with setting up limited liability companies in mainland China.OK. Let’s have an in-depth explanation of setting up a sole trader and guide you starting self-employed business in mainland China.

What we provide

  • Online Services. Simple to set up a sole trader within 10 workdays with comfortable experience, easier process of registration than other corporate types.
  • Simple Files. Only need owner’s ID and one form of application to obtain approval, do not need articles of association and organizational agreement.
  • Taxpayer System. Once business license be approval from local market and supervision department, taxpayer system will be registered automatically.
  • Lower Costs. Smaller start up costs and running taxes to operate daily transactions, as well as easily and simply maintaining costs in China mainland.

Who is suitable for a sole trader or self employed business:

  • Sell goods by offline retail stores
  • Sales counter of agricultural products
  • Restaurants, coffee shops
  • Milk tea shops, flower shops
  • Gymnasiums, yoga gyms
  • Bars and Liquor shoppes
  • Grocery, cooking-oil food stores
  • Handmade articles, workshops
  • Aquatic products counter, etc.

More viewpoints and referance for a sole trader or self employed business

View 1 Ecological Environment of Sole Proprietor-ships

Maybe you have found that the most of sole traders are operating and running businesses with offline stores, actual shops, etc. They have to rent a physical office or shop first ( as well as warehouses ) to start the business transactions. They are the most important new forces distributing in various cities and streets.

That is different with branches of foreign corporate entities which through setting up parent companies or subsidiaries, holding corporations in mainland China, and expand their influence of brands by registering offline actual shops ( branches ).

Because only individuals can select starting business through sole traders ( self-employed businesses ).

View 2 Characteristics of China Self-employed Proprietors

1. Simply programs of establishment and dissolution.

2. Flexible managements and operations determining business strategies and making decisions depending on proprietor’s individual will.

3. The owner has unlimited liability for the debts of the business, when the assets of an enterprise are insufficient to pay off its debts, the owner has to take responsibility for paying off by his or her personal property. So a sole proprietorship is unsuitable for risky industries.

4. No registered capital requirements is key advantage ( limited liability companies must set up investment capital ), but no registered capital sometimes signifies that a sole trader can not get bigger orders ( such as, competitive tenders, can not operate daily import or export businesses ).

5. A self employed business must be owned by a Chinese individual ( local national citizen ).

View 3 Bank Account Opening

The process of establishing a local bank account is easily and quickly. Only needs proprietor’s original ID and approved business license and company stamps and submit to local banks to obtain approval. Sole traders can open bank accounts easily because the owners from Chinese citizens.

View 4 How Registering a Sole Proprietorship

1. Choose an available brand name such as: ABC ( Shanghai ) Trading House, or ABC ( Beijing ) Coffee Shop, or ABC ( Pu dong ) Agency Trader, etc.

2. Have a registered address ( Chinese registered address must be a commercial business address, can not be home or apartment address ). Your self employed business in mainland China can use our virtual registered address and secretary forwarding services to obtain certificates of business registration.

3. Prepare requirements and fill in official forms of application of registration.

4. Sign a form of application of sole traders registration.

5. Submit all signed documents to local market and supervision departments through SMEsChina’s assistance.

6. Obtain an official business license and company seals.

7. Open a corporate bank account and internet banking system.

8. Different from limited companies, sole traders can not apply for import and export licenses and permits to operate international businesses.

View 5 Other Corporate Options for Non Residents

If non residents want to open offline shops ( stores ), you can not register a sole trader ( self employed business ) directly from Chinese system of business registration, you have to apply for registering a WFOE ( wholly foreign owned enterprise ) or JV ( joint venture business with Chinese partners ) with the corporate type as a limited liability company. And then you can use the registered business to open branches as offline shops in other cities or streets.

View 6 Latest Implemented Policies of Taxation

Chinese corporate taxes include ( as well as sole traders ):

1. Income tax in terms of income records from corporate transactions.

2. Addition taxes include: city construction tax, additional tax of education, river comprehensive management tax in terms of the amount of VAT.

3. Corporate income tax ( known as profits tax ) in terms of the quarterly profits of corporations.

4. Construction tax on cultural undertakings depends on VAT aims at advertising industry.

5. Personal tax depends on monthly salaries for corporate staff.

Because the complex taxes system depends on different industries and business activities in mainland China, if you want to get more tax policies and guidance, suggest you contacting our online CPAs to understand and learn.

FAQs of Sole Traders and self employed businesses

After business license be approved, you have to open social insurance account and house funding account, and provide agreement of employment to labor security bureau, and then you can get monthly salary from a registered sole trader. Although self employed business owned by yourself, but also have to pay off personal tax and social insurance each month.

Most popular names must be included: territory and brand name, and the end of naming with: Sole Trader, Trader and Trading House, Individual Office, Self Employed Business. and so on. You can not apply for the end with limited or Co.,Ltd.

Chinese sole traders must be owned by a Chinese citizen ( individual ), foreign individuals can not be the owners or contributors in terms of Chinese enterprise laws of registration of sole traders. If non residents want to be the owners, you have to register corporate type as WFOE or Joint Venture.

Exactly, because as a Chinese sole trader, does not need to set up registered capital, so you can not apply for import and export licenses and permits from the local Customs. If you want to do international businesses, you must register a limited company here to operate daily international transactions.

Depending on your decision and needs for starting up a sole trader in China, you can choose business activities such as: beverage sales, sell flowers, coffee or other products, as well as consultancy services, technologies supporting, etc.

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Check if setting up a private company is right for you, how you launch a corporation depends on what business activities your company does. It can also affect the processes of registration and different requirements for your preparation.

SMEsChina focus on the growth of enterprise and providing a variety of business solutions in the area of strategy consultancy, business registration, company formation, incorporation of domestic invested enterprise, finance and audit services, HR and payroll, corporate bank account, resident permit, immigration and visa, trademarks and legal compliance. If you have everything to set up a private business in Mainland China, you can get in touch with our teams to get more useful information and online guidance.

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