In the process of opening up my own company in China, I was jolted into shock at how complex the process is. What looked like a simple matter at first has become a job that involves several government bureaus and endless paperwork. However, there are reasons behind all the dizzying formalities. On one level, the Chinese government may be trying to protect new businesses from failure. In the United States, many new businesses fail during their first year because new business owners underestimate the kind of capital they really need to establish a healthy cash flow. Maybe they overestimate how successful they will be in the first few months, and then when business doesn’t go as expected, they go under.

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As a result minimum registered capital is tightly monitored by the relevant government agencies. Capital isn’t the only issue. Even if you want to open a WFOE (Wholly Foreign Owned Enterprise) you must go through the strict process of registering your business with the Chinese government. To register properly there are several major steps. Keep in mind that a lot of rules are decided on the municipal level. The rules for foreign companies in Nanjing (where I’m starting my business) may not be the same in Xi’an or Tianjin. As a result of this policy, some entrepreneurs do a lot of shopping around for the most hospitable cities.) No matter how well you prepare, there are bound to be issues along the way. Here are three things to expect when starting your own company in China.

1) Name game
One of those first steps is letting the government choose the Chinese name of your business. In Nanjing, one must go to the government bureau and submit five Chinese names. The officials choose the one that they like. In reality, I don’t think it has much to do with who likes what, but more to do with other businesses in the area, and if they think your business name aligns with what your business actually does.

2) Capital conundrum
The next way in which the Chinese government will play a role in your business, is in making sure you have enough capital to start in the first place. This is the “minimum registered capital” part of your application process. The MRC is basically an amount of money you must put into a certain account, which the government will check, to prove that you have the amount of money they consider necessary to actually start a company.

Each municipality has guidelines for how much money a company in a certain industry would need, but for many places, these really are just “guidelines.” It ultimately depends on how much money the person who reviewing your application thinks you need to have to start your business. So although the guidelines say a normal WFOE will need 100,000 RMB in minimum registered capital, if they think your particular business needs more money, they may require you to put more money in your account. Once the money is in your account, and the government has approved your application, you are free to use the money for your business.

3) Tax time all the time
Another way the Government will continually be a part of your business is through taxes. In the United States, tax day comes around once a year, and our efficiency-obsessed culture has done a decent job at keeping forms to a bearable minimum. In China, taxes can be collected monthly and there are certainly many “piao ge” forms to hold on to. Be prepared as you begin your company to deal with monthly taxes.

The process of starting your own company in this vibrant country is certainly more complex than just these three steps. But if you can handle the name, capital and tax registration parts, you will already have gotten over some of the most complicated steps in the entire process.
 

Related Links
Do You Dare Start a Business in China?
Seizing the Moment: Entrepreneurs in China
Setting up Wholly Foreign-Owned Enterprises

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