Open a Limited Liability Company (LLC) in China

One of the ways to start a business in China is by registering a limited liability company, which is one of the business forms regulated under the local commercial law. Locals and foreigners alike can open a limited liability company (LLC) in China, and our consultants in setting up a company in China can offer the necessary information on its characteristics, advantages, obligations, and registration requirements.

What are the characteristics of the LLC in China?

The LLC is a business form that has separate legal personality. Its main traits are regulated under the Company Law, which states that the business form gains legal recognition through its bylaws, the articles of association, and after the standard steps for company formation in China have been completed.

Given that the entity has its own legal personality, its founders (known as shareholders) are not personally liable for the debts of the company – they are, however, liable for such debts to the extent of their capital participation. It must also be mentioned that the LLC is a private company, therefore it can’t be publicly listed.

Considering that the LLC is a structure incorporated for commercial purposes, it is liable to the basic corporate taxes charged to companies operating in China (for instance, the standard corporate tax rate is 25%, but reduced rates of 15% and 5% are available for companies carrying out specific operations or for those who activate in certain areas of the country).

Other characteristics important in the process of company incorporation in China concerning the LLC are:

• the minimum number of shareholders who can open a company in China as an LLC is 1;
• the LLC can’t have more than 50 shareholders (in cases where the company has 100% foreign capital, which is allowed in this country, the LLC is considered a wholly foreign owned enterprise – WOFE in China);
• it is necessary to appoint at least 1 director, who does not have to abide by any residency requirements;
• the timeframe for paying in the company’s subscribed share capital must be agreed upon by the shareholders and stipulated in the bylaws, but the period can’t be longer than 5 years since the process of company formation in China has been completed;
• it can take up to 3 months to set up a company in China as an LLC if the investors are foreigners, as special approvals may be necessary.

Registration documentation

In order to start a company in China, investors must gather a large set of documents and submit it to the relevant authorities. In this sense, it must be noted that there are 3 main categories of papers – the 1st refers to documents submitted with the registration authorities, the 2nd, to the documents establishing the governance of the company, and the 3rd, to the financial/tax matters.

The 1st set of documents includes: papers attesting the registered address, the proof of reserving a trade name, documentation presenting the objects of activities that will be carried out in China, the identity papers of the shareholders, etc.

The 2nd set of papers that must be prepared when registering the LLC contains the articles of association, the shareholders resolution, the decision to appoint a director, the application for a company seal and the letter of appointment of a legal representative.

The 3rd category of documents includes the confirmation of opening a bank account, the tax registration form, the registration for social security, etc. All the financial aspects of an LLC can fall under the supervision of our accountants in China, once the company becomes active.

We invite you to contact our team of consultants, specialized in any legal matter pertaining to company formation in China. Investors who want to open a limited liability company in China can rely on us for professional legal representation.