Shanghai Company Registration – Everything You Need to Know

If you want to register a company in Shanghai, you are making the right decision. Because Shanghai is the hub of economic and trade enterprises. It is among the biggest international ports in the world. It is reported that this dynamo of China had a gross domestic product (GDP) of 14342.90 billion US dollars in 2019. In this article, we will explain everything you need to know about company registration in Shanghai, such as the company type: WOFE, joined venture, representative office; The advantage of the free trade zone company, the common mistake of registering a company in Shanghai, and documentation related to setting up an office, as well as how to think of a Chinese company name.

Shanghai Economic environment

Shanghai has been one of the most emerging cities economically and it is the center of trade, culture, and finance.

It is the first city in China that accomplished 3 trillion-yuan GDP in the year 2017.  In 2019, Shanghai’s GDP grew by 6 percent, with the city’s GDP reaching 3.82 trillion yuan ($553.8 billion). Thus, it became the second-largest economy in the world with unanticipated growth in the economy.

Whether it’s the car industry or agriculture goods, Shanghai is the leading manufacturing base in China and perhaps, in the world. There are a total of 166 industries in China, 157 of which are located in Shanghai.

There will be an increase of 6.9% in the economy of Shanghai in the following year. Furthermore, Shanghai always takes the industry into consideration.

Industries related to instruments, paper, shipbuilding, textile, machine, and many more are set up in Shanghai leading to an escalated economic situation.

Shanghai Government Encourage Foreign Investment

Shanghai always takes care of the needs of foreigners.  Thus, it is termed as a ‘magnet’ for foreign investment.

Shanghai is the hub of talented people with an exceptionally good environment which draws a lot of foreign investment. According to the statistics, Shanghai attracted 215,000 foreigners who work in Shanghai with an investment of 270 billion US dollars.

For the inward flow of more foreigners, Shanghai has established Pilot Free Trade Zone to escalate foreign investment.

Furthermore, the government of Shanghai is looking forward to opening up a Free Trade Port to draw the attention of more foreigner investors towards Shanghai.

The government of Shanghai has enabled quick VISA approval and perpetual residency licenses to enhance and encourage foreign investment.

People Can Extend VISA by Registering a WFOE

Let us first discuss what a WFOE is. WFOE is known as a Wholly Foreign Owned Enterprise. It is established by the foreign investment company by regulating all the China laws. This company is established in Mainland, China.

It is a small company with a number of shareholders. Every business has a scope. Evaluate your business first as WFOE depends upon your business scope and generate procedure, time, and documents accordingly.

Starting up a company in Shanghai may take up more time than predicted. Hence, the government of Shanghai has made it easier for foreign investors because they can extend their VISA’s on the basis of WFOE/WOFE.

Just register a Wholly Foreign Owned Enterprise and your VISA will be extended according to your business scope. You can stay in Shanghai for a longer period to completely look after your enterprise.

Introduction to Company Registration in Shanghai

To start up a company anywhere requires legal documentation as per the country’s laws and regulations.

Shanghai company registration goes through the same process by implementing China laws and regulations. Since January 1, 2020, the Foreign Investment Law and the Regulations for the Implementation of the Foreign Investment Law have been in effect. According to the Foreign Investment Law, China offers pre-establishment national treatment plus a negative list management mechanism for foreign investment. “Pre-establishment national treatment” refers to the treatment given to foreign investors and investment in respect of market access at a level no less favorable than that given to domestic investors and investment. “Negative list” refers to China’s special administrative measures for access to foreign investment in specific areas, which means national treatment shall be granted to those that are not on the negative list.

Key points for Shanghai Company registration

However, the main points are:

• Minimum entrance capital.
• Quicker registration course
• Stern management after manufactured.

The key points you must keep in mind while starting a company in Shanghai are that you must manage, maintain, and register your company legally so that they can be approved by investigative and complimentary authorities of China.

The solution to dodge any problem

There are a couple of things that you should consider beforehand. You must be completely sure about the laws and regulations of China for Shanghai company formation. Just have an overview of the basic terms to have strong bases.

You can also hire an agent to guide you through the start-up of the company in Shanghai. However, you must have complete background information of the agent that you will hire. He/she must have a lawful history to guide you through this entire scenario.

Company Type Introduction

Different entrepreneurs want to establish different companies in Shanghai. However, there are pros and cons of every industrial company. We’re going to cover each company with the benefits, as well as its drawbacks.

WFOE/WOFE

WFOE/WOFE is the Wholly Foreign Owned Enterprise. It is a limited company but holds immense importance because of its independence and autonomy. There isn’t any share from an outsider and is governed by the foreign guardian company.

WFOE can be divided into three different categories. However, each of them has the same legal documentation but it mainly differs in the start-up process and cost.

Trade WFOE

Trade WFOE which is also known as the Foreign-Invested Commercial Enterprise is the leading type of WFOE in China. It marks the exports and imports in China, as well as trade through retail outlets. The pros and cons are:

Pros

• Long-term permits. (15 to 30 years)
• Control of highbrow residency
• Can construct assets in China
• Hire staff directly
• Can operate wholesaling activities
• Can activate franchises

Cons

• Must take approval from different bodies before setting up a FICE
• May take many months to set up
• Various industries are omitted from FICE

Consulting WFOE

This type of WFOE is less complex as compared to the other categories. This type of WFOE is related to consulting companies.

Pros

• Long-term permits (15 to 30 years)
• Control of highbrow residency
• Can construct assets in China
• Simple submission process
• No listed investment required
• Hire staff directly

Cons

• Obligated to the payment of all Chinese taxes
• Can specifically operate industry within the registered group

Manufacturing WFOE

If you are involved in manufacturing goods then you should be looking forward to establishing a manufacturing WFOE.

Pros

• Long-term permits (15 to 30 years)
• Control of highbrow residency
• Can construct assets in China
• No listed investment required
• Hire staff directly

Cons

• Lengthy submission process
• Obligated to the payment of all Chinese taxes
• Can specifically operate industry within the registered group

Joint Venture

A joint venture is the union of two industries or individuals in starting up a project in Shanghai. This option may be the smartest one to choose because there are pros and cons of everything.

Pros

• Division of dangers and payments.
• More knowledge about the company
• Higher access to local assets and affordable labor
• Simple management of trials
• Revealing new business opportunities
• Toughen industry’s value in the souk.

Cons

• Inequity may occur by any one of the partners
• Division of dangers and payments with an unfitting partner
• Miscommunication leading to bad decisions
• Mishandling of capitals will lead to waste of the money

Representative Office

Starting up a representative office in Shanghai is the fastest way to get an income at a lesser cost. However, for starting a representative office you need 2 years viability of your company and then the representative office certificate will last till the end of the foreign guardian company.

Pros

• Fast production of an office
• Saves time as it is easier to meet up with the contacts
• Can hire foreign and local staff
• Have your own office in China
• No registered capital required
• Affordable and easy to use
• Fewer tax payments

Cons

• You have to rent an office space before the company start-up
• You can neither make money nor sell
• May not be allowed to take contracts from customers in China
• Can only bring amenities to the main office
• The office can’t pay staff directly

Partnership Enterprise

Partnership enterprise involves two entrepreneurs who partnered together to establish a company in Shanghai. Sometimes, the support from the partner is good, however, it may have some drawbacks too.

Pros

• Toughen industry’s value in the souk
• Division of dangers and payments
• Simple management of trials
• More knowledge about the company
• Revealing new business opportunities
• Higher access to local assets and affordable labor

Cons

• Miscommunication leading to bad decisions
• Inequity may occur by any one of the partners
• Division of dangers and payments with an unfitting partner
• Mishandling of capitals will lead to waste of money
• Difference in culture

Free Trade Zone Company Registration

If you’re looking forward to establishing a company in Shanghai then you should start up your company through the Free Trade Zona in Shanghai.

This Free Trade Zone was established in order to boost foreign investment and inward flow of foreigners to Shanghai. Furthermore, this Free Trade Zone enables foreign investors to start up their companies in Shanghai in lesser time than usual.

These financial subsidiaries will be granted licenses to start up a company in Shanghai in short time frames.

Company Type Introduction (WFOE/WOFE)

Consulting Company

Consulting company WFOE is a consulting service-only company that gives consultancy in different areas of Shanghai.

Food & Beverage

If you’re looking forward to opening up a food and beverage WFOE, then you must legalize your items first. You must enlist the products which you want to sell. Food and Beverage WFOE include a coffee bar, restaurant, snack bar, drink shop, etc.

Trading Import & Export

Trading export and import refer to the trading WFOE. This type of Shanghai company set is required to apply for the VAT certificate in order to export and import.

Manufacturing Factory

Manufacturing factory WFOE includes the formation of heavy machinery and second processes by your own company.

How to Choose a Chinese Company Name?

Choosing a Chinese company name needs a more critical approach. The company name should be chosen according to the qualities of your company. It should reveal your brand’s story.

The people of China have been thrusting to keep that ‘purity’ symbol in their language alive. Thus, you should look for a name that is completely related to your company in meaning and sound.

Of course, it is best to choose but it is the most difficult one too. In finding the right name, you must explore your surroundings in order to get familiar with the language. Then, create your brand name that is self-explanatory and has a symbol of purity in it.

The third part is discovering. The sound of your brand, the vibes it gives, the appearance it has, these all includes in discovering the right company name.

How Much Does It Cost to Register a Company?

Shanghai company registration is more than just filling out some papers. This is a more critical work to do.

The average cost of Shanghai company formation, like WFOE, is null. In the recent China laws, there is a new amendment that there will be no minimum capital required to start a company.

However, there are some other things that you must take into consideration. Thus, you must hire a professional agent who will let you know about all costs and requirements.

This agent will be more than just a middle-man for you. The average cost of hiring an agent is $4000-$5000. Moreover, if you want to rent an office in Shanghai, it will cost you $2000 for a month.

How Long Does It Take?

It takes about 20 working days for the Shanghai company registration procedure.

What Do I Need to Provide to Register a Company?

The documents required are:

• Registered Capital
• 5 hypothesized names of the company
• (2) Copies of the passports of each investor authorized by the Chinese Embassy
• Bank references
• Business Scope
• Chinese office address

Mistakes to Avoid When Register a Company in Shanghai

There are five mistakes that you must avoid in order to start up a company in Shanghai.

1. Comprehend the Labour Law thoroughly
2. Choose the right place for a Shanghai company to set up
3. Keep all the documents collected beforehand
4. State your business scope correctly in the Articles of Association
5. Employ skilled consultancy services

What Documents Can I have after Registering My Company?

After registering your company properly and getting approval from the Chinese authorities, you will get a legal notice and licensed documents so that you can start up a company in Shanghai. Then, you’ll be good to go to mark your enclave in this economic hub.

Find an agent to help you with Company Registration in Shanghai

GWBMA provides professional company registration services for Foreign Investors. We have a very strong relationship with the Shanghai Municipal Commission of Commerce.

We provide a one-stop service for you to start a business in Shanghai, including company registration, location, Accounting & Tax, HR outsourcing, legal services, etc.