There can be up to 50 stockholders in a Limited Liability Company (LLC). Shareholders are typically not personally liable. Double taxation, as it is known, is applied to LLCs on two different levels. An LLC must first pay enterprise income tax on its corporate income before distributing its post-tax profits to its shareholders as dividends, who must then pay income tax on those distributions.
The full process for registering an LLC in China
The actions to take to form an LLC in China are as follows.
Create the necessary documentation
You must compile many documents and request approval before you can begin operating your business. The necessary documents are listed below:
Name of the business
You should ask the Administration of Industry and Commerce for permission before using the firm name. Making ensuring that your name does not conflict with any already in use is crucial. Depending on where you wish to launch the business, this approval may take two to fifteen days.
List of partners who exercise control
These are the shareholders in the business you are incorporating who own the majority of the company’s shares. It is advisable to confirm that the business partners are permitted to hold shares in China to prevent future issues.
The organizational framework
The board of directors, supervisors, general manager, and the legal representative are all included in the whole operational profile of the company. The directors’ passport copies should be submitted with this structure.
The registered office
This is the location of the company’s official headquarters, where the authorities can get information on any problem relating to the business. The home or landowner’s contact information, including phone and email, should be included in the address.
Bylaws
This is yet another essential document for the registration of a Chinese corporation. The extent of your intended operations is among the key details of the company description. You describe the essential elements of the company in the paper, such as the organizational structure and the techniques to be applied for recouping losses.
Total investment and capital registered
The resources set aside to cover the costs of maintaining the business are represented by the registered capital. The total investment, on the other hand, is the sum of the registered capital and any future investor loans. It might also come from other sources like banks.
Possibility research
You must present a thorough business plan and a budget to the authorities to demonstrate to them beyond a reasonable doubt that the company is viable. You must here show that the registered capital can support activities. The feasibility study must satisfy the authorities for your company registration to be accepted. Therefore, be careful to collaborate with a qualified organization to create a compelling feasibility study paper.
Apply for a certificate of approval
You must work with two organizations to obtain an approval certificate and an operating license. First, the State Administration of Industry and Commerce (SAIC) and the Ministry of Commerce (MOFCOM). These organizations will examine your application and let you know if the certificate has been accepted or rejected after reviewing it.
Obtain a business license
Depending on the industry you are working in, you may require extra licenses after receiving a company certificate. Manufacturing, food, beverage, construction, and telecommunications companies in China need additional permits.
Register at the Public Security Bureau (PSB)
This registration enables you to obtain business credentials. Company chops are comparable to the value of a signature in the west in China. Any contract cannot be validated if you do not have a chop.
Establish a bank account
Your company needs a bank account to get going. The business can receive payments and make bill payments thanks to a Chinese bank account. The bank account will be useful while filing returns as well.
Sign up with the Tax Bureau
All businesses in China, including those with 100% foreign ownership, must abide by the tax laws. As a result, you should register the company’s fundamental financial and operational information first, including CFO verification and category, among others. While doing this, you should be aware of several tax obligations. They consist of:
Corporate income tax
This is a 25 percent tax on profits. You can benefit from lower corporate income taxes if you work in the favored industries, though.
Transaction tax
Also referred to as a turnover tax, this fee, which ranges from 3 to 5 percent of gross sales, is levied.
Custom duties
These are charged on items that are imported into or exported from China.
VAT (value-added tax) rates
In China, there are various VAT rates: 3 percent, 6 percent, 9 percent, and 13 percent depending on the industry.
Individual income tax
This tax is applied on employee salaries as well as dividends paid by business partners.
