China

Starting a Business in

China

Below is a detailed summary of the bureaucratic and legal hurdles faced by entrepreneurs wishing to incorporate and register a new firm in China. It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy's per-capita gross national income.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 189 economies. The most recent round of data collection was completed in June 2013.

Compare China to 188 other economies.

  • Standardized Company

  • Legal Form: Limited Liability Company
  • Paid in Minimum Capital Requirement: CNY 30,000
  • City: Shanghai
No. Procedure Time to Complete Associated Costs
1 Obtain a notice of pre-approval of the company name

The applicant picks up the application for company name pre-approval from the local Administration of Industry and Commerce (AIC), or otherwise, downloads the form from AIC’s Web site. The applicant can be the representative designated by all the shareholders or the agent entrusted by all the shareholders. The completed application form shall be signed by all shareholders of the company. The application form together with the business licenses or other registration certificates (if the shareholders are companies or other eligible entities) and the photocopy of the identity card of the individual shareholders shall be filed with the AIC. Effective July 1, 2004, enterprise name registration must follow the amended State Administration of Industry and Commerce (SAIC) rules (that is, the new Enterprise Name Registration Administration Implementing Measures, or qi ye ming cheng deng ji guan li shi shi ban fa). According to the new registration rules, if the applicant goes directly to the AIC, a proposed company name is approved or rejected on the spot. This is newly regulated by Article 24 of the aforementioned measures and is implemented in practice. However if the application is made through mail, fax, email, etc., the proposed company name will be approved or rejected within 15 days.
1 day no charge
2 Open a preliminary bank account; deposit fund in the account and obtain the certificate of deposit

The Company Law was modified on October 27, 2005, and became effective on January 1, 2006.

• Article 26 lowers the minimum capital requirement to CNY 30,000. According to this article, the shareholders, after paying the required initial capital contribution, may pay off their remaining capital contributions, if any, within 2 years after establishing the company. Note that the required initial capital contribution is at least 20% of the proposed company’s registered capital and shall not be lower than the legal requirement for the registered capital for particular industries.

• Article 27 provides the form of the capital contribution. According to this article, if the initial capital contribution is in cash, the shareholders must (a) open a preliminary bank account after obtaining preapproval of the company name; and (b) deposit the initial capital contribution into the bank account. If the initial capital contribution is in nonmonetary assets, the shareholder must transfer the property title of the assets to the company and the value of such assets must be appraised. The initial capital contribution must be verified by legally established verification institutes. The revised Company Law enables shareholders to contribute up to 70% of the registered capital of a limited liability corporation in “nonmonetary assets that can be monetarily valued and legally transferred”.

1 day no charge
3 Obtain capital verification report from an auditing firm

An auditing firm has to prepare a report that verifies the company capital as part of the documents necessary for registration.

2 days CNY 350
4 Apply for registration certification "business license of enterprise legal person" with SAIC, the organization code certificate issued by the Quality and Technology Supervision Bureau and registration for both state and local tax with the tax bureau

Since July 2010, it has been possible to use the "parallel application and review" process in most districts of Shanghai. The entrepreneur can submit the documents for business license, certificate for quality and technology and state and local tax at the same time at one window. All the application forms can be downloaded from SAIC’s website. The agent at the window will scan all the documents and send them electronically to all relevant agencies. The business license is approved first and the two other agencies can give their approval immediately after. They are notified online once the business license has been approved.

1/ BUSINESS LICENSE:
To obtain registration certification, the company must file a completed application form along with the following documents:
• Notice of approval of company name
• Lease or other proof of company office.
• Capital verification certificate or appraisal report
• Articles of association, executed by each shareholder
• Representation authorization
• Identity cards of shareholders and identification documents of officers
• Appointment documents and identification documents (certifying name and address) of the directors, supervisors, and officers.
• Appointment documents and identification documents of the company’s legal representative
• If the initial contribution is in nonmonetary assets, the document certifying transfers of the property title of such assets
• Other documents as required by the authorities

According to the new administrative rules, application forms may be downloaded from the local government authorities’ Web sites. Statutory time limits were introduced for acceptance of application documents and for registration decision making, which differs according to the form of application. Documentation requirements for company registration were standardized. The Registry is now required to publicly display them.

• According to Article 52, if an application is filed (by letter, telegraph, telex, fax, email, or electronic data exchange), the Company Registry must, within 5 days of receiving the relevant application documents and materials, decide whether to accept the application. If the application documents and materials are incomplete or do not meet the statutory requirements, the Registry must inform the applicant, within 5 days, of all contents subject to supplementation and correction.

• According to Article 54, if the organ in charge of company registration must verify the application documents and materials, it shall decide whether to approve the registration within 15 days of acceptance. In other cases, the organ must decide whether to approve the registration on the spot or within 15 days of acceptance.
• According to Article 55, if the organ decides to approve a company registration, it shall issue a “notice on approval for establishment registration” and inform the applicant to collect its business license within 10 days.

The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. This includes the business registration fee (0.08% of the registered capital).

2/ ORGANIZATION CODE CERTIFICATE WITH THE QUALITY AND TECHNOLOGY SUPERVISION BUREAU:
The company must apply for the organization code certificate within 30 days of obtaining the business license, by filing a completed application form with the Shanghai Organization Code Management Center (a branch of the Quality and Technology Supervision Bureau) along with the following documents:
• Business license (original and one copy)
• Identity card of the legal representative (one copy)

The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014. The production cost of CNY 18 for Organization Code Certificate is exempted for a micro or a small size company. The remaining amount CNY 102 still needs to be paid to Quality and Technology Supervision Bureau for the technical service and production cost of IC card.

3/ REGISTRATION WITH LOCAL AND STATE TAXES:
The tax registration procedures have been simplified since 2004 with the implementation of the Administration Measures of Tax Registration, issued by the State Taxation Bureau. Two separate taxation authorities still exist (the state taxation bureau and local taxation bureau). However, company founders are required to file tax registration only once, to either of these two authorities. The statutory time limit is 30 days from the date of receiving the registration application.

The company must file the tax registration form and the initial tax reporting forms. Together with those forms, the company submits for review the following documents:
• Business license duplicate (original and one copy)
• Organization code certificate (original and one copy)
• Identification card of the legal representative (original and one copy)
• Identification card of the taxation personnel (original and one copy)
• Company seal and financial seal
• Office lease agreement and receipt(s) for rent paid
• Articles of association (original and one copy) and bank-issued account-opening certificate (original and one copy)
• Capital verification report
• Photocopy of property ownership certificate
• Land use right certificate
• Commitment letter regarding the authenticity of the documents submitted

The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014.
11 days no charge (Fee exempted for micro and small size companies from 2012 to 2014 - otherwise 0.08% of registered capital)
5 Obtain the approval to make a company seal from the police department

If all the shareholders are individual investors, the registration file will include the duplicate of the business license (the original and one copy) and the legal representative’s identification card. If registration is approved, a notice to make the company seal will be issued to the company.
1 day no charge
6 Make a company seal

To make the company seal, the company shall designate a company possessing a Shanghai Special Industry Permit (company seal carving) (《上海市特种行业许可证》公章刻制业). This process costs CNY 70–300, depending on the design and the quality.

1 day CNY 300
7 Pay the fee for the organization code certificate issued by the Quality and Technology Supervision Bureau at the time of pick-up

Prior to pick up the organization code certificate issued by the Quality and Technology Supervision Bureau and pay the fees, the entrepreneur had to obtain the company seal.
1 day CNY 102 (Production cost of CNY 18 for Organization Code Certificate is exempted for micro and small size companies from 2012 to 2014)
8 Register with the local statistics bureau

Within 30 days of obtaining the business license, the company must apply for statistics registration by submitting to the local statistics bureau a completed statistics registration form along with the following documents:
• Business license (one copy)
• Organization code certificate (one copy)
1 day no charge
* 9 Open a formal bank account of the company and transfer the registered capital to the account

The procedures and required documents for opening a company bank account and transferring the registered capital to it may vary depending on each bank’s practice.
1 day (simultaneous with previous procedure) no charge
10 Apply for the authorization to print or purchase financial invoices/receipts

After registering for state or local taxes and obtaining the tax registration certificate, the company must apply separately to the relevant authorities (that is, the state and local taxation offices) for approval to purchase and issue financial invoices/receipts. The taxation authority will issue the invoice purchasing book, if it agrees to grant the company such qualification, upon reviewing the following submitted documents:
• Tax registration certificate (one copy)
• Identity card of taxation personnel (one copy)
• Application forms
• Models of invoice seal

10 days no charge (Fee exempted for micro and small size companies from 2012 to 2014)
11 Purchase uniform invoices

The company must obtain and submit an application form to purchase uniform invoices (购用统一发票申请单). The form and the authorization book (from Procedure 10) must be submitted to the Tax Office.

The VAT and ordinary invoices are published by the tax authority for anti-forgery reasons (with few exceptions). Taxpayers buy VAT and ordinary invoices from the tax authority.

The Notice on the Exemption of Some Administrative Fees for Small and Micro Enterprises (CZ [2011] No.104), co-issued by the Ministry of Finance and the National Development and Reform Commission, exempts micro and small size companies from paying several administrative fees between January 1, 2012 and December 31, 2014.

1 day no charge (Fee exempted for micro and small size companies from 2012 to 2014 - otherwise CNY 1.05-1.67 per book of invoices)
12 File for recruitment registration with local career service center

Within 30 days of recruiting employees, a new company must register with the local career service center, sponsored by the local government. Relevant application forms which can be electronically downloaded or obtained from the local career service center shall be filled and submitted.
1 day no charge
* 13 Register with Social Welfare Insurance Center

Within 30 days of establishment, the company must register for the payment of employee social insurance with the local social insurance office by submitting a completed social insurance registration form and the following documents:
• Company seal
• Duplicate of business license (original and one copy)
• Organization code certificate (original and one copy)

After all these documents have been verified, the authorities will issue a notice to open a social insurance account for the company. The company must then apply to open a special account at the designated bank. The local social insurance office will issue the social insurance registration card to the company on receiving bank notification of account opening.

1 day (simultaneous with previous procedure) no charge
* Takes place simultaneously with another procedure.

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