How to Form a China WFOE: A Roadmap

My law firm’s China company formation lawyers are often asked about the steps it takes to form a China WFOE. So often, in fact, that we long along drafted a stock response to that question. Figuring this response would be helpful to our faithful readers, I am running it below. Please note that the below is a generic roadmap for WFOE formation and the exact details for forming a WFOE in China will depend on, among other things, the WFOE’s business scope and the city/district in which the WFOE will be formed.

Generally, if all goes smoothly, the overall process will typically take 3-5 months. We do not break down each of the steps as to time because the time involved for each step can vary wildly, depending on (for instance) how long it takes to prepare financial information, negotiate a lease, obtain documents from the landlord, authenticate relevant documents, and validate the corporate structure. Lately though the Chinese authorities have been quite efficient in processing applications, at least in the major cities and usually once we have provided them with all of the requested information in the exact format they need, they usually provide a response within 2-3 weeks. It is getting to that point that takes so much time.

Generic WFOE Formation – Roadmap

A. Name Approval Application

1. WFOE Investor(s): corporate structure chart, authenticated corporate documents, passports and other documents identifying key personnel.

2. Business Scope: define scope of business.

3. Registered Capital: determine amount of capital to be invested, pursuant to financial projections.

4. Total Investment Amount: determine maximum investment amount (capital + investor loans).

5. Capital Contribution Timeframe: default is within 30 years.

6. Proposed Chinese Names for WFOE: at least 6-10 choices.

7. WFOE Address:  dependent on lease/office space.

8. Name Approval Application Form: prepared by your lawyers, signed by client.

B. During Formation Process

1. Select accountant.

2. Select bank.

3. Draft labor and employment documents: employment agreements, WFOE rules and regulations, non-compete agreements, confidentiality agreements, etc.

C. Post-Formation

1. Open bank account.

2. Carve chops.

3. Open social insurance accounts and begin tax reporting.

4. Other post-formation activity as relevant.

For more on what it takes to form a China WFOE, check out the following: