One of the most common calls our China lawyers get is the one from someone saying they want to “start a business in China.” The first thing we do with that sort of caller is to seek to ascertain whether a China business is actually necessary. Forming and then operating a business entity in China is not fast, easy, or cheap. So whenever possible, we seek to determine whether there is some way the caller can conduct business with China and achieve what it is seeking to do with China, while not having a business in China at all. For potential alternatives to forming a China business, check out the following:
- Getting Your Product Into China Via a Distributorship
- China Licensing Agreements: The Key Provisions
- What you Need to Know to Sell Your Product Into China
But if forming a China business does make sense, the next issue is what kind of business makes sense. On this, you typically have three choices: a Wholly Foreign Owned Entity (WFOE), a Joint Venture (JV), or a Representative Office. These days, the overwhelming majority of foreign companies seeking to do business in China go in as a WFOE, but there are definitely still instances when a Joint Venture or a Representative Office make sense. or more on the differences between these three sorts of entities and on what it takes to form each of them, check out the following:
- China WFOE or JV
- The Slow Death Of The China Rep Office.
- China Representative Offices: Got WFOE?
- China Representative Offices: Getting Started
- China Joint Ventures — The Information The Chinese Government Does Not Want You To Know
- Joint Venture Jeopardy (article I wrote for the Wall Street Journal)
If you are going to have a China business entity, you are going to have employees (indirectly in the case of a Rep Office). That means you are going to need written employee contracts (these must be in both Chinese and in English or whatever additional language you choose) and a written employee manual/employee handbook (again, in Chinese and in English). You probably will want your employee agreements to speak to issues like trade secrets and non-competes (which are limited in China) and overtime. For more on employee contracts and employee handbooks, check out the following:
- China Employee Contracts And Employee Manuals: Not Optional.
- China Employment Contracts: Ten Basic Things
The last thing you need to focus on if you are going to be doing business with China, particularly if you are going to be doing business in China, is protecting your intellectual property. This almost always means registering your brand name as a trademark in China and oftentimes your logo or slogan as well. This also means registering your patents or copyrights in China as well. For more on registering your trademarks in China and protecting your IP there, check out the following:
The above are the four main issues confronting foreign companies seeking to do business in China:
1. Determine if a China company is necessary.
2. If a China entity is necessary, form the right one.
3. If you are going to have a Chinese company, you should have the proper employment contracts and employee manual.
4. If you are going to be doing business in China, you are going to need to take certain steps to protect your IP.
That was easy, wasn’t it? Now go forth and prosper.
