How to go about setting up a business in Hefei?

[小心地滑- Caution Slippy Floor]

I know some people in Hefei are fairly well read on issues of this sort, therefore I'd appreciate help from those particular people. So:

Does anyone know the procedures for a foreigner wanting to successfully and legally set up a small commercial venture in Hefei? For example, what are the requirements for becoming a 'director' or similar? With your own company do you have the right to get a working visa of some description? How much investment capital is needed?

Any information is welcome!

[ebby]

Hi 小心地滑, I heard  it's kinda difficult for a foreigner to register a business here but much better and easier if you have a chinese partner to register on your behalf Business F visa is sure on this . And except you are working as a representative of your company here , you may not be able to get a working visa.
 
Requirements:

1. Company name( to be verified before proper registration begins)
2. Cash running up to 100,000 yuan (if not hard currency)
3. Office address
4. ID card
  There are others I cannot be sure of, I hope guys can add to this list.

[Aussie Mike]

It's a catch 22 at times as you need to have the business premises before you register.

[rae]

u dont really need 100,000rmb to set up a company, the least to set up an company account is 30,000rmb. if u go through an agency, they will help u to set up a company account which means u can save u at least 30000rmb, but u need to pay the agency some money (depends on how much ur account values)which is not much.

[kaibo 开 博]

The info for business registration in China is dependent on many factors. The local bureau will advise on mimimum capital investment for a WFOE -- generally minimum of 100,000 deposited from a foreign account. 30,000 minimum is the general guideline for a Chinese person to register a business. The minimum capital investment is operating capital to ensure the venture has more chance of survival. As stated, the bureau dictates minimum capital required based on operational requirements at a given location.


Oct 06, 2009
Source: China Briefing
The wholly foreign-owned enterprise has become the investment vehicle of choice for the international investor wanting to manufacture, service or trade in China. In addition to the WFOE's expansive business scope, its unrivaled popularity arises from multiple other factors:
• 100 percent foreign ownership and control
• Security of technology and intellectual property rights
• Self-developed internal structure
• Insertion of existing company culture
• Profit repatriation
• Domestic sales
Your organization has decided to invest in China. Deciding which entity to establish based on your short and long-term plans is the next step.
Structuring your WFOE
Business scope
You need to ensure your business scope is accurate and genuine. The requisite administrative government offices will quickly pass your proposed business scope, but that does not mean you are finished. Your proposal will then make its way to the state and local tax bureaus, and they will also thoroughly check your application. Any attempts to fool the tax bureau into thinking you are producing one thing when you are actually producing another will inevitably fail.
WFOEs can only operate within the business scope approved by the authorities. The scope of business article within your articles of association will define exactly what your company is going to do. If you are going to be selling your product domestically, be sure to mention China's required compliance with the WTO treaty. This will allow easier access to the domestic marketplace. Also, your business focus must be clearly indicated or problems with the tax bureau and customs will arise when seeking due tax refunds. This does not mean your WFOE must be one-dimensional, but that you must be honest and prescient when planning your operation. Beyond being a complicated approval process, it is also a lengthy one due to the requisite translations and multiple bureaucratic departments.
Registered capital requirements
Registered capital requirements are dependent on location and industry and are used as an entry barrier to ensure foreign-invested enterprises are of sufficient quality and financial strength.
Minimum capital requirement
The legal minimum capital requirement for a domestic commercial, manufacturing or service enterprise is RMB30,000 but immediately jumps to RMB100,000 for entities with only one shareholder is present. In reality, however, the minimum capital requirements vary drastically by location and industry. For instance, a manufacturing WFOE in Beijing may face different capital requirements than a manufacturing WFOE in Tianjin, a service WFOE in Shanghai, or a FICE in Guangzhou. Shop around and compare regional differences. But beware, people are often duped into attractive but untenable minimum capital requirements proffered by local magistrates trying to meet their quotas. This will lead to complications with the central and local tax bureaus, both of whom will be intimately involved in your business life. It might be helpful to note that your registered capital is also your limited liability and this is also reflected in this amount. This could become a deal-breaker if a potential client wants to do business but cannot determine whether or not you are sufficiently capitalized.
Total investment
Registered capital and total investment figures are both required during the application procedure. The total investment is the amount necessary to realize the company's operations, while the registered capital is the equity pledged to the local authorities. The difference between registered capital and total investment represents the debt of the investment and can be made up by loans from the investor or foreign banks. Pay attention to the relationship between registered capital and total investment in case you need to obtain further debt or other financing from your holding company or other financial institution. Keeping this window open will cost you nothing, but closing yourself off from further financing by equating registered capital and total investment may leave you handcuffed. The payment schedule of the WFOE registered capital also needs to be specified in the articles of association. The investor may choose to pay it as a lump sum or in installments.
It is crucial for the investor to understand the importance of minimum registered capital, total investment, and working capital; but beyond that, basic investment criteria remain the same. The government will look at the general viability of the project and a reasonable cash requirement for a particular type of investment. Injections of cash and plant equipment take place after the WFOE license is approved, making it a no-risk investment in terms of money up front.
Working capital
The amount of working capital required until a business is self-sufficient is often underestimated. When the time comes, do not simply put in the minimum registered capital requirement during initial capitalization as you may later find the business is under-capitalized, unable to pay its bills and out of funds. Injecting capital is costly in terms of time and money. Any money sent to make up an operational shortfall that does not follow the government's business cash injection protocol can be subject to the 25 percent corporate income tax. Err on the side of over-funding. It is an operational cash flow issue, not a regulatory licensing matter. Bear in mind that newly established foreign businesses in China must still make a tax deposit to customs for VAT and remit duty on initial imports, usually for a period of about six months. Many new businesses do not cater for this as initial working capital (as part of their registered capital requirements), leaving them short of cash later on. Again-factor in your working capital requirements as your registered capital amount as opposed to any 'minimum' suggestions.
Set-up process
Feasibility study report
The feasibility study is one of the first steps in the application process. Reviewed by the Ministry of Commerce or its local counterpart to assess foreign direct investment in China, this non-binding report is also used to assess exactly how much thought and planning has gone into your business. You will need to address your operating budget and the raw material inputs, among other pertinent information. The application follows a standard format and is provided by the authorities to you as part of your application documentation. It needs to be translated into Chinese for application.
Setting up Wholly Foreign-Owned Enterprises
Oct 06, 2009
Source: China Briefing
Environmental protection valuation report
The Environmental Protection Bureau will issue you a document that is intended to control manufacturing production processes in accord with specified environmental norms. The bureau will require information about the raw materials used, the machinery and equipment, and consumption and safe disposal of toxic products. Please note that all assembly and manufacturing WFOE applications must obtain approval by this bureau. In some cases, a full report on the environmental impact issued by an appointed agent shall be required (for example, the leather processing business) and this may represent a major step to go through as it would affect the time frame to get your factory up and running.
Key articles of association
The articles of association is one of the most important documents in establishing a WFOE. These are the operating rules of the company and it is vital that they are properly structured, if they are not, you could run into problems later on. Unfortunately, many foreign investors make the mistake of regarding them as a simple formality and do not take the time to properly formulate them. When establishing a company with a limited life span of 40 years, know what you are agreeing to. Here we highlight some of the articles, what they mean and what should be included.
Business scope article
The business scope article expresses the limits of your WFOE's business practice. It needs to be a clear, honest assessment of your intended business scope while leaving the possibility for expansion.
Production scale article
This can be useful for expressing an exit strategy by linking production and profitability scales to unacceptable levels of business, thus permitting liquidation under such circumstances.
Liquidation audit article
A board of director's resolution approves liquidation and termination in conjunction with the production scale article included in your articles of association. Liquidated assets are then paid in the following order: liquidation expenses, employees, outstanding taxes, secured debts, and other debts. Any funds remaining after business deregistration can be repatriated to the investors.
Total investment article
The relationship between your registered capital and your total investment capital can affect debt financing and the ability to obtain parent company loans. Clarity is important.
Profits repatriation article
This gives the parent company the right to bill the WFOE for services, royalties, and R&D costs for example. This will make it easier to overlay expenses, send money out as an invoice payment and save on your profits tax bill.
Trade union article
In China, the staff  has the right to form a trade union but not to strike. They can however, elect a representative that you will need to deal with. It is wise to attempt to control the union's budget and influence its expenditure.
The articles of association should be studied in great detail and redrafted to fit your business situation. Once completed, they need to be translated into Chinese. It is important to note that the Chinese language version of your articles of association will take legal precedence over any other version. For these reasons, this stage of the application needs to be handled with the utmost precision and care.
***

[kaibo 开 博]

 
Provisional Regulations on      

Administration of Foreign-Funded Enterprises in Hefei      

http://220.178.124.16/english/xgfg_view.jsp?id=3753&Rnd=0.4207249115664402
 

[kaibo 开 博]

This is also a good article which I think I found at the HETDA website. These guidelines may apply if you are registering in HETDA but might also be more generally applied to have some understanding of the process.

The Procedure in Establishing Joint Venture/Cooperative Enterprise

1. Enterprise name pre-approval (Administration Bureau of Industry and Commerce, Tel: 3821962)

(1) The original Enterprise Name Pre-approval Application Form.

(2) The sealed Business Opening Registration Certificate of each investing party or the copy of individual investors’ ID cards. (One copy)

 

2. Joint venture project approval (Economy and Trade Development Bureau, Tel: 3811107)

(1) Request of Applying for ______Project Approval (required by HETDA Economy and Trade Development Bureau, original documents in duplicate)

(2) Project Application Report (one original document, possibly substituted by Project Feasibility Research Report)

(3) The sealed Business Opening Registration Certificate or the copy of personal ID cards of individual investors (One copy)

(4) Cooperation Agreement between Chinese and Foreign parties (One copy)

(5) Proof of the right to use a place of business (One copy)

(6) Examination result on Environment Impact Assessment (One copy)

(7) Enterprise Name Pre-approval Notification (One copy)

( Other documents and certificates relating to laws and regulations

 

3. Approval of the establishment of joint venture/ cooperative enterprise （HETDA Economy and Trade Development Bureau, TEL: 3811107）

(1) Request of Establishing Joint Venture/ Cooperative) _____ Company submitted by the Chinese party. (Original documents in duplicate)

(2) Enterprise Name Pre-approval Notification (One copy)

(3) Articles of Association of the joint venture/cooperative enterprise (sealed and signed by the legal person of each investing party) and the Appendices（5 copies including 2 original copies）；

(4) The name list and power of attorney of the board of directors board of supervisors signed and sealed by the legal person of each investing party and the copies of the ID cards of all the members (note: the board chairman should be the legal person of the joint venture or cooperative company)

(5) The sealed Business Opening Registration Certificate of both parties and the foreign investors also need the notarization of the state organs, the attestation of the embassy of the foreign country and the Chinese consulate stationed in that country.（The investors from Hong Kong, Macao and Taiwan districts provide notarization only.）

(6) Bank credit certificate of the investors (One original document)

(7) Authorized power of attorney delivered in legal document (One original document)

( Proof of the right of using a business place (One copy)

(9) List of imported materials (One copy)

(10) Other documents and certificates relating to laws and regulations

 

4. Acquire the National Organizational Code—the Code Assignment Notification of National Organizational Code (The Technological Supervision Bureau)

 

5. Acquire the Approval Certificate for Foreign Investment Enterprise (HETDA Economy and Trade Development Bureau)

Submit the copy of the national organizational code assignment notification

 

6. Industrial and commercial registration (the Industry and Commerce Bureau)

(1) Registration Application Form for Foreign Investment Enterprise (acquired from the Administration Bureau of Industry and Commerce attached with a submission list of other application documents)

(2) Examination Registration Certificate for Foreign Investment Enterprise (One copy)

(3) A transcript of the Approval Certificate for Foreign Investment Enterprise (One copy)

(4) Other materials required by the Administration Bureau of Industry and Commerce.

[ronaldcarter]

I am planning to set up a business, can someone tell me what will be the initial cost of setting up a retail business there?

[kaibo 开 博]

How long is a piece of string? It depends entirely what your requirements are: location, company structure, available capital, market analysis, insurance or legal fees etc. You say retail business ... let's assume it is clothing ... you want a wholly owned foreign enterprise structure ... I would advise you that your initial investment would be 2-300,000 Chinese RMB (CNY) If you set the business up with a Chinese partner it is much cheaper.

I walked into a business here for 50k (CNY) & recovered my investment in 5 months ... but much of what I did was under the radar because I used a Chinese partner. I set up the business to test the market & basically came away with some interesting findings that I might use down the track.

If you are really interested I can assist you with translation services & provide you with all the legal advice including a link with the right Chinese professionals, introductions to government departments etc. I will negotiate a fee, find the right kind of location, as well as give an independent market report on how your business might perform.

I will give you some friendly advice from the common famous quote ... "those who fail to plan, plan to fail." That really is where it is at. If you do not structure a business plan, don't do a feasibility study, fail to assess the market demographics, investigate the legalities etc., -- you will head into unknown waters & get frustrated immensely. I spent hundreds of hours formulating what I did & it paid off. What I learnt was, don't assume anything; do your homework first.