When looking into overseas expansion, a representative office (RO) is one of the simplest ways to establish a physical presence in China. The Chinese market is a robust economy for investment; an RO allows foreign companies to understand and research markets trends before they establish a more traditional presence with a Wholly Foreign-Owned Enterprise (WFOE) or Joint Venture (JV)—among others.
Why is Setting up an RO a Good Idea?
Just like any other business structure, a representative office comes with certain limitations—the primary one being the inability to make profits. Since the RO is merely a legal extension of the overseas parent company, it faces limitations in business operations¸ as well as hiring capacity. But there are a considerable number of reasons to open a China representative office. Let’s take a look:
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Even though an RO cannot do business that makes profit, they can still conduct activities to promote their products, network with other companies, and carry out non-profit making activities
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Since an RO cannot indulge in profit-making, it faces very low tax rates and administrative burdens, unlike a WFOE
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The registration process can take months for other business structures, but it is significantly faster for ROs
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There are no capitalization requirements for setting up an RO and therefore the cost and risks are also low
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The set-up costs of an RO are minimal and it can hire both foreign and local staff
Requirements for Setting up an RO in China
To set-up, you’ll need to comply with certain legal requirements and considerations. As the registration process starts, you’ll need following documents:
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Notarized application form for registration
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Personal documents such as passport, letter of appointment, and pictures of the chief representative
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Rental contract or lease agreement for a legal commercial building
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Complete certification, articles, and registration information of the overseas parent company
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Application for opening a bank account
The process typically takes at least two months before you have an operational RO in China. Once the set-up process is complete, you’ll need to outsource security and hiring to a local agency in China.
Setting up a company in China can be expensive and time-consuming, but with the help of Business China, the process can be quick and hassle-free. We proudly serve foreign companies operating in China.
Business China provides a variety of services—from registration and set up to accounting and legal services—to international clients.
Get in touch with us to know more details.
