Last Updated: March 27, 2019
The Wholly Foreign Owned Enterprise (WFOE or WOFE) is a Limited liability company wholly owned by the foreign investor(s).
1. Different Types of WFOE
Following are different types of WFOE. Commonly,
- If the WFOE only be allowed to manufacture here. We can say it's manufacturing WFOE.
- If the WFOE is allowed to do Consulting & Service, we call them Consulting WFOE.
- If the WFOE is allowed to do Trading, Wholesale, Retail or Franchise, we call them Trading WFOE.
2. Advantages of WFOE
The advantages of incorporation a WFOE, compared with other types of enterprises, include, but not limited to:
- Independence and freedom to implement the worldwide strategies of its parent company without having to consider the involvement of the local partner;
- Protection of intellectual know-how and technology;
- For Manufacturing WFOE, no special requirements for Import / Export license for its own products;
- Full control of human resources
- Greater efficiency in operations, management and future development.
3. Articles of Association
It will mention exactly how the WFOE can operate, th
4. Business Scope
According to WFOE regulations, "Foreign investors are permitted to setting up a 100% foreign owned enterprise in industries that are conducive to the development of China’s economic benefits, and not prohibited or restricted by China government." The Catalogue of Guidance to Foreign Investment" [-Latest Catalogue of Guidance EN-CN-]categorises fields of potential investment as "prohibited," "restricted" and "encouraged". It is advisable to fully comprehend the interpretation of these categories. In China, Business scope of a business is a "one sentence description" covering all of the present and future activities of the WFOE; it is essential this encompasses every envisaged scope of future activity. The WFOE can only conduct business within its approved business scope, which ultimately appears on the business licence.One of the most important issues in WFOE application is business scope. Any amendments to the business scope require further application and approval. Business scope of a company in China is not as broad and general as in other countries. Generally business scope includes investment consulting, international economic consulting, trade information consulting, marketing and promotion consulting, corporate management consulting, technology consulting, manufacturing, etc. After China's entry into WTO, more and more business is open to WFOE especially in Trading, Wholesale and Retail business, check the Catalogue of Guidance to Foreign Investment which was Amended in 2007 [-Latest Catalogue of Guidance-] (PDF, 325 KB)
5. Registered and Paid up Capital
Registered capital is the amount that it's required to run the business until it can break even - the 'registered capital' is a guideline only. If you do looking for a minimum registered capital, this means you will run out of money pretty soon, which leads to increased costs in reapplying for permission to increase capital, additional licensing fees and renewals of business licenses and so on. The WFOE needs funding via it's registered capital until it's about to support itself from it's own cash flow.
6. Office address of WFOE
Before submit the application forms of forming a WFOE, the foreign investor must rent a plant(manufacturing WFOE) or an office in advance
7. Choosing WFOE Company Name
. The company name should be formatted as: first word -company name/product(For instance: MCK; second word: activity (For instance: business consulting); third word - company structure. (For instance: Co., Ltd.)
8. Business License
Business license is the key offical document of the WFOE
brought to you by Path To Asia (PtA) www.ePathToAsia.com a one-stop shop for setting up your business presence in Asia Market.