The short answer
Three structures are usually on the table: a wholly foreign-owned enterprise (WFOE), a joint venture (JV) with a Chinese partner, and a representative office (RO). They are not three speeds of the same decision.
- If the China entity will invoice Chinese customers, employ staff directly, import or export, or hold a licence, it has to be a company — a WFOE, or a JV where the sector requires one.
- If the China presence is purely liaison — sourcing, quality inspection, market research, coordinating the parent’s suppliers — an RO can work, provided nobody in China needs a fapiao from it.
- If the sector is on the negative list and caps foreign shareholding or requires a Chinese partner, the structure follows the sector, not your preference.
The rest of this guide sets out what each structure can legally do, what it costs to run, and the five questions that settle the choice.
What each structure can legally do
| Structure | Legal form | Invoicing, hiring, trade | Liability | Fits |
|---|---|---|---|---|
| WFOE | Limited liability company with a foreign shareholder | Can invoice, hire directly, hold RMB, and apply for import-export rights | Limited to the company | A China business with local revenue |
| JV | Company with Chinese and foreign shareholders, or a contract-based cooperative JV | Same as a company, but governance is shared | Limited to the company | A sector that requires a Chinese partner, or a partner who brings a licence, land or distribution |
| RO | Registered presence of the foreign parent, not a company | Cannot sign revenue contracts or issue fapiao; staff usually engaged through a dispatch agency | Parent liability, unlimited | Liaison, sourcing and quality control with no China revenue |
| Branch | Extension of the foreign parent | Limited to licensed sectors such as banking, insurance and oil | Parent liability | Rare and sector-specific |
The WFOE: a Chinese company you own outright
A WFOE is a limited liability company whose shareholder is foreign. Since the Foreign Investment Law took effect in 2020 and its five-year transition ended on 31 December 2024, “WFOE” is no longer a separate legal category: the company is organised under the Company Law on the same terms as a domestic company, with foreign-investment rules layered on top.
That matters in three places.
- Capital. There is no statutory minimum registered capital in most sectors. The amount is subscribed in the articles and must be paid in within five years of establishment under the 2023 Company Law, effective 1 July 2024. From 1 May 2026, market regulation registration forms record the contribution schedule itself, and companies whose existing schedules exceed the limit must adjust them by 30 June 2027.
- Scope. The business scope is drafted from the industry catalogue. Activities on the negative list need a partner, a cap or a separate approval, and regulated activities need a sector licence before the scope can actually be used.
- Operations. A WFOE can issue fapiao, employ Chinese and foreign staff directly, hold RMB, and apply for import-export rights. Those are the practical reasons it is the default for a real China business.
Registration typically takes two to four weeks for the business licence once documents are complete. Banking, tax onboarding, company chops and foreign-exchange registration add several more weeks, and hiring foreign staff adds a work-permit filing on top.
The joint venture: when a Chinese partner is required
A JV is not a separate legal form either. An equity joint venture is a limited liability company with at least one Chinese and one foreign shareholder; a cooperative joint venture is organised around a contract that allocates investment, profits and obligations differently. The label describes the shareholding, not a special regime.
Most foreign founders do not need a JV. It becomes the structure when:
- the sector sits on the negative list and requires a Chinese partner or caps foreign ownership;
- the licence, land, distribution network or customer access you need is held by a Chinese company;
- a state-linked or public-sector customer requires a local shareholder.
The cost is governance. Board composition, reserved matters, deadlock, capital calls, technology licensing, transfer pricing and exit rights all have to be negotiated before incorporation, not after. A JV agreement that is not reflected in the articles is difficult to enforce. Expect three to six months for approvals, longer where merger review or national-security review applies.
The representative office: a liaison presence, not a business
An RO is a registered office of the foreign parent, not a company. It has no shareholders, no registered capital and no separate legal personality, which means liabilities attach to the parent.
Its permitted activity is liaison connected to the parent’s business: market research, promotion, supplier and customer contact, quality inspection, coordination. The list is exhaustive. An RO cannot:
- sign revenue contracts or issue fapiao;
- import or export in its own name, or receive payment from Chinese customers;
- employ Chinese staff directly in most cases — staff are engaged through authorised dispatch agencies;
- be converted into a subsidiary, or moved to another province.
The tax treatment is the part founders underestimate. ROs are assessed on a deemed-profit basis under the cost-plus method: a profit rate of at least 15% is imputed to expenses, producing a liability of roughly 11–12% of total expenses whether or not the parent makes money in China. Add the annual report with an audited expense statement, filed between 1 March and 30 June, and the requirement that the parent has been incorporated for at least two years.
An RO fits a narrow set of cases: a sourcing or quality-control office, a liaison presence in a sector where foreign equity is restricted, or a defined market-assessment period with no local revenue.
Cost, tax and timeline compared
| Item | WFOE | JV | RO |
|---|---|---|---|
| Legal personality | Separate company | Separate company | None; parent is liable |
| Minimum capital | None in most sectors | Negotiated | None |
| Paid-in deadline | Within five years | Within five years | Not applicable |
| Corporate income tax | 25%, or an effective 5% on the first RMB 3 million for small low-profit companies through 2027 | Same as a WFOE | Deemed profit, about 11–12% of expenses |
| Invoicing | Yes | Yes | No |
| Direct hiring | Yes | Yes | Usually through a dispatch agency |
| Registration time | Two to four weeks for the licence | Three to six months | Three to six weeks |
| Convertible into a company | Not applicable | Not applicable | No |
How to choose: five questions before you file
- Will anyone in China need a fapiao from this entity within 24 months? If yes, it must be a company. This single question eliminates the RO for most trading, services and e-commerce businesses.
- Will you employ staff directly? An RO’s dispatch arrangement adds a margin to every headcount and limits control over terms.
- Does the sector sit on the negative list? Check the current national list and any free-trade-zone list; the answer decides whether a JV is mandatory.
- Do you need import-export rights, a licence, or RMB settlement? All three are company features.
- What capital can you commit and pay within five years? Registered capital is a funding commitment on a fixed clock, not a credibility score. Size it against first-year operating costs and the five-year plan.
If the answers point to a company, the remaining choice is between a WFOE and a JV, and the sector usually settles it. If they point to liaison only, model the RO’s deemed-profit tax against the cost of a small subsidiary before assuming the RO is cheaper. In many cases it is not.
Before filing, prepare the parent’s incorporation documents with apostille or consular legalisation and a Chinese translation, the legal representative’s passport, a registered address, the business scope, the capital schedule and the ultimate-beneficial-owner chain. Document authentication is usually the longest item, so start it first.
If you are weighing a structure for a specific sector, our China company setup service sets out the filing sequence, and the foreign investment insights hub covers registration, capital and compliance in more depth. The capital each structure commits is set out in the registered capital guide, and the hiring consequences are in the first-foreign-employee guide. To have a structure checked against the current local rules, contact an advisor.