Before you decide to invest in China, you're advised to look through the Catalog for the Guidance of Foreign Invested Enterprises (Revised 2007) (or, 《外商投资产业指导目录(2007 年修订)》in Chinese), which is a catalog of encouraged, restricted and prohibited foreign investments. Basically, it tells you which industry you are allowed or not allowed to invest in, and in what form, WFOE or JV, etc. Unfortunately, I cannot find an officially translated version of the Catalog. Interested foreign investors may use Google to find unofficially translated English versions of the Catalog. Anyway, don't worry. Foreign investors are allowed to invest in most industries in China. Then, let's look at the pros and cons of a rep. office and LLC.
Pros of Rep. office:
- No minimum registered capital requirement.
- No allowed to conduct actual business (only for liaison purpose);
- Cannot hire Chinese employees directly; Employees sign employment contracts with a qualified HR company (e.g. Beijing Foreign Enterprise Service Group Co., Ltd. or 'FESCO' in short) and employees are then dispatched to work for the rep. office. The service provided by FESCO is not cheap.
- Must pay taxes even if a rep. office does not have any income. The tax payable is calculated on the basis of a portion of a rep. office's expenses.
- Can conduct actual business in China;
- Can hire Chinese employees directly;
- Pay taxes just like any other Chinese company.
- Minimum registered capital requirement: RMB 30,000. (Trust me, nobody would do big business with you if your liability is limited to just RMB 30,000. To make your company look trustworthy, increase the amount!)
Of course, there are other business forms you can choose. My objective in this post is to advise foreign investors to go for LLC rather than a rep. office. Don't always assume a rep. office costs you less than a LLC (You pay the registered capital and it's still yours, right?).
You may be interested in having a look at the Company Law of P.R. China (《公司法》). By the way, registering a company in China is not so difficult and you don't have to hire expensive lawyers to help, unless your case is complicated and you feel the need to use lawyers. However, if you don't want to waste time on your trips, you may need to hire a professional agent to run errands for you and get your company registered.