China Entrepreneur: Voices of Experience from 40 International Business Pioneers

Chapter 2

Setting Up Shop (I)

Obtaining a Business License and Choosing the Right Legal Form

“The difficult part is, when you are a small company, you can’t always do things in an official way or with the right legal structure. Sometimes, you need to move in and out of gray areas. It’s sometimes out of your control. If you are a big company, you’ve got backbone behind you; you’ve got finance, partners, and legal departments.”

Susan Heffernan (Australia), Founder and Managing Director, Soozar

INSIDE CHAPTER 2

Getting Help with Licensing

Choosing the Right Legal Form

Conclusion

Introduction

This chapter covers the first set of “initial steps” for foreign businesspeople setting up shop in China: seeking the right business license, and choosing the best legal structure and form for the company. Chapter 3 will cover two other critical aspects of a new venture: finding the money to finance it, and choosing the right partner.

Foreign entrepreneurs have basically two legal options: (1) to establish a company outside of China, and subsequently open a representative office there; or (2) to form a foreign invested enterprise. Foreigners as individuals are not permitted to set up a Chinese firm (except in the form of a joint venture), although some of our interviewees found creative ways to bypass this rule, with widely varying degrees of success. The option of forming a joint venture with a Chinese partner is covered in Chapter 3.

The chapter covers two main topics:

1. Finding help with ...