Wholly Foreign Owned Enterprise (WFOE) is a company with foreign capital. In China, the WFOE was originally designed to encourage the industrial activities turned to the export or in the advanced technology. However since China entered the World Trade Organization, these conditions were given up and the WFOE became more democratic.
From now on the WFOE is used from now on by service companies and of consulting, import export and company of software also.
Advantages of the WFOE in China
A WOFE presents numerous advantages:
– Autonomy: contrary to an office of representation, the WFOE can lead itself classic commercial activities, emit and register invoices. It is not also necessary to have a parent company established for at least two years to open a WOFE;
– Control: the WOFE offers a total control over the capital, the management and the operations of the company, the easy repatriation of dividends and is the way most on to avoid the dangers of the joint-venture (retreat of the Chinese partner, etc.);
– Flexibility of the HR policy: there is no limitation on the number of foreign employees.
Needs for a WFOE creation in China
1. The capital
The minimum capital depends on the envisaged district of setting-up(presence), on the business sector and on the frame of the operations of the company. For informational purposes, below the minimum capital to be invested according to the business sector:
– WOFE of Services(Departments): from 500,000 RMB
– WOFE of Consulting: from 500,000 RMB
– WOFE / FICE of Trading: from 1,000,000 RMB
– WOFE Food and Beverage: from 1,000,000 RMB
– WOFE of Production: at least 1,000,000 RMB
To avoid the premature bankruptcies first year, the government rejects generally corporate development plans sub-capitalized. These must thus be able to finance almost all of their spending the first year.