How to Set-up a Trading Company in China
1. What is Business Scope of a Company?
Different from foreign companies, for example American companies, there is a concept called “Business Scope of the Company” in China which is specially approved by Commerce Bureau of the district of the city or the city where the Company locates. The Business Scope is a particular on the Business License and also shall be stipulated in the bylaw of the Company.
The Company can not do business beyond its business scope, or it will be fined by the Administration of Industry and Commerce.
According to the Regulations on the Administration of Foreign Investment Trade Sector (2004), enacted by the Ministry of Commerce, the business scope of a foreign-invested trading company may include: (1) to be a trade agent; (2) wholesale; (3) retail; (4) franchise; (5) export and import. And the categories of the goods to be traded shall be specified in the business scope, for example wholesale and export of textile, electronic products, furniture etc.
Every time the Company wants to change the business scope, it shall submit application to Commerce Bureau first.
2. What is the Registered Capital?
The Registered Capital of the Company is a certain amount of cash or substances evaluated to certain amount of money the Shareholder of the Company promises to invest into the Company.
According to the above-mentioned Regulations, the minimum Registered Capital for a foreign-invested company should comply with the requirement of the Chinese Company Law, which provides that the Registered Capital for a wholesale company should be at least RMB 500, 000, and for a retail company should be at least RMB 300, 000.
The competent authority may require a higher amount of Registered Capital according to different situations. For example, if the Company applies for trading automobile, the Registered Capital will be required higher.
The shareholder does not have to contribute the Registered Capital all at once. After the Company is registered, 20% of the Registered Capital needs to be paid in within 90 days after the Business License is issued and the rest can be paid in within 2 years.
3. What is the Post-Registration?
After the Business License is issued, the Company can do business under its own name. But there are still some post-registration procedures like Foreign Exchange IC card, Tax Registration Certificate, Finance Registration Certificate, Statistic Registration Certificate, Custom Registration Certificate, Electronic Port IC Card and etc. These are essential for the Company’s normal operation too.
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