Doing business in China has never been easy for foreign companies. The country has a long history of a complicated and ever-changing bureaucracy which make it challenging for foreign entrepreneurs to obtain a business license in China.
However, in recent years the Chinese government has implemented new regulations. This was done in an attempt to make China a more business-friendly environment and attract foreign investors. Even though the new business reform hasn’t happened at the expected speed, 2018 has seen significant changes which confirms the government’s determination to continue this reform.
For instance, several unnecessary licenses and certifications have been cut or merged into what is today known as the Five-in-One business license. As we will explain, obtaining a Five-in-One business license is not as easy in China, as it is in many western countries, but it surely is easier and faster than before.
All that comes as good news for foreign businesses who want to enter the Chinese market. Despite the ups and downs of the local economy, China still represents one of the most appealing and rewarding markets. For instance, according to a recent report, E-commerce sales in China during 2017 accounted for 23.8% of all retail sales. This figure is expected to reach 33.6% by 2019.
Therefore, a simplified process to obtain a business license creates new opportunities to operate in the local market.
Even though having a business license is not always necessary to operate in China, having one is highly recommended if you want to be successful in this market. A business license allows your company to make use of essential benefits which will allow you to operate more thoroughly in China.
Let’s consider, therefore, what is required to obtain a Chinese business license and what benefits come with it.
How To Obtain a Five-In-One Business License in China
As the name Five-in-One suggests, this business license incorporates five different certificates:
• The Business License: This document includes key details about the company, including the name of the organization, registration number, legal representative, registered capital, and so on. An additional important feature is that this license is necessary to open a bank account in China.
• The Business Tax Registration Certificate: This document contains the company’s tax number, taxpayer name, and indicates the scope of the business.
• The Organization Code Certificate: This certificate demonstrates the legality and legitimacy of the business in front of customers or clients. The government uses this same document when creating a digital database of all the companies registered in the country.
• The Social Security Registration Certificate: It is mandatory for employers to register and contribute to the social security system. The document certifies that the company is compliant with this requirement.
• The Statistical Registration Certificate: This document is issued for statistical purposes, even though some regions like Shanghai and Guangzhou do not use it anymore.
The process of obtaining a business license in China has been simplified in several ways by the introduction of the Five-in-One license.
In the past, companies had to start this process by applying first for a business license with the local Administration for Industry and Commerce. After obtaining the business license, the company had to apply for all the other certificates individually. A different office released each additional certificate, and it would take many days, or weeks to be released. This made the entire process very lengthy and time-consuming.
Nowadays, thanks to the digitation of business registration promoted by the State Administration for Industry and Commerce, companies can apply online for a business license. The system supports the online request filing and the upload of requested documents and e-signature.
This new arrangement has created an important improvement in the procedure. A process that is now completed in a significantly shorter time. However, this doesn’t mean that the process has become entirely easy for foreign business.
The local bureaucracy remains complicated. And the language barrier can make the whole process discouraging. It is highly advisable to make use of a local consultant who has expertise with this process and can handle all the steps on your behalf. This will make it easier and faster for you to obtain your business license and in a short time you will be fully operational.
Benefits of Having a Business License
Once your company obtains a business license in China, all the limitations imposed on foreign investors are lifted. For instance, if you are running an E-commerce website which targets the Chinese market, or you have a company website, a business license gives you total freedom for your marketing activities.
The Chinese business license grants you the right to request the ICP license, a document necessary to open a website or operate an E-commerce website in China. Moreover, without an ICP license, your online platform cannot be hosted in China.
Therefore, if China is an important market for you, a business license is necessary. Other solutions, such as targeting the Chinese market from abroad, or using a cross-border platform, may bring results, but they will be limited. For example, Chinese censorship blocks or slows down websites that are not hosted in China. This results in a poorer user experience and will reduce your potential revenues.
Another important factor that you might want to consider, is that a business license is required to open a WeChat Official Account. WeChat is a necessity when marketing your products and services in China. You can use this platform to reach out to your audience, create promotions and reward programs, build customer relationships, and more. Chinese users utilize WeChat even to finalize their purchases online. Every trusted business in China is expected to have a WeChat Official Account.
Know Your Business License
This is a standard license needed to carry out your business activities in China. In this document, you will find the following information, used to denote your categorisation within the Chinese commercial jurisdiction.
1. Unified Social Credit Number
This is a central identification number used, for instance, in tax and credit searches.
2. Business License Number
This number is used to the denote your business license, however not the company itself. This number is interchangeable.
3. Company Name
(Custom Name + Name of Business Field + Company Type)
a) Custom Name
This name contains 3 to 4 characters, and must fulfill a range of criteria, as stipulated by Chinese authorities. It must not mislead, nor indicate the name of political or military organisations.
b) Name of Business Field
This contains a term relevant to your business activities. This will be featured in your company name, for identification purposes.
c) Company Type – Suffix
The company type must feature at the end of the company name.
4. Company Type
Company types can range from:
- Limited Liability Company (invested by individuals)
- Limited Liability Company (invested by foreign invested company)
- Limited Liability Company (invested by foreign investor)
- Limited Liability Company (invested by Hong Kong/Taiwan Macau investors)
- Individual invested company
- Joint Stock Limited Company
- Limited Liability Company (invested by companies)
5. Legal Representative
This denotes the person which represents the company within the legal environment. This individual enjoys power of attorney and can act in their capacity as legal proxy to company matters. This representation extends into all aspects of the legal environment, as any illegal activities carried out by the company renders the individual liable for the same infractions.
6. Business Scope
The section outlines the business’ intended activity. Depending on the nature of the company, this process can be extensive, as it must outline details of every business operation conducted by the enterprise.
7. Registered Capital
This section provides reference to the amount of money that the investor seeks to input into the company.
8. Founding Date
The segment provides the date of the establishment of the formal legal entity.
9. Operating Period
This is the intended period under which the company will carry out its activities. Customarily, this amounts to 30 years. When the time elapses, and without renewal, the enterprise legally dissolves.
10. Registration Address
This is the domain under which your company physically exists, and resides prior to the registration process.
Make Good Use of Your Chinese Business License
Although China is a market with plenty of opportunities, it can still be challenging to successfully enter it. The best solution for foreign businesses is to ask for the support of local experts. This will speed up the process of obtaining a business license, and it is a necessary step in understanding how to approach Chinese customers.
QPSoftware has over a decade of experience in the Chinese market. We have designed and developed web solutions which are specifically designed for local customers. Thanks to our knowledge of local culture and habits, we can advise you on how to create a product that meets local expectations.
QPSoftware is the leading website agency in China, all our solutions are customized with your business in mind and take into consideration your target audience. Contact us today and we will help you enter the Chinese market.