Okay! So, what I’ll do is answer a bunch of questions we get asked A LOT – like, literally ALL the time in our practice (E’Or SOLUTIONS, Inc.™) concerning WOFEs.
And then after that, I’d attach from our library a BONUS document & our 7-Part Series WOFE Crash Course Workshop. Why? So that you can make informed judgements as to whether or not a WOFE will be the most preferred vehicle for your foreign direct investment into China.
Sounds good? (saw you nodding – 😉 ) Perfect!
Man! Before we go though …
I feel like all of sudden WOFEs are the talk of the day; present day world 2019 relating to China~Shanghai (of course, in our office & on our Entrepreneur WeChat group) and newly Africa (Kudos E’Or SOLUTIONS, Inc.™ on scaling to Africa ) …
I mean, everyone seems to have awoken to it … so weird!
So weird, I swear because …
I remember way back when we started this (because of emoH™) – like 5 years ago (Psh! not to even mention veterans who came before us) – It was so quiet; no one made so much fuss about setting up enterprises in China let alone WOFEs?
It was the talk of only a select few!
Like, literally hushed within elite business circles; within private men’s meetings whilst they smoked on cigars and flirted with beautiful girls … 😀 + 😛 + 😉
Don’t believe it? See this video-pic of me, on that cold wintery morning in 2015 begging (on my knees – Ha! Ok, I lied!) the Chinese government to PLEASE choose me as WOFE-worthy.
WOFEs were SUPER hard to come by. If you didn’t’t have huge sums of money stacked up to credit your bank account – capital injection; no way!
Or, money for plane tickets to your home country, back and forth for application in China; and then make videos like myself begging the China government … you were doomed to NO business-in-China.
And oh, I forgot!
Then, put up with endless red-tape, signing down of paperwork for company registration/approval with the Commerce Bureau (MOFCOM) and Administration of Industry and Commerce (AIC); you couldn’t tap into the China market! Ever!
So, where did that leave the young entrepreneur who was bursting out with crazy ideas deep in the heart of meaningless business school in China like in our case with emoH™?
Where does that leave that person or foreign/parent company who sees the 1.3 billion Chinese head-count and goes … “I/we could totally use that to make loads of money; growing the Chinese economy simultaneously”.
A total no-go, right?
So, then what happened was, the China Government got woke! They upped their game.
They became super ENTREPRENEURIAL! Meaning, they broke away a lot of the red tape, created massive numbers of Special Economic Zones (SEZs) & Free Trade Zones (FTZ) for investments. (SEZ/FTZs usually come packaged with tax breaks and concessions, liberalised admin and general trade incentives)…
Welcomed innovation and new tech. Adopted the ‘One Window, One Form’ policy, Instituted the Internet Plus campaign to streamline and digitise government/central procedures … etc.
Again, so that ordinary people can come in ‘easierly’. Simple!
And that’s why we’ve indeed, ever since then partnered up with the China/Shanghai Local Government to spread the word. The word being:
“ you now can also penetrate China” you do not need to be BOUJEE anymore to do it!
Isn’t that so cool? I think it is! And that’s why everyone these days has been talking WOFEs and are on their way to WOFE!
Ha! Okay, back to our focus task of the day … HOT WOFE FAQs, shall we?
1. What is the meaning of the word WOFE or WFOE?
Same abbreviation for Wholly Foreign Owned Enterprise.
2. How do you say the word WOFE?
Omg! Is this a phonics lesson? Ha! WOO and Fiiii. WOOFiii!
3. What is a WOFE?
It is the LLC equivalent in China. Meaning, can be owned by 2 or a max of 4 shareholders (foreigners only, of course!).
4. What types of WOFEs exist or can I set up?
3 main types:
Trading WOFE, Consulting/Service WOFE and Manufacturing WOFE. Just depends on what exactly you want to do in terms of business activities.
Our brandyourselfstrong Manual (coming up soon) has all the deets on this. For now you can use our 7-Part Series WOFE Crash Course Workshop to fully comprehend what business scopes these different WOFE types allow.
But as per their names, if you register a trading WOFE, means you want to operate as a trading (middle man between buyers and sellers for import and export transactions) company … If you do a Consulting WOFE, means you plan on offering services of some sort in whatever industry you choose to … If you do a Manufacturing WOFE, means you want to set up a factory in China and make whatever physical products you want made.
5. Why WOFE?
Because of the little prelude above (:grin:) and then because working with Chinese, as in owning a business along side them can be hard work.
It is hard work! We are talking cultural differences, language nuances, managerial rifts, irrational xenophobia … IP theft etc. Mm-hmm!
So think of a WOFE as your WIFE, whom you wouldn’t want to share with your Chinese counterpart.
Ha! I m surprised at this joke myself. It just came off the bat!
Anyhoo! Here are some standard reasons/benefits ‘Why WOFE?’:
- * 100% in equity (100% invested in and owned by foreigners)
- * Independence and freedom to implement the worldwide strategies of your parent company without having to consider the involvement of the Chinese partner
- *Ability to formally carry out business rather than just function as a Representative Office (RO) and being able to issue invoices to your customers in RMB and receive revenues in RMB
- *Capability of converting RMB profits to US dollars for remittance to its parent company outside of China
- *Protection of intellectual know-how and technology
- *For Manufacturing WFOE, no special requirements for Import/Export license for its own products;
- *Full control of human resources, greater efficiency in operations, management and future development
And I’d add the most amazing benefit most of our clients love, LOVE is:
- * Free gateway or pass to obtaining your own Z-Visa.
- Typical life-span of a WOFE is 20-40 years. Meaning, that’s how long one can invest in China.
6. Sounds all rosy thus far, Jane! But can I just set up a WOFE in any industry or sector in the Chinese economy?
Yes and no! It depends! There’s actually some industries and sectors of the Chinese economy that are anti-WOFE or should I say anti-FDI (Foreign Direct Investment).
Which is only natural, no? Chinese won’t let you – foreigner, come install units to fabricate next gen atomic bombs, would they? Ha!
Here’s the story … let me make it easy on you; that although you are only allowed so much, it is taking its course as our Chinese friends are evolving and opening up.
Spoiler Alert!!! I might murder-spice the story a little …
Years ago, after the Qing dynasty — the last monarch rule in China, 1921, Mao Ze Dong rose to power (I skipped the Sun Yatsen Revolution and Yuan Shikai leadership 😛 Because basically they were just fighting – decades of war leaving China socially and economically barren) in the late 40s and ruined everything.
I have heard, under his rule via the instrument of ‘Great Leap Forward and Cultural Revolution‘, he killed and killed, humiliated intellectuals and capitalists publicly, seized farm lands and property.
Why? In a bid to move China from an agrarian economy to the perfect socialist economy via industrialisation and collectivism.
So, after he did all these things and didn’t succeed death caught up with him in the late 70s …
Then, came Deng Xiaoping with his Economic Reforms and the ‘Open Door Policy’ (Gaige Kaifang); to make up for Mao’s failures, turning China into market-economy. Instigating Foreign Direct Investment to bolster the Chinese economy via the creation of SEZs (Special Economic Zones) especially south of China (Shenzhen, Fujian, Xiamen … etc).
And now fast forward 40 years to present day China 2019, you and I can talk about WOFEs thanks to Deng’s Reforms; with so many more geographical regions open to us, foreigners, across China. And so many more sectors and industries open but for a few areas.
A few areas where the numbers have gotten even smaller by the day. Or, where there is permission to venture in only with a Chinese local – a.k.a Joint Venture (JV). Or, an outright no-go!
Not bad if you ask me! Here, you can get our FREE Catalogue Guide with succinct commentaries on the varied industries and sectors that are permitted (encouraged), restricted (allowed only with Sino-foreign partnerships) and prohibited (Negative list).
7. Wow! Great answer to the last question. So how long does it take to set up a WOFE in present day China, 2019?
In our practice, don’t mean to brag 😛, we take 25 Working Days! Yay!
Yeah! That’s how FAST and STRESS-FREE the processing gets with us. See Testimonials … and besides you remember I said above, that a lot of the bureaucracy on WOFE registration & approval has been heavily slashed by the Chinese government.
Download a FREE copy of E’Or SOLUTIONS, Inc.™ WOFE-China Checklist to see the exact engagement steps from start to finish.
8. What documents do I require to set up a WOFE?
Only one document. Guess???
Your PASSPORT! Dang! How awesome is that?
That’s how SIMPLE and EASY it is with us.
We start the processing with only the scan copy of your passport profile page. And then, before closure of process, will require that the original be sent us for use; for a max of only 2 working days.
And then that’s it! Your passport will be sent express to you.
9. Do I or all shareholders need be present in China to have a WOFE set up for me?
Absolutely not! Your absence (s) can well be used. And of course, it takes the same time span – 25 working days to get you set up.
P.S. And that’s minus the time it takes to have you send us scans of your passport and/or the original passport copies.
10. Confused! Who is the Legal rep of a WOFE and how different is he/she from the other shareholders. Also how different is the Legal rep from the company Supervisor?
Okay let’s break this down as this is really critical to structural dynamics of/ within a WOFE; for many a time in our practice, have we seen fights between well meaning shareholders who were just, only, VERY ignorant about this.
So, usually, as mentioned above, WOFEs can hold a max of 4 Shareholders. But the thing is, only one of these shareholders has to take on the role of the WOFE boss a.k.a the Legal Representative; or the go-to-person if ever the Chinese government seeks the WOFE out.
You know what I mean?
Or say for example, when the bank needs you guy’s WOFE to sign out oversea dollars sent you for procurement. What will happen is they’ll need the Legal rep’s signature to release funds.
More on the Legal rep: Only the Legal rep’s names get featured on the face value of the business licence and some of the WOFE chops will bear his names; and his/her signature is the final say ~ his signature is EVERYTHING!
Why is this? Because, Chinese come from a very paternalistic past or top down, vertical management style. Hence, the Legal rep is very power-potent.
In fact, he/she has the right to buyback shares from all shareholders and kick them out of the WOFE if he/she so pleases. And that goes whether or not he/she paid lesser shares in the company than other shareholders.
So tip for you! Don’t go pissing off your Legal rep. Always massage his/her ego then strike only when you have an exit plan (:smirk:) Ha!
You feel me?
Or, before choosing a particular shareholder to take on the position of the Legal rep, care must be taken to ensure he/she is not a jerk ~ is mature enough to work for the greater good of all shareholders involved.
懂吗 (Dong ma?) (Understood?)
Now on to the Supervisor?
For formality & paperwork norms a Supervisor is needed; not for the fact that the AIC (Admin of Industry and Commerce) in charge of WOFE registration really cares.
Think of the Supervisor as the advisory board of the company. Usually, it is an elderly person who can act as a sounding board, mentor, overseer … etc. And so the Supervisor could be one of the shareholders (except the Legal rep) or an outsider without any vested interest in the company (WOFE).
Of course, the Legal rep tops the Supervisor!
11. Sounds really nice that even our ABSENCE is used to set up a WOFE! How about office space ~ don’t we need one when setting up a WOFE?
No, it is not a requirement of the Commerce Bureau but of the Labour Bureau’s ~ who are charged with expatriate Visa Work and Resident permits.
In our FREE 7-part series WOFE Crash Course Workshop we did a beautiful job discussing a lot about that because here is the thing, in China Incorporation is done in 3 phases. You have the:
- Pre-incorporation phase (which is solely what I am doing now writing this article – offering a lot of FREE advisory/business intelligence before you incorporate your business (WOFE) in China;
- Incorporation phase (actual registration process of your WOFE by the Commerce Bureau) and;
- Post Incorporation phase which involves visa work, taxes and accounting.
You can download FREE 7-part series WOFE Crash Course Workshop for all the deets and/or head on to phase 3 ~ Post Incorporation phase here. And read phase 2 ~ Incorporation here.
12. What percentage of shares can WOFEs have per each one of the shareholders?
A max of 100%. Now, its then up to the shareholders to split the shares whichsoever way they want. Usually our clients do a 50/50 in case of 2 shareholders. Or a 50/30/20 ratio in the case of 3 shareholders. Whatever combination works mutually. 70/10/10??? 60/40/10/10 … etc.
13. Okay! So, now that my WOFE is registered can I just start doing business straight away?
For the most part, yes, you can straight away. In other particular cases you’d need special passes from authorities within the different industries.
For example, if you registered a Trading WOFE, for you to do real business you need to get an import/export license to have your WOFE appear under customs’ database.
If your WOFE is registered under the Food Industry, then you need a food licence/distribution licenses. If in the Cosmetics Industry you need a Cosmetics hygiene license.
If in the pharmaceutical industry then you need an extra license for Pharmaceutical trading. If in the Manufacturing industry, say you wanted to produce special electronic devices, then you’d need permits to produce.
14. How about taxes?
Okay let’s talk about taxes later (as it is Post Incorporation phase. Now we on Pre-incorporation/Incorporation phase). How about you brood on all this ‘WOFEness’ we’ve just discussed.
Taxes in China are so simple, I often wonder why there’s a ‘general’ dread for taxes.
Plus, there’s plenty of tax incentives just for owning a WOFE so that you can stay enchanted (:tongue out with a wink eye:), especially if your WOFE is registered on the Free Trade Zone. Remember the Deng Xiaoping’s story above? (:Wink!: yeah, you got that right!)
So, there you have it! Now you know how to WOFE! I have helped share a LOT of insider as to WOFEs; practical questions we get from our practice everyday and just out of firsthand experience – being a 2-time WOFE owner myself.