Generally, Chinese companies can be divided into two types: Limited Liability Companies, and Companies Limited by Shares. Depending on different contributors and investors, Chinese companies can be further divided into Joint Ventures, Wholly Foreign-Owned Enterprises, State-Owned Enterprises, Private Enterprises, Individually-Owned Small Business, and Partnership Enterprise.
Understanding the various types of enterprises in China can help you to make decisions of doing business with which company or establishing which type of company in China.
1. 有限责任公司, Limited Liability Companies
In a Limited Liability Company, the shareholders should shoulder the limited liability and be responsible for the debts of the company with their capital contribution. The legal representative needs to be fully responsible for the debts of the company.
2. 股份有限公司, Companies Limited by Shares
A Company Limited by Shares consists of the board of directors, the board of supervisors, and some other organizations. The shareholders’ liability to the company is limited to the original amount of capital invested, rather than all the debts of the company.
The two types above are the main types of enterprises in China, they differ in the number of members, the way they are established, and other aspects. Both of them have advantages and disadvantages.
Limited Liability Companies
1. The setup procedure is simple.
2. Equity is concentrated which means shareholders will be more responsible.
It is difficult to concentrate capital in large quantities which means this kind of company is tough to be expanded.
Companies Limited by Shares
1. A large amount of money can be raised in a short time.
2. Members will undertake fewer risks.
1. The setup procedure is complex.
2. Security is weak.
Before choosing the types of companies, please take this information into consideration.
Depending on who invests in this company, the Chinese company can be divided into more specific sub-categories.
1. 合资公司, Joint ventures
In general, a Joint Ventures includes one or more domestic companies and one or more foreign companies. These two or more companies agree to raise funds for a certain aim.
2. 外商独资企业, Wholly Foreign-Owned Enterprises
Wholly Foreign-Owned Enterprises is established absolutely by foreign companies without the involvement of Chinese companies.
3. 国有企业, State-Owned Enterprises
State-Owned Enterprises are owned by the state, which predominately exists in China.
4. 自然人独资, Private Enterprises Invested by Sole Natural Person
A Private Enterprise is a profit-making economic organization that is registered by individuals, with more than 8 employees.
5. 个体工商户, Individually-Owned Small Business
Normally this type of company is quite small, they are established by just one person or one family. They are very simple to set up and do not need so many funds.
6. 自然人投资或控股, Partnership Enterprise
Partnership Enterprise is a profit-making organization in which the partners enter into a partnership agreement, jointly contribute capital and operate, share profits and risks, and assume unlimited joint and several liabilities for corporate debts.
Where can I find what type of enterprise a Chinese company is?
Depending on different versions of business licenses, the methods can differ. Here are some examples:
1.On this kind of business license, the Chinese characters ‘主体类型’ means ‘type’. You could find it on the second line.
2. On this kind of business license, the Chinese characters ‘公司类型’ means ‘type’. You could find it on the fourth line.
3. On this kind of business license, the Chinese characters ‘类型’ means ‘type’. You could find it on the second line.
All these types of enterprises have the right to apply for import and export qualifications and do business with foreign companies. Before doing business, please check other information rather than types of enterprises.
Information such as company structure & shareholders, intellectual property, related risks, customs registration information, financial information, business registration information, change records can be really crucial, if you want to know this detailed information of a company, please contact us, we are willing to help you.