How Americans Can Help Start a Small Business in China
With the speed of China's economic development, it is becoming increasingly common that Americans are starting up new business ventures in the Far East. Americans can start a business by setting up a foreign joint venture with a Chinese business partner. Compared with other forms of business start-ups, foreign joint ventures are often the easiest and least expensive route when starting a new enterprise in the People's Republic of China. However, there are many pitfalls and mistakes a would-be entrepreneur needs to be aware of before starting a new business.
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Instructions
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Research the market thoroughly before setting up a business. The Chinese market is a complex and competitive one which differs from province to province. Consulting the American Chamber of Commerce or using the services of a private consulting firm will help you analyze local market conditions for your business.
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Acquire a Chinese business partner. It is important that you do a thorough background and credit check on the individual, as starting a business with an individual you don't know is fraught with risk. Use the services of a legal professional before signing any contracts, and make sure any agreements in the contract is not in breach of Chinese law.
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Obtain preliminary approval for your project from the State Administration for Industry and Commerce (SAIC). They will review your project proposal which will contain information such as energy usage, employment and wages, demand for local utilities, and the use of technology. The preliminary approval process typically takes up to 20 days.
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Obtain official approval from the Ministry of Commerce. In addition to the documents submitted for the preliminary approval process, contracts and other legal documents such as articles of association are required. In addition, a feasibility study is also submitted, which details any forecasts and risks that are relevant to the new business venture.
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Register for a business license. This is obtained from the local State Administration for Industry and Commerce (SAIC) and is dated in accordance with the date of the business's establishment. The business license is the final stage of bureaucracy which allows your business to legally operate.
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Register with relevant institutions that are important to your business. These may include the local tax authorities, the public security bureau, opening bank accounts and insurance. All new businesses must have an official seal which must be approved from the police department.
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Tips & Warnings
There are many other types of businesses that may be established in China, such as a "Wholly Foreign Owned Enterprise" (WFOE). However, joint ventures are established in order to take advantage of the local knowledge of the Chinese partner and the marketing knowledge of the American partner. For a small business, this route is often the most advantageous considering the size of the business.
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- Photo Credit china image by Luisafer from Fotolia.com
