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Types of China Company

Before establishing your business in China, it’s essential to have a thorough understanding of the various company types in order to choose the one that will best support the expansion and long-term success of your enterprise. The main statutory classifications are sole proprietorship, partnership, and corporation. Besides, there are different classifications according to the ownership type, including state-owned enterprises, private enterprises, mixed ownership enterprises, foreign-invested enterprises, etc.

Basically, the common types of companies in China include limited liability companies, joint stock companies, limited partnerships, and foreign or individual-owned enterprises. The following is a review of their differences:

Company Type	Company Type	Joint Stock Company	Limited Partnership	Wholly Foreign Owned Company
Suitable group	Suitable for the early stage of business development. It can separate the company from the individual on a legal level, which prevents the entrepreneur from taking unnecessary financial risks.	Suitable for mature, large-scale companies, the establishment procedures will be more complex and stricter.	Consists of a general partner and a limited partner, of which the general partner has unlimited liability, and the limited partner is only liable up to the amount of their investment. Often used for equity incentives, law firms, and investment companies.	The process is more complicated and strictly regulated than that for domestic companies. The name is the same as that of a limited liability company.
Number of shareholders	Less than 50 people. It can even be established with a one-person limited company	The promoters must be more than 2 people and less than 200 people. After the company is formed, the number of shareholders is not limited.	2 to 50 people. At least 1 general partner and 1 limited partner among them.	It depends on the type of enterprise, which can refer to the number of shareholders of a limited liability company, joint stock company, or limited partnership.
Registered capital	Minimum limit of RMB 30,000.	Minimum limit of RMB 5 million. RMB 50 million for listed companies.	The Partnership Enterprise Law of China does not require a minimum registered capital but is determined by each partner based on their respective capital contributions.	There is no minimum registered capital requirement for foreign companies, and the registered capital can be reflected on the business license in RMB, HKD, EUR, and GBP.
Transfer of shares	There are restrictions on the transfer of capital to persons other than shareholders, which require the consent of a majority of all shareholders.	There is no restriction on the transfer of capital to people other than shareholders, and it is freely transferable.	The transfer of shares to persons other than shareholders is subject to restrictions and requires the consent of a majority of all shareholders (or as otherwise agreed).	All shareholders and the original approval authority of the business (the commerce department) must agree to the transfer of foreign equity, and it must be registered for industrial and commercial changes.
Advantage	Low operating costs; a small organization; and a straightforward structure. There is no need to disclose the company’s financial status to the public.	It can be listed on the stock exchange. A limited liability company needs to be converted to a joint stock company before it can be listed. Separation of ownership and operation of the company can improve the operation of the enterprise.	The distribution mechanism is flexible, and the profit and earnings distribution of a limited partnership is entirely at the discretion of the partners and is not constrained by the percentage of capital contribution.	The parent company’s global strategy is carried out independently, without regard for China investors.
Disadvantages	The transfer of capital is not as free as the transfer of shares and requires amendment of the articles of association. For shareholders, this is not conducive to achieving the liquidity of the investment, and the investment risk is relatively high.	Decision-making and management rights are determined by the number of shares held by investors, and such a system of power distribution tends to lead to the disregard of minority shareholders’ rights by major shareholders.	The limited partnership is not a corporate legal entity. The integrity of the partners cannot be guaranteed, and the responsibility is difficult to trace.	It is difficult to grasp the local humanities and traditions, which are not conducive to the establishment of a set of operating organizations and management systems in line with the local circumstances.

 

 

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