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A WFOE (Wholly Foreign Owned Enterprise) is an appropriate legal form for many investors and is becoming increasingly popular as companies are able to act independently of a Chinese partner. Most of the foundations take the form of a Limited Liability Company's (LLC) which is a limited liability company in Chinese law. Investments with only foreign capital are subject to relevant special laws and supplementary provisions. If the specific provisions do not intervene, the general Chinese company law shall apply. WFOE can be established in the form of Foreign-invested commercial enterprises (FICE). However, the company may act only in the business area which was established in the Business License.

 Steps in establishing a WFOE:

 1) Examination of the approved activities

Determining whether the activities of the WFOE are established and authorized for foreign investment by the Chinese government. A detailed overview of all possibilities can be found in the so-called "Catalogue for the Guidance of Industries for Foreign Investment". This examination is followed by the application form "Preliminar Report".

 2) Request for pre-registration

An application for the company registration in the Administration of Industry and Commerce (AIC) must be provided. The company name must contain only Chinese characters. Furthermore, the name must reflect as an additional legal form (eg Ltd.). This process can take up to 6 months.  

 3) Submission of a feasibility study

A feasibility study must be submitted at the State Development and Reform Commission or an appropriate local authority. Capital, division, construction of the organizational structure and assessment must be clearly outlined.

 4) Approval of the statutes

For larger investment approval, businesses must submit an application, the articles of association and the feasibility study and other documents.

 5) Registration of WFOE

In a period of 30 days after the issue of the approval, the company needs to register at the Administration of Industry and Commerce (AIC). Finally, the company gets the Business License and the company is established in China legally.