Owning your own company is fantastic. creating one from nothing? difficult Which explains why some firm owners choose to purchase an established company outright. There are also some additional factors to consider, such as expanding your investment portfolio or acquiring a promising rival.
The procedure for purchasing a small business is the same regardless of your motivation. We’ll help you through the entire process, from identifying and assessing the ideal company to requirements, so you know what to expect.
Step-by-step guide
Here are the following steps for buying a company in China:
Step 1: Learn about the Chinese market
Verify that the business you are purchasing sells items that are popular in China. Technology companies that supply industrial automation control products are the most lucrative businesses to buy in China. Additionally, you can look up pharmacies, import-export businesses, marketing agencies, or telecommunications.
Step 2: Choose the type of business
Finding out about the company structures China offers to domestic and foreign buyers is the second stage in buying a firm there. The list of business categories in the nation is as follows:
WFOE
The most typical sort of corporate organization in China held by foreign companies is a wholly foreign-owned enterprise (WFOE). Foreign capital in this kind of corporate framework is welcome, as are industrial operations and cross-border commerce in commodities. A WFOE might also be allowed to conduct wholesale and retail business with Chinese clients. There are many different trading options in WFOE, including those in advisory services, production, services, hi-tech, and the food and beverage industry. In most ways, WFOEs are similar to the commonly known limited liability company.
Joint Venture
When the state has imposed limits on overseas investment in a sector, a JV is one of the corporate structures that are most frequently used. The JV might also be a wise decision if you wish to take advantage of a local expert’s expertise or network. The buyer must get the following paperwork from the seller before buying the JV, including meeting resolutions, financial reports, shareholder descriptions, etc.
Representative office
The Chinese government won’t allow a transfer of a representative office in an asset transfer since a Chinese representative branch is simply an outpost of a global firm. To maintain the Chinese activities, the seller will have to close the representative office and set up a new China corporation.
A Chinese subsidiary cannot conduct extensive marketing or market entrance efforts because it lacks a distinct legal personality in China.
Step 3: Search for the right business
The second stage is to identify a Chinese company that is both open for sale and a good investment. There are many companies up for sale. However, they are uncommon to find ones that genuinely capture your interest and have financial potential. Find a company that is ready for profitability and isn’t hiding any ugly truths. Online searches for businesses that are for sale are possible, or you can engage with a local specialist.
Step 4: Making your decision
Both of the aforementioned methods are expensive and take time, but this is typical of China-related issues. You’ll probably spend less money if you buy the WFOE or JV rather than a representative office. And compared to RO, WFOE and JV offer more market prospects.
Along with the business structure and costs, you must choose the kind of goods you want to sell. After you make your decision, collect all necessary documents and submit them to local authorities.
Requirements
To purchase a company in china you must:
- Submit your Id, passport, and passport-size photos to the Chinese authorities;
- File for the business permit in China and submit the permit to officials;
- provide a clear criminal and credit history;
- Open a bank account or ask for the previous owner for an already existing one;
- Make essential changes in registration papers and MOA of the company;
- Letter of intent prepared and signed by the seller;
- Announce the change in ownership to all shareholders and employees; and
- provide proof of enough financial resources.
