Three common types of foreign-invested entities in China
Company, partnership, and representative office are China's three major organization types of foreign-invested entities. The Company Law, the Partnership Enterprise Law, and the Administrative Regulations on the Registration of Permanent Representative Offices of Foreign Enterprises govern the respective entities.
1. Company
Foreign investors can set up limited liability companies and companies of liability limited by shares in China.
A limited liability company refers to an entity established by less than 50 shareholders, each shareholder bears limited liability to the company up to the amount of capital contribution, and the company takes limited liability for its debts with all the assets.
A company of liability limited by shares refers to an enterprise in which all the registered capital of a company is composed of equal shares and raised through the issuance of shares (or share certificates), each shareholder is liable to the company to the extent of the shareholding, and the company bears limited liability with its assets.
2. Partnership
A general partnership is formed by general partners who are jointly and severally liable for the partnership's debts.
A limited partnership consists of general partners and limited partners. The general partners bear unlimited liability for the debts of the partnership, while the limited partners are liable for the debts of the partnership to the extent of their subscribed capital contribution.
3. Representative office
A representative office is an agent established in China to engage in non-profit activities related to the business of its foreign parent enterprises. A representative office is not a legal person. It shall not engage in profit-making activities but can only conduct business activities such as market research, product exhibition, promotional activities related to the products or services of foreign enterprises, as well as liaison activities related to product sales, service provision, domestic procurement, and domestic investment of foreign enterprises.
