What is the establishment procedure for an LLC?

The following process is based on the assumption that the LLC is an LLC with foreign investors and that the intended business activity of the LLC does not fall under the scope of the Negative List of the People’s Republic of China (refer to this Question for details).

The registration of foreign investment enterprises shall be handled pursuant to the law, by the market regulatory authority of the State Council or the market regulatory authorities of local People's Governments empowered thereby. A LLC with foreign investors shall therefore go through registration with the Administration for Market Regulation (the “AMR”). The registration steps are as follows.

1. LLC Name Pre-Registration

Generally, the first step for the establishment of a LLC is the name pre-registration with the local AMR. The foreign investor (“FI”) needs to submit to the local AMR an application form with proposed names of the LLC. The AMR will review such an application and issue to the FI a letter confirming the name of the FI, if no similar enterprise names exist in the same location, which is active in the same or a similar industry. In certain locations, this step can be executed online.

2. Registration with AMR

Generally, the second step for the establishment of a LLC is the Registration with the local AMR. The FI shall submit to the local AMR all the required materials, whereas the documents required to be submitted may vary from location to location.

If the submitted documents are complete and correct, no further special documents or information are required by the local AMR and the local AMR will issue the Business License of the LLC. The LLC is legally established on the date, on which the Business License is issued. With the Business License, the LLC can initiate post-establishment registrations.

3. Other Potential Certificates or Procedures

Depending on the specific business scope of the intended LLC with FI, further approvals and/or registrations before or after a LLC’s establishment (issuance of business license) might be required. As an example, a LLC intending to engage in financial business needs to obtain a financial license issued by the China Banking Regulatory Commission before its establishment.

4. Post-Establishment Registrations and Procedures

After the LLC has completed its registration with AMR and obtained its Business License, the LLC shall also undertake various post-establishment registrations and procedures with relevant authorities. Such registrations and procedures are generally required to be completed within thirty (30) days of the establishment date. Such registrations and procedures include for example the following:

a)        Public Security Registration and Obtaining a Company Seal (Chop), Financial Chop and Legal Representative Chop

The LLC shall file its corporate seals with the local public security bureau (“PSB”). The LLC shall apply for carving a company seal, which is commonly referred to as a “chop”, a financial chop as well as a legal representative chop. These chops are a prerequisite in order to open bank accounts and to complete other formalities thereafter.

b)       Foreign Exchange Registration

Since the State Administration of Foreign Exchange has transferred its examination and approval competence of the foreign exchange registration to the banks, the LLC shall register the Foreign Exchange Registration with its account opening bank.

c)        Opening Bank Accounts

The LLC shall apply to open a foreign exchange capital account and a separate RMB basic deposit account with a bank inside China. In practice, this step and the step in the above paragraph (b) for Foreign Exchange Registration is usually initiated at the same time. The applications must be submitted to the relevant bank to open the LLC’s relevant bank accounts. Whereas the process of opening a bank account has been straightforward and could usually be executed within a few days until only a few years ago, this process has become rather time consuming and troublesome in the past few years.

d)       Tax Report

The LLC shall, within 30 days from the date the Business License is received, report its registration to the taxation authorities and conduct relevant formalities.

e)        Social Security Registration

The LLC shall present their business license, registration certificate or organization seal within 30 days from the date of incorporation to apply for completion of social security registration with the local social security agency. The social security agency shall examine the application and issue a social security registration certificate.

f)         Expatriate Formalities

The LLC shall go through a variety of steps with the PSB and Customs Authorities in order to complete relevant registration and visa formalities for the LLC expatriate personnel (if any) who will work in China.