Joint Venture Registration
A Joint Venture is a business arrangement when the participants create a business that is new or formal contractual relationship and share investment and operation costs, management responsibilities, and profits and losses.
Joint Ventures in China
China is the world’s largest manufacturer and its labour costs are still very low compared to western countries. For that reason it makes a good choice for manufacturing location, particularly if you’re making products with a high labour component or need to order in bulk. But as a foreign enterprise it’s all too easy to overlook vital details when you’re promised the earth by eager manufacturers and have a bargain in sight.
Throughout the past few decades, China has been attracting foreign companies due to its low labor cost, impressive infrastructure and its enormous market potential. That’s why a Joint Venture (JV) may be on your mind. A JV is a partnership between a Chinese and an overseas company. Usually, there are two reasons for a foreign investor to use Joint Venture to establish representation in China:
- Certain industries in China require a local partner
- A local partner may be able to provide several benefits, such as, well-established distribution channels, governments relationships and knowledge of the local market
Joint Venture Types
An Equity Joint Venture (EJV): This is a form of Chinese Limited Liability Company (LLC) between a Chinese and a foreign party, and is therefore a separate legal entity. Each participant contributes to the venture in financial terms by way of an investment of capital and therefore has a stake in the business. This is similar to the holding of shares in a limited company.
A Cooperative Joint Venture (CJV): A more flexible way of operation with a Chinese partner is a Cooperative Joint Venture. This legal framework allows individual agreements such as profit sharing, which need not be restricted to the equity contributions. It differs mainly with the Equity Joint Venture in that the foreign investor may repatriate his original investment prior to the expiration of the Joint Venture.
Depending on your business scope, we can advice you if a Joint Venture is the best option for you. We will be glad to answer your questions and find the right solution for your company.Compared to registering a business in most Western countries, registering a business in China is challenging work filled with paperwork and bureaucratic red tape. It is time-consuming and challenging to properly complete the registration process without a qualified agency. Corporation China is a government licensed registration agency that provides business registration services. We offer practical solutions for corporate formation with our extensive knowledge and background, all while guaranteeing results for our clients.
We’ve provided you with the pros and cons of a JV below – If you are unsure about the disadvantages of a JV then a Wholly Foreign Owned Enterprise (WFOE) might suit your business better. Guess what: We specialize in WFOE’s so check out our WFOE pages under Company Formation for more information.