There are many ways for American cross-border companies to operate in China, including setting up domestic offices of overseas companies, brand licensing, Sino-foreign joint ventures (wholly foreign-owned enterprises), etc. These operating models are suitable for foreign-funded enterprises that want to enter the mainland market to carry out business activities. In this regard, let’s take a look at the operating model selection and decision-making factors of American cross-border companies in China.
First, the domestic office of an overseas company is a simple and flexible way. If the overseas company’s business activities in the mainland are just business liaison, then it is enough to set up a domestic office of an overseas company. According to relevant laws and regulations, the office may not be separately accounted for or separately registered for tax. However, it should be noted that the domestic office can only play the role of business liaison, and cannot engage in any business activities, nor can it form a direct purchase and sale relationship with customers. Therefore, this model is not suitable for overseas companies to conduct business in the mainland.
Secondly, the brand licensing model is a common domestic operating model for American cross-border companies. In this model, the overseas company and the mainland company sign a licensing agreement to authorize the overseas company’s brand to the mainland company to act as the agent for the mainland business. The mainland company will fully represent the overseas company’s brand promotion and operate by relying on the brand of the Hong Kong company. This method can effectively save costs, so it is very common in the domestic market.
Another way is to establish a Sino-foreign joint venture (wholly foreign-owned enterprise). This type of enterprise is a foreign-invested enterprise, which invests in the mainland in the name of an overseas company. The operation process is relatively complicated. First, it is necessary to go to the Ministry of Foreign Trade and Economic Cooperation where the business premises are located for approval, and then to register for industry and commerce and tax registration. The establishment of a foreign-invested enterprise (joint venture or wholly-owned) requires capital verification, and funds need to be remitted from abroad in the form of foreign exchange.
No matter which domestic operation model of the US cross-border company is adopted, the applicant needs to apply for the notarization of the overseas company’s principal qualification certificate by a Chinese notary public and the transfer of the seal to make the principal qualification certificate document legally used in the mainland. This is a necessary step to ensure the legality of foreign-funded enterprises in China. No matter when, ensuring legality needs to be put first.
The choice of domestic operation model of US cross-border companies depends on many factors, including enterprise type, market demand, investment scale, etc. Each model has its advantages and limitations, and enterprises should evaluate it according to their actual situation when choosing. At the same time, understanding and complying with relevant laws and regulations is an important guarantee to ensure smooth operation, so it still needs to be taken very seriously.
In general, whether it is setting up a domestic office for an overseas company, adopting a brand licensing model, or establishing a Sino-foreign joint venture (wholly foreign-owned enterprise), there are actually many domestic operating models for American cross-border companies to choose from. Through reasonable decision-making and compliant operations, these companies can conduct business activities in the mainland market, cooperate with Chinese companies, and achieve the goal of mutual benefit and win-win. Therefore, if you also have some ideas or needs in this regard, you can actually choose a truly suitable operating model to explore and try based on your own actual situation.