Introduction to the China Business License
A business license in China is an official license that all entities (including Chinese-owned companies) operating in China, are required to have. In this article we introduce all the elements present in a Chinese business license and insights to keep in mind when applying for a Chinese business license. In this article, we detail what information is on a Chinese business license.
A Chinese business license contains a wealth of information about a company, including its name, registration number, legal representative, business scope, registered capital, and date of establishment. Other essential details on the license may include the company’s registered address, operating status, and the issuing authority. These details are crucial for conducting business in China and are necessary for opening a bank account, signing contracts, and obtaining permits and licenses. Understanding the information provided on a Chinese business license is essential for foreign investors and companies looking to establish a presence in China.
Unified social credit number
This is the identification number of the company. Every company has one, and it is used in multiple instances. The Unified Social Credit Number (USCN) is a unique 18-digit code assigned to companies operating in China. The USCN system was established in 2014 to replace the previous registration system, which was prone to inconsistencies and inaccuracies.
The USCN serves as a form of identification and enables companies to conduct business with government agencies, financial institutions, and other companies in China. The code incorporates information such as the company’s registration number, organization code, and tax identification number. By having a USCN, companies can enhance their credibility and reputation in the market and gain easier access to government services and support.
Business license number
This is the number issued for your business license. Note that this is the license number, not the company number. If the license is lost or replaced, this number will change, but the social credit number will remain the same.
The formal company name of your business in China. In China, your company’s name must include 2 key pieces of information, business field and business type.
The company’s custom name
This name is usually between three characters or four characters. It can be tricky to come up with this name because of certain restrictions for company names, regulated in the Rules for the Prohibited and Restricted Use of Enterprise. In short, the company name cannot contain:
- Words affecting public and state interests.
- Words that are misleading.
- Words related to a foreign country or international organizations.
- Words with the name of a political party, government organ, military entity or other organizations.
- Unless approved by the state council, it cannot contain words like China or Chinese or National.
- Words containing foreign language or letters, or Arabic numerals.
The company’s business field
The description of the business category shall also be mentioned in a short two or three words. Normally, it would be like “咨询 (consulting)”, “贸易 (trading)”, “电器 (Electrical Appliance)” or “投资 (investment).” This short description is not binding for the actual business. For example, if it says “trading” in the business field, it does not mean that the company can only conduct trading. It is only for identification purposes.
The company type shall be reflected at the end of the company’s name. In general, there are two kinds, the first is 有限公司（Limited Liability Company）, and the second is 股份有限公司（Joint Stock Limited Company). For foreign investors, the common choice is Limited Liability Company.
Overall, the full name of the company shall be:
[ Custom name + Business field + Company type ]
Please notice that the company type here is not the same as the company type in the name section. It is a more detailed description instead of just a general one. Common company types in this section are:
Limited Liability Company (invested by individual)
A Limited Liability Company (LLC) in China is a popular form of business organization for foreign investors and individuals. An LLC can be invested by one or more individuals and provides them with limited liability protection. This means that the company’s shareholders are not personally liable for the debts and obligations of the company beyond their investment amount.
The LLC structure offers flexibility in terms of management and decision-making, as well as the ability to issue shares to raise capital. The shareholders of an LLC in China are required to hold annual meetings and file annual reports with the authorities.
Limited Liability Company (invested by foreign invested company)
In this structure, the foreign invested company (FIC) serves as the investor and can hold 100% ownership of the LLC. The LLC provides limited liability protection to the FIC, shielding them from any personal liability for the debts and obligations of the company. The LLC structure offers flexibility in terms of management and decision-making, as well as the ability to issue shares to raise capital. The shareholders of an LLC in China are also required to hold annual meetings and file annual reports with the authorities.
Individual invested company
An Individual Invested Company (IIC) in China is a type of business organization in which an individual or a group of individuals invest in a company. The IIC is a separate legal entity from its investors, and it provides limited liability protection, meaning that the investors are not personally liable for the debts and obligations of the company beyond their investment amount.
Joint Stock Limited Company
A Joint Stock Limited Company (JSLC) in China is a type of business organization in which the company’s capital is divided into shares and the shareholders have limited liability for the company’s debts and obligations. A JSLC can have multiple shareholders and can be established by Chinese or foreign individuals or companies. The shareholders of a JSLC in China can transfer their shares to others, and the company can issue new shares to raise capital.
The shareholders are required to hold annual meetings and file annual reports with the authorities. The JSLC structure is suitable for companies with a large number of shareholders and significant capital requirements.
For foreign investors, the business license would show that it is a Limited Liability Company (invested by foreign investor). If the investor is from Hong Kong/Macau/Taiwan, then the business license would show it as a Limited Liability Company (invested by Hong Kong/Taiwan Macau investors). If the WFOE makes another investment to set up another company, then the business license would show that it is a Limited Liability Company (invested by foreign invested company).
The legal representative is the person that represents the company in law. Although every company has an official company stamp, the signature and the decision of the legal representative could still be seen as the company’s decision. Please also be aware that since the legal representative represent the company, if the company conducts any illegal business or action, the legal representative is also liable.
The business scope is a detailed explanation of the business’ intended activity. Unlike the business field in the name, the business scope is very detailed. For big MultiNational Companies, the business scope would be detailed and descriptive. Please note that the business scope should contain the details of every business operation that a company is going to conduct. If the company conducts any activity outside its business scope, the government authorities may impose a fine for the violation.
Another thing to take note is that although it is okay to put a certain business type in a certain business scope, this does not exempt you from other licenses required for a certain activity. In the business scope, there is always a saying “For business that would require other approval, please get the approval from the relevant authority first.” In short, business scope is only a description about the business in China. It does not mean that it is okay to conduct every business in the business scope. For restricted business, please make sure to get the relevant approval/license as well as record it into your business scope.
Every company shall have a declared registered capital. This is solely a reference to the amount of money that the investor shall invest into the company.
While the law does not require a minimum amount of registered capital, the government does not encourage investors to have very low registered capital. This is because registered capital is often seen to represent the financial capability of a company. If your business partner finds that the registered capital is too low, they may have an insecurity feeling towards the image of your company. For example, online platforms such as Tmall or Alibaba may have some requirement for registered capital. If the registered capital is too low, it may be difficult to operate your business via these platforms.
It’s important to note that the registered capital only needs to be claimed and not paid. When registering a company, the investor only needs to claim that the investor is going to invest a certain amount of capital within a certain period. This claim is considered as a promise made by the investor to the company. For example, the investor can claim that the registered capital is one million USD, and that it will be paid within thirty years.
Since it is a promise to the company, even if the promised amount is still not paid after thirty years, there is no negative repercussion from the government. In short, we can conclude that the registered capital does not need to be paid in full when setting up a company, but the capital amount shall not be too low. In practice, the amount of registered capital that we recommend is one million RMB.
The “birthday” of the company. After this date, the company is considered as a formal legal entity.
The operating period can be chosen by the investor. Normally it is thirty years. When the established operating period is coming to an end, the company can renew the business license with the local authorities, otherwise it will be dissolved.
The registered address is one of the most complicated factors in starting a company. As you can perhaps infer by its name, the registered address is the address where the company is registered.
A registered address needs to be a physical address, and each company shall have its own one-and-only registered address before its registration begins. If you intend to get a working office ready before the company is officially set up, then you may use this address for registration. If you do not need an office to work from, a significantly cheaper address can be provided to you by a service provider.
Virtual Office in China
Not all investors would choose to commit to an actual office before setting up a company. In that case, it is possible to use virtual address services. A virtual address is a small office that you can use to register your company but cannot work in.
In addition, it cannot receive any mail, phone calls, or packages related to your company. But the prices for a virtual address are always cheaper than a real office.
Since a virtual address cannot be used for contact purposes, another kind of service can be used for that function. This service is what we call a mailbox service, as it is an address registered to be the contact point in the government database. This contact address needs to be an actual address where mail or packages can be sent to. Unlike a registered address, more than one company can use the same contact address. The service details can vary depending on the price. The cheapest option may only be able to receive your mail. If you are willing to pay extra, it is also possible to get a hot seat and a phone number for your company.
Aside from the elements mentioned above regarding the business license, you will also observe a QR code and the stamp of the government authority printed on the physical license. The QR code is linked to the government official data base. When scanning this QR code, it will direct you to the official government website, where you can access the information of this company. The stamp of the government authority, on the other hand, is what officially allows the business to become operational.
All the elements described above will be shown in the original business license. A company will only receive one original business license. However, it is also possible to apply for several certified copies. The certified copy will contain the same information plus these words 副本 (certified copy).
A Chinese business license contains every important information about a company and is required when managing many business operations, from administrative affairs to third party co-operations. The business license symbolizes that a company has been legally registered in China. But it shall not be forgotten that misusing a business license may result in important legal risks. And while it is possible to obtain a new business license when the original business license is lost, this process requires a lot of time and effort, even the need to notify the official newspaper. So beware, always handle your business license with great care! As it will be the centerpiece of your business dealings in China.