How to Register a Business in the US from China

Step 1: Benefits of starting your US business from China

Starting a US business from China offers a multitude of benefits that can significantly enhance your entrepreneurial ambitions. Firstly, the cost advantages associated with China's manufacturing capabilities are well-known. By leveraging China's robust supply chain and lower production costs, businesses can create high-quality products at competitive prices. This opens up substantial profit margins when selling in the US market, which is known for its high consumer spending power.

Additionally, managing a US business from China allows entrepreneurs to tap into the technological advancements and skilled labor force available in both countries. China's expertise in areas such as electronics, textiles, and consumer goods production, combined with the US market's appetite for innovation, creates a symbiotic relationship that benefits business growth. Furthermore, modern communication technologies and digital platforms facilitate seamless operations across borders, making it easier than ever to manage logistics, customer service, and marketing efforts from China while targeting US consumers.

Step 2: How to start your US business from China

Starting a US business from China involves several key steps that need to be carefully followed to ensure compliance with both countries' regulations. Firstly, decide on the type of business entity you want to form, such as a corporation, limited liability company (LLC), or partnership. It's essential to research the differences between these entities, as they have varying implications for taxation, liability, and management structure. Once you decide on an entity type, choose a suitable name for your business and conduct a search to ensure it is unique and meets the naming requirements of the state where you plan to register your business.

Next, you will need to appoint a registered agent who resides in the state of your business's registration. This agent will handle important legal documents on behalf of your business. Prepare and file the necessary formation documents, such as Articles of Incorporation for a corporation or Articles of Organization for an LLC, with the appropriate state agency, often the Secretary of State. Additionally, obtain an Employer Identification Number (EIN) from the IRS, which is required for tax purposes. Depending on your business activities, you may also need to apply for specific licenses or permits. It's highly recommended to consult with a legal or business professional experienced in US regulations to navigate these processes effectively.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in China

Understanding Compliance Requirements for Running a US Business in China

Running a US business in China involves navigating a complex landscape of regulations and requirements. To ensure smooth operations, it’s essential to understand these considerations:

Legal Structure

• Representative Office (RO): Easiest to establish but limited in business activities.
• Joint Venture (JV): Partnership with a Chinese entity, allowing more control over operations.
• Wholly Foreign-Owned Enterprise (WFOE): Complete control by the foreign investor but with more regulatory hurdles.

Business Licenses

Each industry in China has specific licensing requirements. Understanding the necessary licenses for your business is crucial, including:

• General Business License: Required for all businesses.
• Industry-Specific Licenses: Additional permits may be needed depending on your industry, such as food safety licenses or cybersecurity approvals.

Taxation

Complying with Chinese tax regulations involves understanding several key components:

1. Corporate Income Tax: Generally set at 25%, though incentives may apply in special economic zones.
2. Value-Added Tax (VAT): Rates vary by product and service type, commonly at 13% or 9%.
3. Withholding Tax: Applicable on certain payments like dividends, interest, and royalties to foreign entities.

Labor Laws

Chinese labor laws are stringent and cover various aspects such as:

• Employment Contracts: Must be written and comply with local laws.
• Working Hours and Wages: Guidelines on maximum working hours, overtime compensation, and minimum wage standards.
• Social Insurance: Mandatory contributions for pensions, medical insurance, unemployment insurance, etc.

Intellectual Property Protection

Protecting intellectual property (IP) is vital in China. Considerations include:

• Trademark Registration: Important to register trademarks in China, even if they are registered elsewhere.
• Patent Protection: Apply for patents to safeguard inventions and designs.
• Copyright: Register copyrights with local authorities to protect creative works.

Data Privacy and Cybersecurity

Compliance with data privacy and cybersecurity laws is becoming increasingly significant due to new regulations like:

• Cybersecurity Law: Applies to data storage and transfer, requiring data to be stored within China.
• Personal Information Protection Law (PIPL): Governs the processing of personal information, ensuring it is lawful and transparent.

Navigating compliance requirements in China requires thorough understanding and preparation. Consulting with local legal experts and advisors can further help in ensuring all regulations are met effectively.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in China

Understanding Tax Obligations for Running a US Business in China

Operating a US business in China can be a lucrative venture, but it comes with its own set of tax obligations. Understanding these obligations is crucial for compliance and successful operation. Here's a look at some key considerations:

1. Corporate Income Tax

China imposes a corporate income tax (CIT) on businesses operating within its borders. The standard CIT rate is 25%, but certain businesses may qualify for reduced rates. It's important to understand which rate applies to your business and any available incentives.

2. Value-Added Tax (VAT)

VAT is a major source of revenue in China. The standard VAT rate is 13%, although different rates may apply depending on the goods or services provided. VAT is levied on the sale and importation of goods, as well as the provision of certain services.

3. Withholding Tax

If your US business makes payments to non-residents, such as dividends, royalties, or interest, you may be subject to withholding tax. The rate can vary but typically ranges from 10% to 20%. Treaties between the US and China may offer reduced rates.

4. Tax Residency

Determining the tax residency of your business is essential. A business is generally considered a tax resident in China if it is managed and controlled within China. Tax residency affects the extent of your tax liabilities.

5. Transfer Pricing

China has strict transfer pricing rules to ensure that transactions between related companies are conducted at arm's length. Proper documentation and compliance with these rules are necessary to avoid penalties.

6. Double Taxation Avoidance

The Double Taxation Avoidance Agreement (DTAA) between the US and China can help mitigate the risk of double taxation. Understanding the provisions of the DTAA can significantly benefit your business.

7. Compliance and Reporting

Maintaining compliance with local tax laws and regulations is critical. This involves timely filing of tax returns, accurate record-keeping, and staying updated on any changes in the tax laws. Non-compliance can lead to significant penalties.

8. Hiring Local Expertise

Navigating the Chinese tax system can be complex. Engaging local tax advisors and legal experts can provide valuable insights and ensure that your business adheres to all tax requirements efficiently.

Understanding these key tax considerations can help you effectively manage your US business operations in China, ensuring compliance and optimizing tax liabilities.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country