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Features of a Representative Office

Features of a Representative Office

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A Representative Officeis mainly engaging in non-profit activities related to its parent office. Usually a Representative Office is used as a basis for doing market research within China and others not for profit seeking activities like e.g. meeting and researching / acquiring suppliers and potential customers. It is thus the easiest way to officially step into the Chinese market but also a quite efficient one, if you just want to improve supplier or customer relations quickly. Of course there are some disadvantages coming with it. As you can imagine there are certain activities, which you will not be allowed to do and thus create a trade-off between quick and cheap market entry versus limited commercial activity options. In the following chart you can clearly see the opportunities you will have after setting up an RO but also some limitations of a Representative Office.

Opportunities and Limitations of a Representative Office

Features of a Representative Office
1) Legal Status of a Representative Office
The Representative Office is a non-legal entity operating representing it's parent company overseas. A representative office is not allowed to engage itself in business activities, issue invoices on its own, remitting outward, signing sales or purchase contracts, or receiving income from services performed but may act as a liaison and promotion office for its parent company.

2) Name of a Representative Office
The name of the Representative office should be in the form of "Name of the Enterprise + Name of the City + Representative Office".

3) Business Address of a Representative Office
At the beginning of setting up the Representative Office, it is advised to decide the place and building where office is going to be located first, as the address of the proposed office will have to be mentioned in the application for approval.
Note: the business address must be located in commercial buildings approved by the government.

4) Social Security of a Representative Office in China.
A new rule on foreign employees’ social security in effect started from October 15, 2011. It is said that if a company hires a foreign employee, the company shall register this employee with the local social security authority within 30 days of the employee receiving their work permit.

Advantages of setting up Representative Offices(RO) in China
Using a representative office as China entry form has the following advantages:
1) Affordable: no paid capital required, government and service fees are usually lower than what is needed for WFOEs.
2) Quicker registration process (usually within one month or so)
3) Less paperwork required for application (compared to wholly foreign owned enterprises)

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