🇨🇳 Annual Compliance — China

Underestimating the WFOE setup timeline

Fix: A fully operational WFOE — with business licence, bank account, tax registration, Golden Tax System, and all required permits — typically takes 3–6 months. Many founders budget 4–6 weeks and are severely disappointed. Start the process well in advance of your planned market entry date and use the lead time for market research and relationship building.

Ignoring the Negative List before committing to a WFOE

Fix: The Foreign Investment Negative List is updated annually and determines which sectors allow 100% foreign ownership, which require a Joint Venture, and which are prohibited. Internet content, media, education, telecoms, and several other sectors are restricted. Verify your specific business scope against the current Negative List with a Chinese law firm before investing in the setup process.

Poor chop (seal) management

Fix: Company chops in China have the legal weight of a corporate signature. The company chop, financial chop, and legal representative chop can authorise contracts, bank transfers, and government filings. If an employee or partner gains unauthorised access to your chops, they can legally bind the company. Establish strict chop custody procedures, require dual-authorisation for chop use, and store chops in a secure location with access logs.

Assuming profits can be freely repatriated

Fix: China has capital controls. Repatriating profits as dividends requires: completed annual audit, corporate income tax filing and settlement, board resolution approving dividend distribution, and SAFE clearance through the bank. The entire process can take 2–4 months. You cannot simply transfer RMB out of China. Plan your cash flow and treasury management around these constraints.