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02 April, 2015
China is attracting more and more foreign entrepreneurs. But starting a business in China, with its repulsive paperwork is not always easy. Entrepreneurs wishing to set up in China have the choice of the structure: the Wholly Foreign Owned Enterprise (WFOE), the Joint-Venture, the Representative Office, the Foreign Invested Partnership Enterprise (FIPE). These forms can be very restrictive because of the long time allocated to all the administrative procedures. But another method of establishing a business presence in China, consisting in using an umbrella company, exists.
The principle of PEO Services is simple. It’s a legal representation of a consultant or employee on behalf of a foreign company.
A contract is concluded between the foreign company and the umbrella company. This company will dispatch its consultant(s) within China; those employees will be then legally represented by the Umbrella Company which is in charge of paying them wages in the currency of their choice.
The umbrella company in China will therefore support the recruitment in China of employees but also help getting their working visa, their insurance and tax declaration.
This solution has many advantages:
- Autonomy and flexibility
When a company uses the services of an umbrella company, it also engages itself into a business relationship, which allows it to deal with the unpredictability of the environment. It uses only the benefits they need and avoid paying excessive fixed costs.
In addition, the foreign company remains independent. It’s free to manage its teams and its implementation process.
- Expertise and additional services
The umbrella company meets the needs of its clients with multidisciplinary skills. This makes it possible to outsource punctual and specific projects to specialists.
The services provided are also evolving, depending on the progress of implementation into the Chinese market. Indeed, the umbrella company is constantly adapting to its client company’s needs.
- Listening and coaching
The umbrella company in China supports numerous companies. Through its specialists of the Chinese Market and culture, it knows the context and the different market developments within China. It guides its clients to have access to information they need to succeed in the Chinese market.
- An Economical way
In addition to being a flexible solution, the umbrella company is also economic. Clients pay only the required services, so they limit the charges.
Furthermore, no start fees are necessary, unlike the creation of a structure such as a WFOE. The company does not need to shell out large sums when it launches its activity. Spending evolve according to its needs.
- A quick implementation
This solution also enables quick access to needed services. When an entrepreneur seeks a new service or a new skill, he simply looks for an umbrella company that can meet its expectation in the shortest possible time.
To conclusion, the umbrella company is the easiest, fastest and most economical method for an entrepreneur who wants to enter into the Chinese market. The consultant focuses only on its business without worrying about all the paperwork.
HR Supervisor at INS Global Consulting in China, Payroll Outsourcing and HR Management firm based in Shanghai.
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