Types of Companies in China
Limited Liability Company (LLC)
The limited liability company (yǒuxiàn zérèn gōngsī) is the most common corporate form in China, governed by the Company Law (gōngsī fǎ). An LLC features a capital structure divided into membership interests (chūzī é) rather than shares, with members’ liability limited to their capital contribution. The LLC requires at least one shareholder and is capped at 50 shareholders. The organisational structure includes the shareholders’ meeting, a board of directors (or an executive director for smaller companies), and a board of supervisors (or a single supervisor). The minimum registered capital requirement was abolished by the 2013 Company Law amendment, though certain regulated industries maintain specific capital thresholds.
The Limited Liability Company is the vehicle of choice for small to medium-sized enterprises and joint ventures. Its flexible governance structure, limited liability protection, and relatively low compliance burden make it suitable for both domestic entrepreneurs and foreign investors operating through wholly foreign-owned enterprises.
Joint-Stock Limited Company
The joint-stock limited company (gǔfèn yǒuxiàn gōngsī) is the corporate form used for larger enterprises, particularly those seeking public listing. The Company Law requires a joint-stock company to have between 2 and 200 promoters, with at least half of the promoters residing in China. The capital is divided into shares that may be listed on a stock exchange. The governance structure is more formalised than an LLC, requiring a board of directors of 5 to 19 members and a board of supervisors of at least 3 members.
Joint-stock companies may issue shares to the public through initial public offerings on the Shanghai Stock Exchange, Shenzhen Stock Exchange, or Beijing Stock Exchange, subject to approval by the China Securities Regulatory Commission (CSRC). Listed companies must comply with extensive disclosure and governance obligations under securities regulations.
One-Person Company
The one-person limited liability company (yīrén yǒuxiàn zérèn gōngsī) is a variant of the LLC structure with a single natural person or legal entity as the sole shareholder. The one-person company was introduced by the 2005 Company Law amendment to facilitate entrepreneurship and limited liability for sole proprietors. The shareholder exercises the powers normally held by the shareholders’ meeting and must prepare annual financial reports audited by an accounting firm.
A natural person may establish only one one-person limited liability company, and that company may not establish a further one-person company. These restrictions aim to prevent abuse of the corporate form and creditor protection concerns. The one-person company remains subject to piercing the corporate veil principles, and the shareholder bears the burden of proving separation of personal and corporate assets.
Wholly Foreign-Owned Enterprise (WFOE)
The wholly foreign-owned enterprise (WFOE; wàishāng dúzī qǐyè) is the most common vehicle for foreign direct investment in China. Governed by the Foreign Investment Law (2019) and the Company Law, the WFOE is a limited liability company entirely owned by foreign investors. The WFOE replaced the former Foreign Invested Enterprise regime under the prior Sino-foreign investment laws, which were unified by the Foreign Investment Law.
WFOEs may engage in a broad range of business activities subject to the Negative List (fùmiàn qīngdān), which identifies sectors where foreign investment is restricted or prohibited. Sectors outside the Negative List are open to foreign investment on a national treatment basis. WFOEs benefit from China’s commitments under the WTO and various bilateral investment treaties.
Joint Ventures (EJV and CJV)
The equity joint venture (EJV; zhōngwài hézī jīngyíng qǐyè) and the contractual joint venture (CJV; zhōngwài hézuò jīngyíng qǐyè) were historically the primary investment vehicles for foreign investors. Under the EJV structure, profits and risks are shared in proportion to capital contributions. The CJV structure allows greater contractual flexibility, with profit sharing and management rights determined by agreement rather than equity proportion.
Although the Foreign Investment Law (2019) effectively abolished the specialised joint venture laws, existing joint ventures continue to operate under transitional arrangements, and new joint ventures may be established under the Company Law. The EJV and CJV forms remain relevant in certain regulated sectors where joint venture participation is mandatory under the Negative List.
Partnership Enterprise
China recognises both general partnerships (pǔtōng héhuǒ qǐyè) and limited partnerships (yǒuxiàn héhuǒ qǐyè) under the Partnership Enterprise Law (héhuǒ qǐyè fǎ). Partners may be natural persons, legal persons, or other organisations. Limited partnerships have become particularly significant as the preferred structure for private equity and venture capital funds, with general partners assuming management responsibility and unlimited liability while limited partners contribute capital with liability limited to their investment.
Partnership enterprises are not subject to entity-level taxation; profits flow through to partners who are taxed at the individual or corporate level. This tax transparency makes partnerships attractive for investment fund structures and professional services firms.
Representative Office
The representative office (dàibiǎo chù) is a simpler establishment form for foreign companies seeking to conduct market research, liaison, and preparatory activities in China without engaging in direct profit-making operations. Representative offices are governed by the Regulation on the Administration of Resident Representative Offices of Foreign Enterprises. They may not sign commercial contracts, invoice clients, or generate revenue directly. Taxation and employment compliance requirements are more limited than for a WFOE, making the representative office suitable for exploratory market entry before establishing a full operating entity.