WFOE vs representative office: which China entity do you need?
A WFOE is a company in China that you own 100%. It can sign contracts, invoice customers and hire staff. A representative office is only a liaison office: it can't sell, invoice or employ staff directly. Most foreign businesses that want to trade or operate in China choose a WFOE.
3 min readUpdated
Key takeaways
- A WFOE can trade, invoice in yuan and hire staff. A representative office can't.
- A representative office suits market research and liaison, and is taxed on its spending.
- A joint venture is mainly for industries where foreign ownership is restricted.
- If you only buy from China and ship home, you may not need a China entity at all.
The short answer
| WFOE | Representative office | Joint venture | |
|---|---|---|---|
| What it is | A limited liability company you own 100% | A liaison office of your overseas company | A company owned with a Chinese partner |
| Sign sales contracts and invoice (fapiao) | Yes | No | Yes |
| Hire staff directly | Yes | No, only through an employment agency | Yes |
| Liability | Limited to the company | Your parent company is responsible | Limited to the company |
| How it's taxed | On its profits | Usually on a share of its spending | On its profits |
| Best for | Trading, services, sourcing and QC offices | Research, liaison, supporting the parent | Restricted industries, or a partner with licences or customers |
What a WFOE is
"WFOE" stands for wholly foreign-owned enterprise. Since the Foreign Investment Law took full effect, foreign-owned companies follow the same Company Law as Chinese ones, but WFOE is still the name everyone uses.
In practice, a WFOE is an ordinary Chinese limited liability company that happens to be owned by you or your overseas company. It has a business licence, a defined business scope, its own bank accounts, and can do everything its scope allows: buy, sell, invoice, hire and rent premises.
What a representative office can and can't do
A representative office is an extension of your overseas company, not a separate company. It's useful for being present in China without trading there.
- It can do market research, liaise with suppliers and customers, and support your parent company's business.
- It can't sign sales contracts, issue invoices or earn revenue in China.
- It can't employ local staff directly. They're hired through an approved employment agency.
- It's usually taxed on a share of its spending, even though it doesn't earn anything.
- Your parent company is responsible for its obligations.
Representative offices are quicker to set up than a company, but many businesses outgrow them and later register a WFOE.
Not sure what you need?
Tell us about your product and we'll get back to you within 24 hours.
When a joint venture makes sense
Some industries limit or ban foreign ownership. They're listed in China's Negative List for foreign investment. In those areas, a joint venture with a Chinese partner may be the only route. A joint venture can also make sense if a partner brings licences, land or customers you can't easily get yourself. The trade-off is shared control, so the agreement between partners matters a great deal.
Do you need a China entity at all?
Often you don't. If you buy from Chinese factories and ship the goods to your own country, you can do that from home. A sourcing agent can look after suppliers, quality and shipping for you without you needing a company in China.
A China entity is worth it when you want to sell inside China, hire your own team there, invoice in yuan, or run your own buying and quality-control office.
How to decide
| If you want to | Choose |
|---|---|
| Buy from China and ship home | No entity needed. Use a sourcing agent, or buy direct |
| Research the market or liaise with suppliers, without selling | Representative office |
| Sell in China, invoice, or hire your own staff | WFOE |
| Run your own sourcing or QC office | WFOE |
| Operate in a restricted industry | Joint venture, if allowed |
Setting up
Registering a WFOE involves choosing the business scope, a registered commercial address, preparing documents, registration with the market regulator, then tax registration and a bank account. Most are fully set up in around two to three months. Our company registration service explains each step and can handle it for you.
Common questions
Can a representative office invoice customers?
No. A representative office can't sign sales contracts or issue invoices. It's only for liaison and support activities.
Is a WFOE expensive to run?
It needs bookkeeping, monthly or quarterly tax filings, a yearly audit and annual reports, even when it has no income. Budget for an accountant from the start.
Can I convert a representative office into a WFOE?
Not directly. You set up a new WFOE and then close the representative office, which has its own deregistration process.