I have had a number of conversations over the last few months with American and European start-up companies looking to sell their high end products into China. Most of these calls touched on pretty much the same things and so it occurred to me to write about the issues we discussed, as they apply broadly to many such companies. The following issues seemed to come up nearly every time, as they should:
- What sort of entity should we have in China? In both instances I talked of how time-consuming and expensive it is to form a WFOE in China and how they should delay forming a WFOE in China until such time as they truly needed one, and of how that time might never come. See How to Form a WFOE in China, Part 12: Do You Really Even Need One?
- When should we register our trademarks and where and who should own those registrations? My response was that you should register your trademarks before anyone outside your inner circle might learn of them. I then lectured them on the dangers of not using a qualified lawyer for such registrations and on how it is a myth that trademark registrations are easy. I then gave a couple of horror stories of companies that had botched their trademark registrations in China and in the United States, and ended up going broke because of that. I told them that foreign entities can own China trademarks and there are even advantages to doing it that way. I told them that in addition to registering their English language names and their logos, they should probably get a Chinese language name and register that as well. See Register Your Trademark In China, All Things Considered
- What’s it like selling on Alibaba? We talked about the legal requirements/legal issues they likely would confront if they sought to sell their products on Alibaba and the major differences between Tmall and Taobao.
- Do we need a China WFOE to get a WeChat business account? Yes.
- What about setting up offshore entities to save on taxes? Unless you have a lot of money right now, it makes better sense to spend your time and your money focusing on growing revenues and profits, and not on worrying about paying taxes on profits years down the road. I’ve had many clients wonder why their previous attorneys or accountants had set up complicated and multi-country entities but I’ve never had a client bemoan their having been late to do so.
- What do we need to do to hire people in China? Get a WFOE. Please. See Doing Business in China with Deportation or Worse Hanging Over Your Head.
- What about customs issues? We are happy to help, but usually the much cheaper way to handle these is to have your China distributer or reseller (if you end up going one of those routes) be in charge of this or you bring in a third party logistics company to assist.
- Anything else? Yes. Take it upon yourself to try to figure out any rules specific to your particular product. You can pay your lawyers to do this now and in the future, but that usually isn’t necessary.
This article was written by Dan Harris and published on China Law Blog. Original Post: http://www.chinalawblog.com/2017/09/selling-your-product-into-china-eight-key-questions.html