Chinese Business License
Chinese Business License
The business license, together with the company chops, is one of the most important documents any company in China possesses. Every company has a business license, from local Chinese companies to Joint Ventures and Wholly Foreign Owned Enterprises (WFOE). We realise that not every country has these kind of licenses and therefore it is not always clear what the use of the license is. In this article we would like to inform you what is stated on the Chinese business license and why it is such a useful document, even for foreigners.
What Information is on the Chinese Business License
To get an idea what the business license is, please find an example business license below.
On this document there is a treasure trove of information. As almost everything on the document is in Chinese, it might be difficult for many readers to use this information. The most important information on a business license, going from top to bottom, is:
The company name is the first item on the Chinese business license. Chinese company names are all quite similar. They are usually composed by “city” – “name” – “company type”. In our case this is “Shenzhen” – “1421” –“Consulting Company”, which is very similar to our official company name.
The company scope indicates what kind of company entity is involved. In our case it is a limited liability company, however there are also non-profit organizations or state-owned companies.
The address is the third line of information listed. The address should correspond to where the majority of the business activities are performed. Important to note is that if you change address, the business license also needs to be updated, to be in line with the new address.
Below the address, you will find the name of the person who is the legal representative or the representative director. This person has the primary authorization of the company and is also responsible for that the company operates legally. This person is often in charge of the company chops, bank accounts and other company licenses.
成立日期 Incorporation Date
The last line on the Chinese business license is the incorporation date. This gives an idea how long the specific location of a company has been active.
An item which is not listen on our old business license but which can be found often on other licenses is the registered capital. This should give an idea on how much investment a company has done and how big their financial capabilities are.
There is a QR code indicated on the business license. By scanning the QR code, you can see more detailed information about the company on the local government website. Please note that the specific information is different for every local government. Generally speaking, additional information is visible, such as business scope, performed audits and potential blacklisting.
How to Use a Chinese Business License
Now that we have an idea what kind of information is on the business license, it is good to think about how a license can be used. Requesting a business license for a company in China before doing business is standard practice, since all companies have to have this license. With the license you can then check whether the information given to you in previous communications overlaps with the license. Then, if something does not add up, you know this beforehand.
Examples of discrepancies of a business license, going in order as the previous chapter, are:
- The company name is different than the company name on other items like the import license or the bank account. This should be a red flag that there is something seriously wrong in the communication.
- The company says they can do the export of a certain product, but the company scope lists marketing agency. This can be a red flag that the company is and will be unable to perform the export operation, since Chinese companies must stick to their business scope.
- The address noted on the license is in a different location, or even worse in a different city, than the company you are doing business with is located. Companies can have multiple locations, so it would be wise to investigate the link between the entities and ask for the other location’s license.
- The legal representative name is not the same as the person who signs the contracts. This might mean someone goes around their boss’ back or accidentally makes a contract invalid, since only the authorized legal representative is allowed to sign documents.
- The registered capital is low. This can be a warning that if you do business in products with large quantities and want to be guaranteed that the company you are dealing with can handle this volume.
Knowing is half the battle, especially in China. If you are going to set up your company in China, the Chinese business license is one of your most important documents. Keep it safe. If you are going to do business with a partner in China, request a scan of the license. Should their license give you a hunch or you are unsure what you are dealing with, then a small background check can be of much assistance.
Nathan Jansen went to China in 2012 for an internship at 1421 Consulting Group. Intrigued by the country, he decided to return in 2014 and start a new office for 1421 Consulting Group in Shenzhen. As local General Manager has thrived and quickly grew 1421 Shenzhen in a profitable hub. Since 2019 Nathan returned to the Netherlands, working as a Sales Consultant for Johnson and Johnson.
What happened in the year 1421?
From 1421 to 1423, during the Ming Dynasty of China under Emperor Zhu Di (朱棣) the fleets of Admiral Zheng He (鄭和), commanded by the Chinese captains, discovered Australia, New Zealand, the Americas, Antarctica, the Northeast Passage; and circumnavigated Greenland.
Due to this endeavour we can conclude that “1421 is the year that the Chinese discover the world”.