Nanchang FIPE Setup
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Foreign-invested partnership enterprise (FIPE) is an unlimited liability business entity at least one of whose partners is a foreign investor. Both foreign individuals and legal entities can be partners of a FIPE. The term partnership enterprise refers to general partnerships and limited partnerships. A general partnership enterprise may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership. The general partners share unlimited liabilities for the debt of the partnership. On the other hand, a limited partnership enterprise is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership's debts to the extent of their capital contributions.
Nanchang FIPE Setup – Overview
For a FIPE, a partner may contribute capital to the partnership to garner a share of the partnership's profits or losses. The capital contribution may include money, intellectual property right or other properties, and even labor services at a valuation determined by agreement among the partners.
As for profit distribution, the default format is to follow the percentage of capital contributions made by the partners. However, it can be fully decided by the partners provided in the partnership agreement in the way unnecessarily in proportion to the capital contribution.
Generally, a FIPE as a whole is only subject to Business Tax whose rate in most occasions is 3-5% of the turnover. No corporate income tax is required. The partners shall pay respectively their partnership income tax.
Nanchang FIPE Setup – Different Types of FIPE
Nanchang foreign-invested partnership enterprise mainly include the following types:
1. General partnership Enterprise (GPE): A general partnership enterprise may be formed by general partners who bear unlimited joint and several liability for the debts of the partnership. The general partners share unlimited liabilities for the debt of the partnership.
2. Limited partnership enterprise (LPE): A limited partnership enterprise is formed by a combination of general partners and limited partners where the limited partners bear the liabilities for the partnership's debts to the extent of their capital contributions.
3. Special General Partnership enterprise (SGP): A special general partnership enterprise resembles a general partnership except that it must be a professional service institution offering services requiring professional knowledge and special skills. The structure shields co-partners from liabilities due to the willful misconduct or gross negligence of one partner or a group of partners. It is very similar to limited liability partnership in Europe and America.
Nanchang FIPE Setup – The Reason to Set up a Nanchang FIPE
Partnership Enterprise has been available only to Chinese citizens for nearly 15 years since August 1, 1997 when the Partnership Enterprise Law of PR China took effect. However, since March 1, 2010, according to the Administrative Measures for the Establishment of Partnership Enterprise in China by Foreign Enterprises or Individuals, FIPE is newly available for foreign investors who intend to start their own business here in China.
Compared with WFOE, RO and JV, FIPE is the most convenient way for foreign investors to set up business in China. It is especially tailored for professionals, like architect, fashion designer, private equity investor, who are highly motivated to establish business presence in Chinese market. Unlike WOFE, foreign partners in FIPE are relieved of doubly levied capital income tax; also there is no additional process of application for pre-approval from Chinese Ministry of Commerce, no compulsory minimum registered capital. The daily maintaining expenses of a FIPE is much lower than WFOE or RO. When foreign investors finally want to stop their business in a FIPE, they can simply quit it by signing agreement with other partners. By the way, the process to close a FIPE is very flexible and convenient as well.
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