Basic Process for Setting Up a Limited Liability Company
While different entity types (limited liability companies, sole proprietorships, partnerships) differ in the details, the core process is universal. Below, I'll use the most common form — the limited liability company — as the main thread and map out a standardized, end-to-end setup process.
1. Preparation Before Registration
Name Filing
- Most places now use a self-declaration system — no pre-approval notice needed; you simply submit the name along with your registration.
- The trade name is the core element under legal protection;
- "Limited Company" and "Limited Liability Company" carry the same legal weight;
- Emerging industries and tech/internet companies serving a nationwide market can place the administrative region in the middle of the name for a stronger brand feel.
| Element | Description |
|---|---|
| Administrative region | The name of your city (Beijing / Beijing Municipality) |
| Trade name | The most essential part — expresses the brand's personality and is the main focus of legal protection |
| Industry descriptor | e.g., Technology, Media, Catering, Artificial Intelligence |
| Organizational form | "Limited Company" or "Limited Liability Company" — same legal effect |
Beijing · Xiaomi · Technology · Co., Ltd.
Confirming the Registered Address
- Provide proof of the company's registered address.
A copy of the property ownership certificate + the lease agreement. If you don't own property, you can use a cluster registration address (one address hosting multiple companies) provided by a business park or incubator — policies vary by location.
- Whether a residential address can be used depends on local rules. Most cities allow "residential-to-commercial" conversion, but it requires stamped approval from the neighborhood committee; internet-based businesses can usually convert.
| Situation | Recommendation | Risks |
|---|---|---|
| Already renting an office | Simplest — just fill it in as per your lease | — |
| Self-owned property | Generally not recommended | ① Cities like Beijing and Shanghai tightly control residential-to-commercial conversion; ② the publicly disclosed address = a privacy leak; ③ it's treated as a deemed lease, involving VAT, property tax, and individual income tax |
| Rented apartment | Allowed in most cities | Talk to your landlord first — using it without permission risks breaching the lease |
| Affiliated / virtual address / university address | Saves money, but you accept the risks | Providers vary in quality (company secretarial firms, bookkeeping agencies, business parks), each with different risks |
- An OPC (one-person company) can often get a free office-address subsidy.
Organizational Structure and Personnel
Governance Structure of a Limited Liability Company
Shareholders' Meeting → the meeting appoints a Supervisory Board for oversight ↓ Elects Directors (the Board of Directors) ↓ Hires Management (the General Manager)
Key Rules
- Number of shareholders: between 1 and 50
- A small company may skip the board of directors and appoint just 1 executive director
- A supervisory board is optional — and supervisors can be omitted entirely
- Directors / the General Manager may not concurrently serve as a supervisor
- The legal representative must be a director or manager who conducts company affairs on the company's behalf
Personnel Information
- Name, ID number, home address, mobile number, email
- Foreign nationals: passport; Hong Kong/Macao residents: Mainland Travel Permit; Taiwan residents: Mainland Travel Permit for Taiwan Residents
Privacy note: The names of shareholders, directors, supervisors, the General Manager, and the legal representative are all public information. If you'd rather not go public, consider having shares held on your behalf by someone else.
Equity Split
| Threshold | Name | What It Means |
|---|---|---|
| 67% | Absolute control line | Major matters — amending the articles of association, increasing or reducing capital, merger, split-up, dissolution — require more than 2/3 of voting rights |
| 51% | Relative control line | Ordinary day-to-day resolutions (budget, profit distribution, electing directors) need a simple majority |
| 34% | One-vote veto line | The founder's bottom line — any major change requires your consent |
| Recommendations by stage: |
- Founding stage: founder holds ≥ 67%
- After new shareholders come in: founding team holds ≥ 51%
- Once equity is more diversified: hold the line at ≥ 34%
Employee equity incentives: Direct shareholding is not recommended. Instead, set up a limited partnership as the shareholding platform — employees serve as LPs, and voting rights stay with the founder (the GP).
This article is an AI-assisted translation of the original Chinese. 以上内容源自 AI 转译，原文本为中文。