Doing business in China these days is hard due to the new coronavirus epidemic. Stephane Grand, the managing partner of S.J. Grand Financial Tax and Advisory, shared his valuable experience of starting his accounting firm in Beijing during the SARS crisis.
Check out the article China Business in Times of Coronavirus, an Entrepreneur’s Lessons from SARS
S.J. Grand had received hundreds of messages from entrepreneurs who wanted to keep their firms in China but feared that it would lead to certain failure. They had asked the question of whether they should stay or leave their businesses during those hard times.
However, staying or leaving are not the only options. There is an intermediate alternative that will allow you to postpone this decision while incurring minimal operational costs. This other option is going dormant.
Even if you have already made up your mind about closing down your business in China, you will have to wait for 18 months to complete the process. Hence, why not consider another path that will allow you to resume operations as soon as the uncertainty subsides or to sell your firm at any point in time?
What it means to stay or become dormant
Switching your company into a dormant status means keeping its registration active while stopping all operations and labor relationships. It enables you to resume business at any time.
In mainland China, unlike in Hong Kong, it is permissible to maintain a registration status without having any activities as long as a minimum of compliance work is done.
But since the risks of not fulfilling these requirements include being blacklisted, it is important to be well-informed. Hence, we have prepared a free guide about the benefits and requirements of being dormant in mainland China.
For entrepreneurs or groups that foresee the re-start of their activity in the short term, “dormancy” can be a good option considering its low maintenance cost and its on-going “ready” status. The regulations do not specifically address such status, therefore, the company is facially fully active. We have even seen corporations keep their entity in China for marketing purposes and win overseas deals simply by having a tax ID in China or by using the entity as a billing vehicle.
What if you do not want to go dormant?
If going dormant is not an option, such as if you need to keep a labor force while limiting access to your company’s premises due to the virus, then you need to implement a home office solution.
We offer you a solution to minimize the risk of infection by allowing you to fully comply with Chinese regulations while working remotely. You can ask for more information about Kwikdroid, our multilingual Cloud accounting, and business management solution.
