Business Opportunity? Buy a WFOE in Shanghai Now! Really?
While randomly browsing the ShanghaiExpat classifieds for random knick-knackery that I could use because I, too, am a tight-fisted bastard like Will the Imagethief, I came across an interesting–if not suspicious–listing:
WFOE for Sale! (07/21/08)
Wholly foreign owned entity for sale in Shanghai!
Business scope: Restaurant with attached licenses for
Alcoholic Beverages, Dairy Products, Snacks, Coffee, etc.
Location in Puxi available if required, otherwise licenses can be transfered to different location of your choice.
This is a great opportunity to save time and money!
F&B licenses are difficult to get and require a lot of time.
By buying this WFOE you buy as well the attached licenses which enables you to open your restaurant or coffeeshop significantly faster.
The registered capital of 140.000USD has been fully verified.
Send us an email to know more about this great opportunity!
contact us at wfoesales@gmail.com …
Now, anyone who has looked into the legal requirements for starting a legitimate and legal business in China knows that there are quite a few requirements and quite a few formalities, none of which seems to be easy to execute with any measure of confidence. Not only is the official information difficult to follow, you’re inevitably fearful of someone ripping you off somewhere or something biting you in the ass when you least expect it.
Therefore, the prospect of being able to by a WFOE off the shelf with all the requisite legalities and licenses handled for you does indeed sound like an incredible convenience, especially if you’re a scrappy entreprenurial foreigner looking to open in a land where you may not speak the language. Ah, all the dreams of showing the locals how to set up a proper, comfortable, dining environment (with ice on demand) that isn’t made up of rickety tables and chairs, grimy floors, and surly service come swirling into one’s head.
Now, I’m not particularly put at ease with an e-mail contact like “wfoesales@gmail.com” nor do I want to pass judgements just yet. All I want to do is give some business-owners or lawyers in China the opportunity to chime in on what they think about this, how legit it might be, and their advice for would-be foreigners looking to give it a go in China.
UPDATE: Found another listing, this time with phone numbers:
Foreign owned restaurant company for sale
Fully foreign owned company for restaurant operation for sale. Includes full set of permits and fully licensed for immediate use. If interested, please call: 150 2162 2008, 135 6457 2083.
Note: This post is only intended to provide would-be business-starters some additional information or cautions. It is not designed to provide proper legal advice from a legally China-licensed attorney. Please do your own due-diligence. It is your own butt you’d be protecting.
3 Responses to “Business Opportunity? Buy a WFOE in Shanghai Now! Really?”
Dear Kai Pan,
thanks a lot for commenting on our post on shanghai-expat.
What we have to offer is the opportunity to buy all shares of a WFOE, based in Shanghai that holds several F&B licenses (in the name of the legal rep of the WFOE).
The company has been operating as a Restaurant in Shanghai since around 1 year. The owners are now focusing on a different business and would like to sell the legal entity behind the restaurant – since as anyone who has registered a WFOE in any industry in China knows how much time, sweat and tears it takes, we would prefer to sell the entity to someone who would like to save time and money as opposed to simply close the company.
Clearly, several legal steps have to be followed in order to not only transfer the shares but also the attached F&B licenses to a new location. These steps include the approval of the local authorities from FDA, Fire and Hygiene departments - therefore is not an as easy “off the shelf” solution comparable with buying a HK shelf company.
Kindly contact us at the email address as posted for any further questions.
The second post with the attached phone number has not been written or posted by us and must refer to some other opportunity.
I don’t know anything about this company/individual, but I wouldn’t be surprised if its a perfectly legitimate operation. I have registered a WFOE, I have helped close a WFOE and I have helped broker WFOE’s just like this service is offering. The reason this is a good business is pretty simple, its difficult to open a business license, but its impossible to close one. If all goes well, you can open a basic WFOE in 3 months, 5-6 if you have some problems. Closing a WFOE can easily take at least a year. In most cases, if you’re selling a WFOE, it means your business has failed and you’re considering leaving China. So why deal with another year of headaches and fees. If you sell it, thats a clean way of getting rid of it and you will probably save money in the long run. But, buyers beware. Firstly, what is the business scope of the WFOE? How difficult is it going to be to have this changed? Sometimes its easier to register a business scope from scratch rather than have it changed on an existing license. Secondly, if you’re buying a WFOE it means you want to set up a business. How do you plan to get money into China to start your company? If its a large amount, you’ll have to register it anyway which takes time. So in that case, you might just want to register you’re own anyway. I think there are a lot of ups and downs, these are just off the top of my head. I know there are a lot of people in China who are operating a business illegally. For them, buying up one of these WFOE’s is a great solution, especially considering the current visa situation. Buy a WFOE and you and whomever else you want can get a work permit through the company. Other things to consider are where the WFOE is registered and the tax implications. Older WFOE’s can claim a shell office in Pudong and pay only 15% taxes. New WFOE’s can’t. So finding one of those older ones is a diamond in the rough. Definitely worth buying. If you really want an expert on all this, you should ask greg prudhemmoux (www.nextstepdirectory.com/team). He’s the one that advised me through most of my own WFOE difficulties.
Sorry for taking so long to heed your call.
One can buy a WFOE “off the shelf” like this, but, like everything else, doing so has its plusses and minuses. One thing the buyer must know is that the scope of the business will be limited to the scope of the initial WFOE application. In other words, don’t go buying a restaurant WFOE thinking you will use it to manufacture briefcases. The other big risk is outstanding liabilities. Are you certain the WFOE does not owe X vendor $40,000? Are you certain the WFOE does not owe X former employee $12,000? Sure you can get the seller to agree to indemnify you for these liabilities, but does the seller have the funds to pay and do you want to have to sue to collect. I actually think that the cost involved in doing proper due diligence on such a deal would probably be fairly close to just starting afresh and starting afresh will always have less risk.