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Foreign Invested Partnership Enterprise (FIPE) Registration
Information provider:zanya consultants    Updated:2016/10/25    Website:www.companyformation86.com

Introduction to Partnership Enterpris (PE)


A partnership enterprise is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested.Since June 1, 2007, Partnership Enterprise Law came into force and established partnerships as a legal business entity, Foreign Enterprises or Individuals establish Partnership Enterprise is not allowed only until March 1, 2010.


The term partnership enterprise refers to general partnerships and limited partnerships which may be established within China by individuals, legal persons and other organizations. A state-funded company, state-owned company, listed company, public welfare-oriented public institution or social organization may not become a general partner of a limited partnership


Concept of FIPE


FIPE stands for Foreign Invested Partnership Enterprise is a unlimited liability business entity set up by more than 2 (including 2) foreign enterprises or individuals; or by foreign enterprises or individuals and Chinese individual, legal person and other organizations within the territory of China.


Types of Foreign Invested Partnership Enterprise (FIPE)


There are three types of FIPE as following:


1.  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.

2.  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.

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.


Advantages of establishing a Foreign Invested Partnership Enterprise


1.  No requirements on minimum registered capital;

2.  Less procedures comparing with Wholly Foreign Owned Enterprise or Joint Venture

3.  No corporate income tax for partnership enterprise;

4.  It permits men possessing different kinds of abilities to unite, thereby increasing efficiency. Second.

5.  It makes possible the employment of larger capital, which, as we shall see later, contributes to increased production.

6.  Foreign Enterprise or Individual is allowed to establish a Partnership Enterprise with Chinese individual (While Chinese individual is not allowed to have Joint Venture with foreign investor)


Disadvantages of establishing a a Foreign Invested Partnership Enterprise


1.  Compared with the single enterpriser the partnership is at a disadvantage in the matter of business policy and authority. Unlike a single enterpriser, the member of a partnership must share more or less authority with others. Consequently, as often happens, the partners work at cross purposes, one advocating one business policy, a second advocating a different policy, while a third partner may disagree with both policies. Oftentimes, under such circumstances, it is found desirable to dissolve the partnership.

2.  Unlimited liability; A partnership must pay all its debts with property contributed to the partnership by the partners. If the partnership is a general partnership then the partners bear joint and several liabilities;

3.  As for trading business of a PE, since PE is not a general tax payer, PE can't get VAT status, and can't apply for VAT rebate accordingly.

4.   Property rights of partnership enterprise is difficult to be transferring to a third party as according to the Partnership Enterprise Law: the property rights of partnership transfer MUST be agreed by all partners in a PE;

5.  China has not adopted Natural Person's Bankruptcy system, credibility of the partners would be hard to maintain if PE involves into a hard situation


Capital Contribution


A partner may contribute capital to the partnership to garner a share of the partnership's profits or losses. The form of acapital contribution can be money, land use right, intellectual property right or other properties, or labor services at a valuation determined by agreement among the partners.However, labor services can not be the capital contributions in a limited partnership.


Terms And Temination


In China, terms of 15 to 30 years are typical for a PE. It is also possible to obtain extensions of the PE's duration.


Documents Required for FIPE Registration


1.  Application Form for Foreign Invested Partnership Enterprise Registration signed by all partners.

2.  Partnership Agreement signed by all partners.

3.  Certificates on the legal status of all partners or their identity certificates if they are natural persons

4.  Original Bank Reference Letters from investor’s bank (declare a good standing).

5.  Proof of Business Premises

6.  Power of Attorney of the designated representative or entrusted agent.

7.  The confirmation letter in which all partners confirm the subscribing or the actual capital paid by each partner.

8.  An explanation which explains the FIPE is in conformity with the industrial policies on foreign investment.

9.  Other materials as required by government.


General Tax Information


There is no corporate income tax in a FIPE. The partners shall pay their respective share of the partnership income.


Profit Repatriation


China Government allows Foreign Invested Parnter Enterprises remit their profits out of the country and such remittances do not require the prior approval of the State Administration of Foreign Exchange (SAFE). Dividends cannot be distributed and repatriated to oversea if the losses of previous years have not been covered while dividends not distributed in previous years may be distributed together with those of the current year. Repatriating the Registered Capital to home countries is forbidden during the term of business operation.


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