In the United Kingdom, there are many different types of business. However, in practice Chinese companies usually chose to set up a branch, a subsidiary or new limited company. Deciding which one is best will depend on your business plans and company circumstances.
Branch
A branch is the permanent office set up in the UK of an overseas company run by local representatives. If your business plans are to make a few sales or employ a few marketing people in the UK, then a single office or store will suffice.
However, unlike a Limited Company a branch does not limit your liability. Additionally, it can take up to 4 weeks for your branch to be registered, compared to the few hours it can take to set up a company.
Branches of an overseas company must register as operating in the UK with Companies House. This must be done within a month of opening, with a fee payable and certain documentation needing to be submitted. This is only required when you set up a physical presence in the UK. You will also have to register with HM Revenue & Customs and pay tax on the profits of the branch.
Limited Company
Most Chinese investor’s businesses in the UK take the form of private limited companies. In most cases, the business is a wholly owned subsidiary of the Chinese parent company. There are many benefits of setting up a separate limited company, such as:
- It limits the liability of the parent company. As long as the subsidiary is run correctly, the parent company will not be liable for any costs the subsidiary incurs, such as compensation and legal charges;
- When the parent company controls over a certain amount of stock in the subsidiary, it will maintain operational control but not be liable for the losses of the subsidiary;
- It allows you to run your business in line with the legal obligations of the UK, allowing a different corporate culture and management system;
- It allows you to sell your product/service under a new brand or identity, allowing the parent company to avoid reputational damage if the venture fails or is subject to legal action;
- As separate entities, the assets of the parent company are protected;
- It is easier for a company set up in the UK to apply for work visas.
There are some restrictions on Chinese companies doing business in the UK, and rules regarding the purchase of established UK based businesses, but these are rare. The UK funs a free market, which tries not to limit how businesses operates as much as possible.
There are several types of limited company you can set up; however, the two main ones are private companies limited by shares and public limited companies.
Public limited companies are where the ownership is open to the public. This means anyone can buy shares in the company. This can be helpful if you wish to gain investment in your business by offering shares out to the wider public. A public limited company will be listed on the London Stock Exchange and is the best platform for capital financing.
Private limited companies cannot be owned by members of the public. The sale of shares is done privately and make it harder to find investment. However, a private limited company means you can control who becomes a shareholder, giving you greater control over the company.