How to Register a Sole Proprietorship (个体工商户) in China

In China, many freelancers and small business owners choose to operate as an Individual Industrial and Commercial Household, or 个体工商户 (pronounced Gètǐ gōngshānghù), because it offers flexibility, a simple setup, and a clear path to legal compliance. It’s an accessible structure for small-scale entrepreneurs, like café owners or neighborhood retailers. That said, it’s only available to Chinese citizens, and the process involves navigating local bureaucratic steps and ensuring you comply with national and municipal requirements.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in China?

In China, a sole proprietorship is officially called 个体工商户 (Gètǐ gōngshānghù), meaning an Individual Industrial and Commercial Household. Depending on context, it may also be referred to as:

• Sole trader
• Self-employed worker
• Independent contractor

These all refer to one person operating a business without forming a formal company structure.

How does a 个体工商户 (Gètǐ gōngshānghù) work in China?

个体工商户 (Gètǐ gōngshānghù) vs. limited company in China

While 个体工商户 (Gètǐ gōngshānghù) is the simplest structure for individuals, many entrepreneurs also consider a limited liability company (LLC). The table below highlights the main differences.

Step-by-step guide: How to register a 个体工商户 (Gètǐ gōngshānghù) in China

Step 1: Check your eligibility

You must be a Chinese citizen. Foreign individuals—including residents of Hong Kong, Macau, or Taiwan—cannot register this structure.

Step 2: Choose your business name

Submit proposed names to the SAMR for approval. The name must be unique and conform to naming rules.

Step 3: Gather required documents

Prepare the following:

• Application form for establishment of a 个体工商户 (Gètǐ gōngshānghù)
• Your identity document (e.g., national ID card)
• Proof of legal use of domicile (your business premises)
• Any required permits/licenses based on your business type
• Commitment Letter for Notification of Market Entities (for certain municipalities)

Step 4: Register with SAMR

Submit your application and documents to the local SAMR office. In Beijing, if everything is in order, registration can be completed the same day or within three working days at most.

Step 5: Pay registration fees

Fees vary by location but are typically minimal. Example: in Beijing, there’s no specific national fee published; instead, small local administrative charges apply—but these remain modest.

Step 6: Complete post-registration obligations

Once registered, you receive:

• A business licence
• A company seal

After this, you can open a local bank account using your official documents. You are also required to maintain accurate accounting records, file tax returns (personal income tax and possibly VAT), and comply with any local regulations.

Financial and tax obligations for 个体工商户 (Gètǐ gōngshānghù) in China

You are responsible for:

• Individual income tax: Sole proprietors (个体工商户 Gètǐ gōngshānghù) pay personal income tax on business profits under China’s progressive individual income tax system. Rates range from 3% to 45% depending on income brackets. Filing is usually done monthly or quarterly, with an annual reconciliation required at year-end.
• VAT (增值税): If your monthly sales do not exceed RMB 100,000, you are exempt from VAT. If your turnover goes above this threshold, you pay VAT at a reduced rate of 1% (instead of the standard 3% for small-scale taxpayers). Returns are typically filed quarterly through the State Taxation Administration.
• Social security contributions: Sole proprietors are not automatically required to contribute, but they can voluntarily enroll in China’s social insurance system for healthcare, pension, unemployment, and other benefits. Contribution rates and minimum bases vary by city or province.
• Record-keeping: You must maintain proper books of account, including invoices, receipts, and bank statements. Chinese law requires businesses to keep tax records for at least 10 years, and authorities can request access during audits.
• Invoicing: Every invoice must be an official fapiao issued through the tax authority’s system. It must include your tax registration number, business details, client information, transaction description, and applicable VAT. Invoices must be sequentially numbered and stored securely, as they are the foundation of China’s tax compliance system.

Launch your contracting career and stay compliant with Deel

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• Automate invoicing and expense tracking with essential Bookkeeping tools
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FAQs

What is the minimum capital required to start a 个体工商户 (Gètǐ gōngshānghù) in China?
There is no minimum capital requirement.

Do 个体工商户 (Gètǐ gōngshānghù) need to register for VAT?
Yes, if your monthly revenue exceeds ¥100,000, you must register and pay VAT (between 3% and 13%).

How much are the standard monthly or annual contributions?
VAT and income taxes vary based on earnings. Social insurance is voluntary but depends on local standards; there’s no fixed national rate for proprietors.

Can a 个体工商户 (Gètǐ gōngshānghù) hire employees?
Yes, you can hire employees. You must provide employment contracts and contribute to social insurance for them.

How long does it take to register as a 个体工商户 (Gètǐ gōngshānghù) in China?
Simple cases can be completed in about 15 days, though in some cities, applications may be processed the same day or within three working days.

Can foreign nationals register as a 个体工商户 (Gètǐ gōngshānghù) in China?
No—only Chinese citizens are eligible. Foreign nationals must use other structures, such as a Wholly Foreign-Owned Enterprise (WFOE), which is a limited liability company fully owned by a foreigner, or a Joint Venture (JV), which is a business co-owned with a Chinese partner.

Do 个体工商户 (Gètǐ gōngshānghù) need a separate business bank account?
It is not a strict legal requirement, but in practice, banks and tax authorities expect it. You will need a local business account to issue fapiao and keep business and personal transactions separate.

What happens if I stop working as a 个体工商户 (Gètǐ gōngshānghù)?
You must apply for deregistration with SAMR, settle final taxes, and liquidate remaining assets. Creditors can also petition for liquidation if debts remain.

Are there any government incentives or reduced rates for new 个体工商户 (Gètǐ gōngshānghù)?
No specific national incentives. Some local governments may offer support for small businesses or entrepreneurs, but this varies by region.

Can I use Deel as a 个体工商户 (Gètǐ gōngshānghù) to get paid by international clients?
Yes. Deel allows individual contractors in China to receive payments from clients worldwide, in multiple currencies, with low fees and transparent exchange rates.

Does Deel generate compliant invoices for 个体工商户 (Gètǐ gōngshānghù)?
Absolutely. Deel automatically generates invoices that meet legal and tax requirements, helping you stay compliant.

Can Deel help me with taxes as a 个体工商户 (Gètǐ gōngshānghù) in China?
Yes. Deel offers downloadable tax reports and payment records to support your filings. While not a replacement for an accountant, it simplifies record-keeping and compliance.

Does Deel offer contracts for freelancers and 个体工商户 (Gètǐ gōngshānghù)?
Yes. Deel provides contract templates that comply with Chinese laws, enabling you to work with clients safely and professionally.

Can I access benefits through Deel as a 个体工商户 (Gètǐ gōngshānghù)?
Yes. Deel offers optional perks like health insurance and retirement savings plans—services traditionally available only to employees.