Funding a US Company from China: SAFE Approval Comes First

0:00Can someone in mainland China own a US company?

It's late in Shenzhen, and Wei has two tabs open. He sells home goods on Amazon US. One tab starts a US company. The other is his bank's transfer page, ready to fund it. Which one comes first? As far as America goes, the company is simple. No social security number, and no trip to the US. We're BaseAcross. We set up US companies for founders outside America, so we'll be straight with you.

In China, the money question comes before the company one. Let's unroll it, a stroke at a time.

0:36Why sellers in China form a US LLC

Why would Wei want a US company at all? US marketplaces and buyers often want a US entity to deal with. And the big card processor doesn't serve mainland China, so a US company is the usual way in. If you're raising from US investors, they usually want a Delaware C-Corp, and that route has rules of its own. Wei sells to American shoppers, so a Wyoming LLC may fit him. But how he pays for it, from China, is the part to settle first.

1:08Do I need SAFE approval to fund a US company?

Here's the rule most guides skip. China has an office for foreign exchange, called SAFE. Under its rules for individuals, investing directly abroad needs the local SAFE office's approval. That approval comes before the foreign currency is bought or sent. Then the investment is registered. Does that cover putting money into your own US company? Under those rules, yes. If you raise from US investors through a structure that holds Chinese assets or interests, SAFE has separate rules for that.

How your local office handles it is a question for your adviser. So ask before you send money.

1:48Wyoming LLC, registered agent and EIN without an SSN

The American paperwork moves quickly by comparison. When you order, we'll ask how you'll fund the company and where it will be managed, because SAFE and the tax bureau ask too. The company needs a registered agent, an address in that state for legal papers, not where you work. Then the EIN, the company's US tax number. Without a social security number, it's a paper form to the IRS.

Prices are in US dollars. So check what your bank allows, and your card's exchange rate and fees.

2:22Which US bank accounts work from China?

Banking from China has a twist. One of the US fintech banks opens accounts for founders living here. It still reviews each company, and it can decline. But the multi-currency account many founders use won't give the business US account details from China. Another fintech bank doesn't bar China, but it wants a physical US address for every owner. With a US bank account, the company can apply to the card processor's US side, and it can decline too.

Use the same names and addresses everywhere.

2:57Will China tax my US company's profits?

Now, can China tax the company itself? It can, in two ways. The first is where it's run. A foreign company whose place of effective management is in China is a Chinese resident enterprise, taxed in China. A US company doesn't change that. So where Wei makes the decisions matters. The second is profit kept back. If you control a company in a place with a distinctly low effective tax burden, and it holds back profits without a reasonable business cause, the tax bureau can adjust and tax them.

Whether either rule reaches your company is for your adviser.

3:37Reporting overseas income, the treaty and Form 5472

Then there's your own return. If China is your home, or you spend a set number of days there in a tax year, you're taxed on income from inside China and from abroad. Income from abroad means filing a return yourself. Tax paid abroad is credited, up to the Chinese tax on that income. There's a tax treaty with the United States, in force. It caps US withholding on interest, dividends and royalties.

Pay for work you do in China generally isn't US income, so for a services business it matters less. And the company still files a report with the IRS every year, even without sales, and missing it is expensive. It's usually due in the spring, and there's a form to ask for more time, filed before the deadline.

4:26What to do first, in order

Put together, the order looks like this. SAFE and the tax questions with your adviser first. Then form, then bank. Keep the SAFE registration current, and put the IRS report and your Chinese return on one calendar. The full guide, with every source and a checklist for your adviser in English and Simplified Chinese, is linked below. And Wei? He closed the transfer tab, and sent the checklist to his adviser first.