Incorporation and Entity Structure
Where you register, which entity carries the business, and what the constitution leaves open — get these wrong at set-up and every financing round and reorganisation pays for it.
Three lines filled in at set-up determine three years of rework
Incorporation looks routine: reserve a name, fill in the business scope, collect the licence. For an AI company, at least two of those steps involve real judgement, and correcting them later is costly.
Entity form determines where liability stops. A single-shareholder limited company can be required to meet corporate debts personally where assets are commingled — not a theoretical risk for early teams running one bank account for everything. Conversely, building a multi-layer holding platform too early adds maintenance and tax complexity before there is anything to hold.
Registered location determines which policies are available. R&D grants, talent subsidies, compute vouchers and tax arrangements differ across parks, and moving an entity later costs far more than choosing well at the start.
The constitution determines governance flexibility. Most early companies adopt the registry’s template, then discover when they need a veto right, a board nomination right or transfer restrictions that the template leaves no room — so everything shifts into a shareholders’ agreement, and the order of precedence between the two becomes the next dispute.
What we do
- Entity form and holding vehicles: limited company, partnership and holding platform combinations; risk isolation for single-shareholder structures
- Location and policy fit: comparison of park policies, fiscal incentives, R&D grants and compute subsidies
- Business scope design: technology development, software sales and online data processing, correctly combined and bounded
- Constitution and governance: voting mechanics, transfer restrictions, director and legal representative arrangements, deadlock provisions
- Nominee shareholding: nominee arrangements, conditions and route to naming the real holder, risk isolation
- Post-incorporation set-up: bank account, tax and social insurance registration, seals and certificate management
Typical situations
Situation 1: Wrong park, no access to grants
The company registers in an office building rather than an industrial park. Two years in, applications for R&D grants reveal that most AI-related programmes require both registration and principal operations within designated parks. Relocating means re-doing qualifications, amending contract parties and moving social insurance accounts — measured in quarters.
Our approach: before incorporation, map the programmes the business could qualify for and work backwards to location requirements. Where relocation is needed, complete it before financing rather than colliding with the share reform and diligence timetable.
Situation 2: Commingled assets and personal liability
The founder uses the company account and personal account interchangeably and skips annual audit. After the company incurs debt, a creditor argues commingling, and the court requires the shareholder to meet the debts personally.
Our approach: establish a separate account and proper bookkeeping at incorporation, audit annually and retain records; where a single-shareholder structure is retained, put isolation arrangements in place or introduce a minimal third shareholder.
Situation 3: Business spread across three companies
The founder incorporates three companies for different lines, with staff, accounts and IP intertwined. In diligence the investor asks which entity is the listing vehicle, how historical business consolidates, and whether IP has been fully transferred. Consolidation takes months, and related-party transactions need pricing explanations after the fact.
Our approach: design for one financing vehicle plus necessary periphery entities from the outset, with clear functional boundaries. Where already fragmented, complete business and asset consolidation before financing and retain the pricing basis for related-party transactions.
Process and deliverables
| Stage | Work | Deliverables |
|---|---|---|
| 1 | Business model review, entity and location options | Set-up options comparison |
| 2 | Name reservation, constitution drafting, business scope | Constitution + scope recommendation |
| 3 | Capital arrangements, nominee or holding platform execution | Contribution documents + nominee or platform agreements |
| 4 | Bank account, tax and social insurance registration | Opening checklist + compliance baseline documents |
| Ongoing | Change filings, constitution amendments, annual reporting | Change register + annual filing reminders |
Frequently asked
How should the business scope be worded to avoid rework? Work backwards from actual operations rather than copying peers. Technology development and software sales cover most pure software delivery; once the company provides paid online services or processes customer data, a separate access assessment is needed — that sits outside incorporation. Over-broad wording triggers unnecessary approvals and diligence questions; too narrow forces a filing at launch.
Which district should we register in? Depends on policy access, office and talent infrastructure, and continuity requirements for future financing and listing. Choosing purely on tax rate is usually a mistake. Within one city, differences in eligibility criteria between parks often exceed the differences between cities.
Can we use a single-shareholder company? Yes, but commingling risk sits with the shareholder. The practical requirement is separate accounts, separate bookkeeping and annual audit, all three together. Where an early team cannot sustain that, the cost of admitting a minimal third shareholder is usually lower than personal liability later.
Can this be amended later? Entity details and the constitution can be amended, but changes cascade into qualifications, contract parties, social insurance and bank accounts, and some qualifications cannot be used during the change. A week of judgement at set-up usually beats remediation.
Can we use the template constitution? For an early-stage company, yes — but anticipate three clauses: transfer restrictions, deadlock resolution, and where investor special rights will sit. Template constitutions rarely leave room for these, so they end up in a shareholders’ agreement, and the order of precedence needs to be agreed in advance.
Legal basis
- Company Law (2024 revision): company types, registered capital and contributions, single-shareholder rules, mandatory constitution contents
- Regulation on the Administration of Market Entity Registration and its implementing rules: incorporation, change registration, standard wording of business scope
- Civil Code, General Part: legal persons and legal representatives
- Tax Collection and Administration Law: tax registration and filing obligations