Starting a Business: Don't Lose the Family Savings

The debts of an individual business (个体户) must be paid with the money and property in your own name. If it can't be told whether the whole family ran it together, the whole family's property pays. A company is not safe either: when the company can't pay its debts, the capital contribution you originally promised and that is not yet due will be demanded early. So decide how much to invest by the rule “even if it is all lost, I can still pay the mortgage and see a doctor.”

If what you sign is a “joint and several liability guarantee,” when the company can't pay, the creditor can bypass the company and come straight to you. Only with “general guarantee” written does the creditor first sue the company, and only what is still short after the company's property is sold comes to you. If your spouse co-signs, the two of you put in your family assets together, and the “limited” in limited company no longer counts for you personally.

Individual businesses and general partners pay to the end: whatever is owed, they repay. Shareholders of a limited company pay only up to the amount they promised at registration. But whatever you promise, you must actually put in within 5 years: write 1 million and you may owe 1 million. If you mix the company's accounts with your household's, the “limited” can also fail.

Once your name is on the register, you are legally a shareholder. The money promised at registration must be paid in full on schedule; if you can't pay, besides paying it later you must also compensate the company's losses. If other shareholders didn't actually pay their money in when the company was founded, you also repay however much is missing. The business is someone else's; the debts are in your name.

Under the rules, the brand must itself first run 2 company-owned stores for a full 1 year, and must also file with the commerce authorities within 15 days after signing. Before signing, it must give you 12 items in writing, including the franchise fees, how the security deposit is refunded, and whether existing stores make money. If you can't find a filing, they won't give you the documents, or they want payment before letting you see the contract, walk away.

Registration itself is free; the registration fee stopped being levied from 2015. The materials required are only five items: an application form, proof of identity or eligibility, documents for the place of business, articles of association or a partnership agreement (individual businesses don't submit these), plus whatever else the regulations specifically name. With complete materials the license is issued on the spot; if it can't be issued on the spot, it is done within 3 working days. Money you get charged is most likely an agent's legwork fee.

Opening without a license: at the light end, you are ordered to stop business, the money you earned is taken away, and you are fined up to 10,000 yuan. If you deal in goods under state monopoly or exclusive sale, or in securities, futures, insurance, or payment and settlement of funds, serious cases constitute the crime of illegal business operation, starting at up to 5 years. Renovating first and getting the license later, or holding a trial opening before the license comes through, is the most common misstep.

If you make things yourself to sell, like a snack shop, braised meats, baking or homemade pickles, you need a license. If you only sell whole packaged food made by others, no license is needed; just file with the market regulation department at county level or above. Selling fresh meat, vegetables and the like needs no license. Doing it without a license, the lowest fine is 50,000 to 100,000, more than the capital of most small businesses.

Food put into packaging and then sold is legally called prepackaged food. The packaging must carry a label, and nine items must be on it, including the production date and shelf life. Bulk food must also be labeled with its name, date, and the seller's name and address. If something required is missing, the fine is 5000 to 50,000 when the value of goods is under ten thousand, and 5 to 10 times the value of goods when it reaches ten thousand.

The labels, instructions and ads of ordinary food may not claim to prevent or treat disease. Apart from these three kinds of ads, for medical services, drugs and medical devices, no other ad may claim to cure disease, or use words that sound like medicine. The fine is 1 to 3 times the advertising cost. If the advertising cost can't be calculated, the fine is 100,000 to 200,000. Serious cases can also lead to revocation of the business license.

The earlier items cost you money; this one puts people in custody. Selling diseased meat or meat that failed inspection, or goods with pesticide residues, veterinary drug residues or heavy metals seriously over the limit, is a crime as long as it is “sufficient to” make people seriously poisoned; no one has to actually get sick, and the sentence is up to 3 years. Adding toxic or harmful non-food raw materials to food starts straight at up to 5 years, regardless of how much you sold.

Once you have a business license, you must file taxes on time. Even if you earned nothing, you must file; the figures on the form are just all zeros. Not filing first brings a fine of up to 2000 yuan, and 2000 to 10,000 in serious cases. If you don't file for any tax type for three months in a row, the system automatically lists you as an abnormal taxpayer, and then you can't issue invoices.

If you are a small-scale taxpayer paying tax under the simplified method, and your sales are under 100,000 a month or under 300,000 a quarter, you are exempt from VAT. What was taxed at 3% is also reduced to 1% over the same period. Conversely, “getting someone to issue invoices to offset costs” is false invoicing, starting at up to 3 years, plus a fine of 20,000 to 200,000.

The tax authorities will not call asking for your bank card password, payment password or SMS verification code, nor will they give you an account number to transfer tax to. Officials who really come to inspect your books must show an inspection notice and an inspection certificate. When you get such a call, hang up first, then call 12366 to verify. If you have already transferred money, immediately call 110 (police) or 96110 to stop the payment.

Only writing the two characters “定金” (deposit) brings the double rule: if you break the contract, you can't get this money back; if the other side breaks it, they must refund you double. The part above 20% of the contract amount doesn't count. Written as “订金” (advance payment), there is no such rule in law. Granting payment terms amounts to lending your own money to the other side for free; if they go under, it's a bad debt.

If someone has worked for a full month without a written contract, from the second month you must pay double wages every month, counting all the way to a full year. Social insurance must be registered within 30 days of hiring; not doing so brings a fine of 1 to 3 times the social insurance contributions due. The law has no such thing as “the employee voluntarily gives up social insurance.”

Wages must be paid on time and in full according to the contract and the law. If they're owed, the employee can go straight to the court for a payment order. If raises, bonuses and advances are only spoken, when a real dispute comes, the side that can't produce evidence loses out. If you lend your own money to an employee, write a written IOU stating the amount, the interest and when it will be repaid.

Researchers followed 116 new Italian companies for about a year: founders who first set a hypothesis and then tested it against market feedback did better business, were also more willing to change direction in time, and did not give up any earlier. So if no one will prepay and no one will place a small order, don't believe “make it and buyers will naturally come.”

The difference between one sample and a thousand units is where the money gets tied up. Yield determines the real cost. Minimum order quantity and payment terms determine how much you have to front. Inventory determines when the money can come back. If the product is in the compulsory certification catalog, without certification and the certification mark it can't leave the factory or be sold.

Selling counterfeits, earning 30,000 or selling 50,000 worth, is enough for a criminal sentence, up to 3 years. Goods sitting unsold in the warehouse count too. “I didn't know it was fake” isn't yours to decide: if the purchase price was clearly below market and you can't give a reason, you'll be found to have known. Only by keeping the purchase contract, invoices, payment records and supplier information do you have a path to being exempt from compensation.

Changing a color on someone else's image, swapping the background color, or adding your own icon is still using someone else's work without permission. Copying someone else's artwork for profit, earning 30,000, doing 50,000 of business, or printing 500 sheets, constitutes the crime of copyright infringement, up to 3 years. On the trademark side, “similar enough to cause confusion” is itself infringement.

Take nurses as an example: the regulations state that on finding a patient in critical condition, the nurse must notify a physician immediately; on finding that a doctor's order violates the rules, the nurse must raise it with the physician who issued the order. Other jobs are the same: first see clearly where your own procedures draw the line for “must report.” Nor does the law make people stand by while someone dies: if you voluntarily give emergency aid and injure the person, you don't have to pay compensation.

If you have no debts and owe no wages, taxes or social insurance, all investors sign a written commitment, and if no one objects during 20 days of public notice, you can use simplified deregistration. Individual businesses need no public notice; with no objection in 10 days, they are deregistered directly. If you can't pay your debts, apply for bankruptcy. If you leave it, don't file annual reports for 2 years and can't be reached, the license is revoked, and a legal representative who bears responsibility cannot be a legal representative again for 3 years.

These scams first take a small sum, then use “upgrade packages,” advance payments for goods and unfreezing fees to make you pay more again and again. The orders and earnings in the back end may be fabricated, and when you try to withdraw, you can't. Pumping up sales with fake orders is itself illegal, and managed-operation firms that get caught are penalized.