Product liability is another major issue to consider, when acting as a sole proprietor. As a sole trader, you don’t have the protection of limited liability. In fact, you have the opposite. Unlimited liability.
Picture that something would go wrong.
For example, that somebody is injured by your product. In that case, you could be held liable for tens of thousands of dollars (or more) in damages.
Indeed, limited liability is not a license to get away with severe violations of the law, but it does make a big difference if you would ever find yourself in a bad situation.
Are manufacturers in China willing to work with individuals?
Keep your legal status to yourself, and focus on the business.
You can definitely start the product development and supplier sourcing process, sometimes even the sample order process, without having a registered company.
Hence, the company registration process is not a good reason to delay the process.
In fact, you should start the process as early as possible, and if you don’t have a company registered at this point, deal with that later.
A common mistake that I see, and perhaps the reason why I decided to write this article, is that many Entrepreneurs wait for weeks, sometimes months, before the company and all trademarks are registered.
That’s fine, but it’s not an excuse to hold off on product development and supplier sourcing. It can easily take several months to find the right supplier, and you will lose precious time if you wait for your papers to be in order.
Papers that, frankly, only you care about. At least at this stage of the process.
At what stage should I register a company?
You should definitely register a company before you and the supplier sign the sales contract.
But, as I already mentioned, it can take months – or even a year – to get to that point. Get started as early as possible, and don’t let the incorporation process slow you down.
That said, the incorporation process is relatively fast and easy in many countries, and can even be done online. What used to be a tedious procedure is now reduced to something you can do in less than an hour.
I think this is more of an issue in developing countries, where the setup process can take months, not days.
In which country should I register a company?
You should register the company in your country of residence. At least if you are a startup company.
While it may be tempting to set up a company in a place with lower taxes, such as Hong Kong or the BVI, you will in the end pay taxes based on your own residency – not that of the company.
Offshore setups are expensive to set up and maintain, and only make sense for established businesses.
We help startups & brands get quality products made in China & Vietnam
Co-founder of Asiaimportal (HK) Limited and based in Hong Kong. He has been quoted in and contributed to Bloomberg, SCMP, Alibaba Insights, Globalsources.com, China Chief Executive, Quartz Magazine and more.
Hey there, I’m Fredrik!
We help e-commerce businesses and brands manufacture products in Asia, Europe and the Americas.
Go ahead and book a call if you’d like to talk to us about your manufacturing projects.
Our Company uses these cookies so that we recognize you on our website and remember your previously selected preferences. These could include what language you prefer and location you are in. A mix of first-party and third-party cookies are used.
Our Company uses these cookies to collect information about how you use a website, like which pages you visited and which links you clicked on. None of this information can be used to identify you. It is all aggregated and, therefore, anonymized. Their sole purpose is to improve website functions.
These cookies are used to monitor the email newsletter's performances
Our Company uses these cookies to collect information about your visit to our website, the content you viewed, the links you followed and information about your browser, device, and your IP address. Our Company sometimes shares some limited aspects of this data with third parties for advertising purposes. We may also share online data collected through cookies with our advertising partners. This means that when you visit another website, you may be shown advertising based on your browsing patterns on our website.
These cookies are used to show targeted ads to the visitors of our website