Pick the right entity before opening: sole props and general partners pay to the end; only LLCs are «limited»

Sole proprietors and general partners owe without limit—pay what you owe until it's cleared. LLC shareholders owe only up to what they subscribed at registration. But whatever you subscribe must be paid in within 5 years: write 1000000, you may owe up to 1000000. Mix company books with household books or use the company to dodge debt, and «limited» can fail. With only one shareholder, you must prove the books are not mixed.

Cost

Register on the local government services portal—a few hours once. After you form a limited liability company, monthly bookkeeping and tax filing are ongoing: your time if you do it yourself, or paid bookkeeping, with prices varying by region.

Benefit

Sole proprietorship debts are paid from personal property or from family property. General partners in an ordinary partnership bear unlimited joint and several liability—pay in full until cleared, and a creditor may demand the entire debt from one partner alone. Limited partnerships are different: limited partners are liable only up to subscribed capital. LLC shareholders are also liable only up to subscribed capital. «Limited» fails in three situations. First, subscribed capital must be fully paid within 5 years of formation, and when the company can't pay due debts, creditors may demand early payment. Second, capital withdrawn after contribution must be returned. Third, using the company as a shell to dodge debt and seriously harming creditors makes you personally jointly liable for company debts. One-shareholder companies are stricter: that shareholder must prove company funds and personal funds are separate; if not, personal liability follows. Courts mainly look at whether money and books are separate. Shareholders casually spending company money without books, or mixing company and personal accounts, count as mixing (nationwide, from July 2024).

Notes

Keep company and personal accounts separate; don't take customer payments on a personal card; don't pay household bills from the company; keep complete books. Don't inflate registered capital for show.

Sources · 4

1. 全国人大 (2020). 民法典（第五十六条）. spp.gov.cn/spp/fl/202006/t20200602_463888.shtml
2. 全国人大常委会 (2006). 合伙企业法（2006 年修订，第二条）. gov.cn/gongbao/content/2006/content_413955.htm
3. 全国人大常委会 (2023). 公司法（2023 年修订，第四、二十三、四十七、五十三、五十四条；第二十三条第三款：「只有一个股东的公司，股东不能证明公司财产独立于股东自己的财产的，应当对公司债务承担连带责任。」）. gov.cn/yaowen/liebiao/202312/content_6923395.htm
4. 最高人民法院 (2019). 全国法院民商事审判工作会议纪要（第 10 点「人格混同」）：「最主要的表现是公司的财产与股东的财产是否混同且无法区分」「公司账簿与股东账簿不分，致使公司财产与股东财产无法区分的」. court.gov.cn/zixun/xiangqing/199691.html