Table of Contents
Chapter I: General Provisions
Article 1 This Law is enacted for the purposes of regulating the conduct of sole proprietorship enterprises, protecting the lawful rights and interests of sole proprietorship enterprise investors and creditors, maintaining social and economic order, and promoting the development of the socialist market economy.
Article 2 For the purposes of this Law, “sole proprietorship enterprise” means a business entity established within the territory of China in accordance with this Law, invested in by a natural person, the property of which is owned by the investor, and who assumes unlimited liability for the debts of the enterprise with his personal property.
Article 3 The principal business premise of a sole proprietorship enterprise shall be the domicile of the sole proprietorship enterprise.
Article 4 A sole proprietorship enterprise engaged in production and business operations shall abide by laws and administrative regulations, observe the principle of good faith, and shall not harm the public interest. A sole proprietorship enterprise shall fulfill tax obligations in accordance with law.
Article 5 The state shall protect the lawful property and other lawful rights and interests of a sole proprietorship enterprise in accordance with law.
Article 6 A sole proprietorship enterprise shall establish accounting books and conduct accounting in accordance with law.
Article 7 A sole proprietorship enterprise shall recruit employees in accordance with law. The employees of a sole proprietorship enterprise shall establish a trade union in accordance with law, and the trade union shall carry out activities in accordance with law.
Article 8 In a sole proprietorship enterprise, the rights of employees to conclude labor contracts, rest and take leave, receive labor safety and hygiene protection, receive social insurance, and other rights shall be protected by law.
Chapter II: Establishment of a Sole Proprietorship Enterprise
Article 9 To establish a sole proprietorship enterprise, the following conditions shall be met: (1) the investor is a natural person; (2) having a lawful enterprise name; (3) having capital contributions declared by the investor; (4) having a fixed production and business operation premise and the necessary production and business operation conditions; (5) having necessary employees.
Article 10 For the application for the establishment of a sole proprietorship enterprise, the investor or the agent appointed by him shall submit to the registration authority at the place where the sole proprietorship enterprise is located documents such as the application for establishment, the investor’s identity certificate, and the proof of use of the production and business operation premise. Where the establishment of a sole proprietorship enterprise requires administrative approval in accordance with laws and administrative regulations, the relevant approval documents shall be submitted at the time of application for registration.
Article 11 The name of a sole proprietorship enterprise shall be consistent with its form of liability and the business it engages in.
Article 12 The registration authority shall, within 15 days from the date of receiving all the documents specified in the application for establishment, handle the registration for those meeting the conditions prescribed in this Law and issue a business license; for those not meeting the conditions prescribed in this Law, registration shall not be granted and a written reply shall be given with reasons stated.
Article 13 The date of issuance of the business license of a sole proprietorship enterprise shall be the date of establishment of the sole proprietorship enterprise. Before a sole proprietorship enterprise obtains its business license, the investor shall not conduct business activities in the name of the sole proprietorship enterprise.
Article 14 Where a sole proprietorship enterprise establishes a branch, the investor or the agent appointed by him shall apply for registration with the registration authority at the place where the branch is located and obtain a business license. Upon the registration of a branch, the registration authority shall report the registration to the registration authority at the place where the sole proprietorship enterprise is located for filing. A branch shall not independently assume civil liability, and the civil liability of the branch shall be assumed by the sole proprietorship enterprise that established it.
Article 15 Where a matter recorded in the registration of a sole proprietorship enterprise changes, the investor shall, within 15 days from the date of the change decision, apply to the registration authority for registration of the change in accordance with law.
Chapter III: Investors and Affairs Management of a Sole Proprietorship Enterprise
Article 16 Where laws and administrative regulations prohibit a person from engaging in for-profit activities, that person shall not apply to establish a sole proprietorship enterprise as an investor.
Article 17 The investor of a sole proprietorship enterprise shall enjoy ownership of the property of the enterprise in accordance with law, and the relevant rights may be transferred or inherited in accordance with law.
Article 18 A sole proprietorship enterprise may, at the time of applying for registration of establishment, report the property contributed as family common property as the capital contribution of the individual, and shall assume unlimited liability for the debts of the enterprise with the family common property in accordance with law.
Article 19 The investor of a sole proprietorship enterprise may manage the affairs of the enterprise himself, or may appoint or employ a person with civil capacity to be responsible for the management of the affairs of the enterprise. Where the investor appoints or employs another person to manage the affairs of the sole proprietorship enterprise, he shall conclude a written contract with the appointed or employed person, clearly defining the scope of authorization and the matters for which the appointed or employed person is responsible. The appointed or employed person of a sole proprietorship enterprise shall perform the enterprise affairs management duties within the scope of authorization.
Article 20 A person appointed or employed by the investor to manage the affairs of the sole proprietorship enterprise shall not engage in any of the following acts: (1) taking advantage of his position to demand or accept bribes; (2) taking advantage of his position or work convenience to embezzle the property of the enterprise; (3) misappropriating the funds of the enterprise for personal use; (4) opening an account in his own name or the name of another person to deposit the funds of the enterprise without authorization; (5) providing security for others with the property of the enterprise without authorization; (6) engaging in any business that competes with the enterprise without the consent of the investor; (7) conducting transactions with the enterprise in his own name or the name of another person without the consent of the investor; (8) transferring the trademark and other intellectual property rights of the enterprise without authorization; (9) divulging the trade secrets of the enterprise; and (10) other acts prohibited by laws and administrative regulations.
Article 21 A sole proprietorship enterprise shall establish its enterprise financial and accounting system in accordance with laws and administrative regulations.
Article 22 A sole proprietorship enterprise shall pay wages to its employees on time and in full in accordance with law.
Article 23 A sole proprietorship enterprise shall participate in social insurance and pay social insurance fees for its employees in accordance with the provisions of the state.
Article 24 A sole proprietorship enterprise may apply for loans and obtain land use rights in accordance with law, and shall enjoy other rights provided by laws and administrative regulations.
Article 25 No entity or individual may force a sole proprietorship enterprise to provide financial resources, materials, or labor services in violation of laws and administrative regulations; the sole proprietorship enterprise shall have the right to refuse any act of forced apportionment in violation of laws and administrative regulations.
Chapter IV: Dissolution and Liquidation of a Sole Proprietorship Enterprise
Article 26 A sole proprietorship enterprise shall be dissolved in any of the following circumstances: (1) the investor decides to dissolve; (2) the investor dies or is declared dead, and there is no successor or the successor decides to forgo the succession; (3) the business license is revoked in accordance with law; or (4) other circumstances prescribed by laws and administrative regulations.
Article 27 Where a sole proprietorship enterprise is dissolved, the investor shall carry out liquidation himself or the creditor may apply to the people’s court for the appointment of a liquidator to carry out the liquidation. Where the investor carries out the liquidation himself, he shall notify the creditors in writing within 15 days before the liquidation; where notification cannot be made, an announcement shall be made. The creditor shall, within 30 days from the date of receiving the notice, or within 60 days from the date of the announcement if no notice is received, declare his claim with the investor.
Article 28 After paying liquidation expenses, the property of a sole proprietorship enterprise after dissolution shall be paid off in the following order: (1) wages owed to employees and social insurance fees; (2) taxes owed; and (3) other debts.
Article 29 During the liquidation period, a sole proprietorship enterprise shall not conduct business activities unrelated to the purpose of liquidation. Where the property of a sole proprietorship enterprise is insufficient to pay off the debts, the investor shall pay them off with his other personal property.
Article 30 Upon the completion of the liquidation of a sole proprietorship enterprise, the investor or the liquidator appointed by the people’s court shall prepare a liquidation report and, within 15 days, apply to the registration authority for the cancellation of registration.
Article 31 A sole proprietorship enterprise shall be terminated upon the approval of the cancellation of its registration by the registration authority.
Chapter V: Legal Liability
Article 32 Where a sole proprietorship enterprise submits false documents or adopts other fraudulent means to obtain enterprise registration in violation of the provisions of this Law, it shall be ordered to make corrections and a fine of not more than RMB 5,000 shall be imposed; where the circumstances are serious, the business license shall be revoked concurrently.
Article 33 Where a sole proprietorship enterprise uses a name inconsistent with its registered name in violation of the provisions of this Law, it shall be ordered to make corrections within a prescribed time limit and a fine of not more than RMB 2,000 shall be imposed.
Article 34 Where a person paints over, rents out, or transfers the business license of a sole proprietorship enterprise, he shall be ordered to make corrections, the illegal gains shall be confiscated, and a fine of not more than RMB 3,000 shall be imposed; where the circumstances are serious, the business license shall be revoked. Where a person forges the business license of a sole proprietorship enterprise, he shall be ordered to cease the illegal act, the illegal gains and the forged business license shall be confiscated, and a fine of not more than RMB 5,000 shall be imposed; where a crime is constituted, criminal liability shall be pursued in accordance with law.
Article 35 Where a sole proprietorship enterprise fails to open its business for more than six months without justifiable reasons after its establishment, or ceases its business for more than six months on its own after opening its business, its business license shall be revoked.
Article 36 Where a sole proprietorship enterprise fails to apply for registration of change in accordance with the provisions of this Law, it shall be ordered to register the change within a prescribed time limit; where it fails to do so, a fine of not more than RMB 2,000 shall be imposed.
Article 37 Where a person appointed or employed by the investor of a sole proprietorship enterprise violates the provisions of Article 20 of this Law by embezzling the property of the enterprise, he shall be ordered to return the embezzled property; where illegal gains are involved, the illegal gains shall be confiscated; where a crime is constituted, criminal liability shall be pursued in accordance with law.
Article 38 Where a sole proprietorship enterprise fails to fulfill its tax obligations in accordance with law, the tax authorities shall impose penalties in accordance with the relevant laws and administrative regulations.
Article 39 Where a sole proprietorship enterprise violates the provisions of this Law by infringing upon the lawful rights and interests of its employees and fails to protect the labor safety and hygiene of its employees, it shall be penalized in accordance with the relevant laws and administrative regulations, and the relevant liable persons shall be pursued for liability in accordance with law.
Article 40 Where an investor of a sole proprietorship enterprise conceals or transfers the property of the sole proprietorship enterprise after the enterprise is dissolved, or fails to repay debts and escapes debt repayment by evading, he shall be pursued for liability in accordance with law; where a crime is constituted, criminal liability shall be pursued in accordance with law.
Article 41 Where the provisions of this Law are violated and a crime is constituted, criminal liability shall be pursued in accordance with law.
Chapter VI: Supplementary Provisions
Article 42 Where a foreign investor establishes a sole proprietorship enterprise within the territory of China, the relevant laws and administrative regulations shall apply. Where the relevant laws and administrative regulations are silent, the provisions of this Law shall apply.
Article 43 This Law shall come into force on January 1, 2000.
Translation note: This is an unofficial English translation for reference purposes. The original Chinese text shall prevail in all legal matters.
