'One-Person Shops' Face Two-Pronged Choice When Hanging Out Shingle

As more and more business gets conducted in the virtual realm, a new breed of entrepreneur that I call the “one-person shop” is starting to pop up around the world, enabled by a growing arsenal of flexible workspaces, communications and computing options. China is no exception to the rule, and may even be leading the pack in many ways with its growing army of these virtual one-person outfits.

Anyone who wants to find this new group of virtual entrepreneurs need go no further than the nearest Starbucks, or better still, to the growing selection of shared office spaces that cater specifically to this group. I previously wrote about these spaces, run by the likes of U.S. giant WeWork and the local equivalent UrWork.

Working as this kind of private one-person show carries huge advantages due to its flexibility. For foreigners who choose to go this route, it also raises some interesting questions about how to go about things. In this case, the central question is whether to go the official route and register a company, or to fly below the radar and go about business on a more-unofficial status. Each seems to have its advantages depending on an entrepreneur’s situation, and I’ll review the various options shortly.

This kind of one-person show certainly isn’t new and has been around for decades now. But what perhaps is newer is that it has become so easy to do and also moved up the value chain to become quite common in a wide range of professions.

I was arguably one such consultant — though at the decidedly low end — in my earliest days in the region when I first came to Taiwan in 1986 and hung out my shingle as an English teacher for hire. Back in those days, I was just one of hundreds of similar young adventurers who came to Taiwan, some of us looking to make some extra money and others due to interest in China.

One of my sharpest memories of that era was the classic “visa run,” which was quite a developed industry and in some ways seemed like a plot from a B-movie. Most of us were too poor or just didn’t want to spend our own money on trips outside Taiwan every six months, which was the maximum stay of our tourist visas under our unofficial status back then.

That reality gave rise to a vibrant smuggling industry, which saw third-party outfits provide all-expense quick trips to destinations like Seoul and Hong Kong for anyone willing to take a suitcase full of new clothing while wearing copious jewelry and carrying an expensive camera slung around one’s neck. The risk was minimal since you still got your trip paid for even if customs caught you in the act of smuggling and confiscated your goods. Of course, there was still a bit of trauma in that process of getting caught, but that was part of the business.

Modern visa runs

Fast-forward to the present, where the visa run is still a part of the formula for many of the people I talked with who run one-person shops in modern-day China, engaging in everything from teaching to financial consulting and headhunting services. Most of those people are on multiple-entry business visas, which require them to leave the country every two or three months. But the authorities seem surprisingly willing to give out such visas, at least at this point in time, even though they presumably know what’s going on.

One contact remarked that the service seems to be friendlier when you return to your home country between trips and apply for the new visas there. That contrasts sharply with the harsher, more-skeptical treatment you often hear about when traveling for visa renewals to Hong Kong, which is still the choice for many due to its convenience, low cost and language-friendly environment.

Then there’s the more-official route, which requires the registration of a business. One contact who has gone that route said the process is relatively simple and allows him to get a proper work visa. He added his main motivation for taking that route was the convenience factor, since he’s based in a relatively midtier city in northern China that isn’t that close to any of the usual visa-run destinations.

Simplicity aside, the biggest attraction to the unofficial route is lack of taxes, since these people work mostly for others on a contractual basis. What’s more, many of them work for foreign companies that are willing to pay them offshore and in foreign currency, making the changing and movement of money less of an issue.

But for those doing lots of business with local customers, the money issue seems to be one of the biggest reasons for going the official route. That may mean paying taxes, but it also means you can issue official government receipts to customers — something often required by local customers but less important to foreign ones. Changing large amounts of currency also becomes problematic when you’re not on an official work visa, as does transferring big sums out of the country.

Another risk to the informal route is visa renewals, since it’s not always guaranteed that you’ll be granted a new visa once the current one expires. Right now the climate seems relatively relaxed, but China is also famous for its periodic crackdowns on people working in the country without the proper visas. That could create major headaches for any of these China-based entrepreneurs whose visa renewals get rejected during such crackdowns.

At the end of the day, there’s really no one-size-fits-all formula for these one-person shows, especially as the number of options available to such entrepreneurs continues to grow. The official route is probably best suited to people who don’t like to travel and do relatively more local business, while the less-official one is probably good for more jet-setter types based in first-tier cities like Beijing, Shanghai and Shenzhen.

Doug Young has lived in Greater China for two decades, including a 10-year stint at Reuters, where he led China corporate news coverage. Send your questions or comments to DougYoung@caixin.com.