1. The Second Digit That Cost a Buyer $12,000

A buyer found a supplier on 1688. Price was right, samples looked fine, and the business license — a crisp PDF with a red stamp — seemed legitimate enough. He wired a $12,000 deposit. Two weeks later, messages went unanswered. The phone stopped ringing.

We ran the supplier’s USCI through the registry. The second digit was a 2. Not a company. A getihu — an individual business registration. The operator had no corporate assets, no dedicated business bank account, and the contact phone was a prepaid number. There was nothing to sue, no company to wind up, and the operator had already moved. That $12,000 is gone.

This is not a story about getihu being scams. There are over 120 million of them registered in China — restaurants, repair shops, small workshops, online storefronts. Many are honest and competent. But they are a fundamentally different kind of entity from a limited company, and treating them the same will get you burned.

The second digit on a Chinese business license tells you which one you are dealing with. 1 means a company — a separate legal person. 2 means a getihu — a person with a license. Everything else flows from that: who is on the hook if the order fails, whether they can export directly, what invoices they can issue, and whether the business will still exist next year.

2. What a Getihu Actually Is

Walk into any small shop in China and ask to see the license. Odds are it says 个体工商户 — getihu.

A getihu is what you get when a person registers to do business in their own name. The local market regulation bureau issues a license, the person picks a trade name (usually something like 经营部, 商行, or 工作室 — never 公司), and that is it. No minimum capital to declare, no articles of association to draft, no board to appoint. The person and the business are the same legal subject — there is no corporate veil separating them.

If the business takes on debt, the operator takes on debt. If someone sues the business, they are suing the operator. A court judgment against a getihu is a judgment against the individual — savings, car, apartment, the works. That is the trade-off for the simplicity: no compliance burden, but no liability shield either.

Some getihu are one-person operations. Others employ a handful of workers and run genuine small workshops. The registration form does not tell you whether the operator is honest or competent. It tells you the structural ceiling of what the business can become.

3. And a Limited Company?

A 有限责任公司 — youxian zeren gongsi, or just “limited company” — is what most overseas buyers picture when they hear “Chinese supplier.” It is a separate legal person: it owns assets in its own name, enters contracts, sues and gets sued. The shareholders’ risk stops at the capital they agreed to put in.

Think of it as a UK Ltd., a German GmbH, or an American LLC with Chinese characteristics. Setting one up means filing articles of association, declaring registered capital (which does not have to be paid in upfront — a common point of confusion), appointing a legal representative, and opening a corporate bank account. More paperwork than a getihu, more ongoing compliance — but the entity exists independently of the people who own it.

That independence is the whole point. A company can outlive its founders, change owners, and take on investment. A getihu cannot do any of those things without ceasing to exist.

4. The Differences That Actually Affect Your Business

Here is the comparison that matters. Not every difference is relevant to every buyer, but the ones in the first rows almost always are.

Dimension	Getihu (个体工商户)	Limited Company (有限责任公司)
Legal status	Not a legal person. Operator and business are one subject.	Separate legal person. Company owns assets and liabilities.
Liability	Unlimited personal liability. Operator’s home, car, and savings are exposed.	Limited to registered capital contribution. Personal assets generally protected.
Income tax	Individual income tax on business income, progressive 5%–35%. No corporate income tax.	Corporate income tax (standard 25%, reduced rates for small/micro enterprises) plus 20% dividend tax when profits are distributed to shareholders.
Registered capital	None required.	Declared amount (no minimum for most industries since 2014 reform).
Ownership structure	Single operator only. No shareholders, no equity, no investment rounds.	1–50 shareholders. Equity can be transferred, pledged, or diluted.
Business scope	Generally narrower. Some industries and licenses are restricted or unavailable to getihu.	Broader. Can span multiple industries with proper registration.
Export qualification	Can apply for foreign trade rights, but many smaller getihu never do. Often export through trading companies or agents.	Standard structure for import/export registration. More straightforward to obtain customs and foreign exchange credentials.
Invoice issuance	Can issue VAT invoices (general or small-scale taxpayer status), but many are small-scale taxpayers capped at 3% levy rate.	Same VAT system, but more likely to be general taxpayers eligible for full input VAT deduction — relevant if you need proper VAT invoices for your own compliance.
Transfer / succession	Cannot be sold as a going concern in most cases. Operator changes require deregistration and re-registration.	Equity can be sold. Company continues under new ownership.
Banking	Often operates through the operator’s personal account or a basic business account with lighter scrutiny.	Must maintain a dedicated corporate basic account (基本户). Payments to personal accounts are a red flag.
Annual compliance	Lighter. Simplified accounting permitted for many getihu.	Heavier. Annual financial reporting, corporate tax filings, and (for larger companies) audit requirements.

The rows below are the ones that come up again and again in real supplier disputes.

5. Liability: Why “Unlimited” Sounds Worse Than It Is (But Still Matters)

This is the difference everyone leads with, and it is real — but not in the way most articles explain it.

A getihu operator carries unlimited personal liability. If the business takes a deposit and disappears, you can — in theory — pursue the operator’s personal assets. A company shareholder is only on the hook for unpaid registered capital. If the company has no assets and the capital was never paid in, your recovery may be zero.

So far, that sounds like getihu are actually safer for creditors. More assets to chase, right?

In practice, it rarely works that cleanly.

A getihu operator who has just taken your deposit and vanished is unlikely to have meaningful personal assets sitting in a Chinese bank account waiting for you to seize. They may have transferred everything. They may have nothing. The theoretical right to pursue personal property is cold comfort when the operator has moved to another province and you are sitting in another country.

What unlimited liability does mean in practice is simpler: getihu operators have stronger incentives to avoid formal legal disputes, because a judgment against the business is a judgment against them personally. This can make them more likely to settle. It also means they are more likely to disappear entirely rather than face a lawsuit. There is no corporate bankruptcy shield to hide behind.

For a company, the limited liability shield works both ways. It protects the shareholders, but it also means the company can simply run out of money and stop — leaving you as an unsecured creditor in line with everyone else.

The takeaway: neither structure guarantees recovery. But the risk profile is different. A getihu dispute is a dispute with a person. A company dispute is a dispute with an entity that may have been deliberately undercapitalized.

6. Taxes: The Double-Taxation Myth and the Real Numbers

You will read that companies face “double taxation” — corporate tax plus dividend tax — while getihu only pay personal income tax once. This is technically true but misleading without the numbers.

Getihu taxation. A getihu pays individual income tax on business income at progressive rates from 5% to 35%. There is no corporate income tax. Under current policy (extended through 2027), getihu with annual taxable income under 2 million RMB get a 50% reduction on the amount under 1 million RMB. For a small operation clearing 300,000 RMB in profit, the effective rate is very low — often under 10%.

Company taxation. A company pays corporate income tax at 25% standard, but most small and micro enterprises qualify for reduced rates. As of 2025, qualifying small/micro enterprises pay 5% on taxable income up to 3 million RMB. When profits are distributed to shareholders as dividends, an additional 20% individual income tax applies. However, many small company owners do not distribute all profits — they leave earnings in the company or pay themselves a salary, which is deductible as a business expense.

The real-world effective tax rate for a small Chinese company is often lower than the headline numbers suggest, and sometimes comparable to or even lower than a getihu at similar profit levels. The “double taxation” label is accurate in structure but overstated in impact for the small suppliers you are likely dealing with.

What matters more for you as a buyer is not their tax rate — it is whether their tax status lets them issue the invoices you need.

7. Invoices and Export Capacity: The Operational Bottleneck

For overseas buyers, this is the section that matters most.

VAT invoice status. Chinese suppliers are either “small-scale taxpayers” (小规模纳税人) or “general taxpayers” (一般纳税人). Both getihu and companies can be either. But in practice, getihu are far more likely to be small-scale taxpayers, because the threshold is generous (annual sales under 5 million RMB for most industries) and the compliance burden is lighter.

Small-scale taxpayers cannot issue the standard 13% VAT special invoice that general taxpayers can — they issue at a 3% levy rate (1% under current temporary reductions). If your own business or your Chinese logistics partner needs a full 13% input VAT invoice for deduction or refund purposes, a small-scale getihu may not be able to provide one. They can go to the tax bureau to have one issued on their behalf, but it is still at the 3% rate, not 13%.

Export rights. Both getihu and companies can register for foreign trade rights (对外贸易经营者备案) and obtain customs registration. But here is the practical reality: many getihu never bother. They are small, they sell domestically or through platforms, and they handle export by routing orders through a trading company or a freight forwarder who handles the paperwork.

If your supplier is a getihu that exports through a third party, the party on your contract, the invoice, and the bill of lading may all be different entities. This is common, but it complicates traceability and creates gaps in your audit trail. A company that holds its own export license is a cleaner counterparty.

Foreign exchange. Receiving foreign currency requires a foreign exchange account and proper trade documentation. Companies set this up as a matter of course. Getihu can do it too, but the process is less standardized and many smaller operators simply receive RMB through a domestic intermediary or — more problematically — through personal bank accounts.

If a getihu supplier asks you to pay to a personal bank account, that is a major red flag regardless of their entity type. Read our guide on the risks of paying Chinese suppliers to personal accounts.

8. Scale, Longevity, and What the Registration Implies

A getihu registration tells you something about the owner’s ambitions and the business’s ceiling.

No equity, no investment. A getihu cannot take on investors. There are no shares to sell. If the operator wants to bring in a partner or raise capital, they must convert to a company — a process that involves deregistering the getihu and setting up a new entity, which breaks the business continuity. This means a getihu is almost always a lifestyle business or a small operation, not a growth-oriented company. If your supplier tells you they are “expanding rapidly” or “bringing in investors” but their license still says getihu, something does not add up.

No transferability. A getihu cannot be sold. When the operator retires, dies, or moves on, the registration is typically canceled. There is no way to buy the business as a going concern. This matters if you are building a long-term supply relationship — the entity you are dealing with may simply cease to exist when the operator decides to stop.

Name restrictions. A getihu’s legal name cannot include “公司” (company), “集团” (group), or similar corporate terms. If you see a business license with a name ending in 经营部, 商行, 厂, 工作室, or 中心, it is almost certainly a getihu. Names ending in 有限公司 or 有限责任公司 are companies. This is the fastest visual check before you even look at the USCI.

None of this means a getihu cannot be a reliable supplier. Some of the best small workshops in China are registered as getihu. But it does mean your due diligence questions should be different.

9. How to Tell Which One You Are Dealing With

Three quick checks, in order of ease:

1. The name. If the legal name on the license does not contain 有限公司 or 有限责任公司, it is not a company. Look for 个体工商户 on the license itself — it will be listed under “主体类型” (entity type) or similar.

2. The second digit of the USCI. As mentioned earlier, digit 2 of the 18-character USCI encodes the entity type. 1 = enterprise (company), 2 = individual business (getihu), 3 = farmer cooperative, 5 = social organization. Learn how to decode a USCI number.

3. The business license type field. On the new-style electronic business license, there is a field labeled “类型” (Type). For a getihu, it will say “个体工商户.” For a company, “有限责任公司” or “股份有限公司.”

If you only have an English name or a trading name, you need to look up the actual registration. ChineseVerify pulls the entity type directly from SAMR’s official registry and translates it, so you do not have to decode Chinese license fields yourself.

10. What This Changes About Your Due Diligence

A getihu supplier is not automatically high-risk, but the risk vectors are different. Here is what to adjust:

Verify the operator, not just the business. Since a getihu has no separate legal identity, the person behind it matters more. Check whether the operator’s name matches the contact person you are dealing with. A mismatch — where the registered operator is someone you have never heard of — can indicate a borrowed or rented license, which is illegal and common.

Check for abnormal operations listing. Getihu are more likely to fall into “abnormal operations” (经营异常) status because they miss annual reporting deadlines. A getihu that has been listed as abnormal for over a year may be effectively dormant. The NECIPS system tracks this. Learn how to use NECIPS for supplier verification.

Confirm export capacity directly. Do not assume. Ask for their foreign trade operator filing record (对外贸易经营者备案登记表) and customs registration certificate (海关报关单位备案证明). If they cannot produce these, they are exporting through an intermediary — find out who, and make sure that intermediary is on your contract or at least documented.

Match the payment recipient to the registered entity. This is critical for getihu. The bank account name should match the business name on the license. If the account is in a personal name, walk away — or at minimum, understand that you have zero recourse if the payment goes missing.

Assess scale against registration type. A getihu claiming to employ 200 people or own a 10,000-square-meter factory is either lying or has outgrown its registration. Both are problems. Legitimate larger operations convert to company structure precisely because the getihu form cannot accommodate that scale.

11. The Bottom Line

Nobody sits down at the start of a sourcing relationship and asks “is this a getihu or a company?” They should. The answer changes what kind of contract you want, what payment terms make sense, and how much due diligence is enough.

A getihu is fine for small orders, sample runs, and suppliers you are still testing. Keep order sizes modest, pay to the business account (never a personal one), and understand that if something goes wrong, you are chasing a person — not an entity with assets you can lien.

A company is what you want for production runs, long-term supply agreements, and anything involving export licenses or significant deposits. It is not risk-free — undercapitalized shells exist — but at least there is a legal entity to pursue and a registration you can verify.

The second digit on the USCI, the suffix on the business name, the entity type field on the license — none of these are hard to check. They just require looking. Most buyers do not. That is the gap.

Close it. Run the license through the official registry before you wire money. The PDF is what the supplier sent you. The registry is what the government has on file. Trust the second one.

Look up any Chinese company or getihu in under two minutes →

FAQ

Can a getihu export goods directly?

Yes, legally. A getihu can register for foreign trade rights and obtain customs registration just like a company. In practice, many smaller getihu never complete this registration and export through trading companies or freight forwarders instead. Always ask to see their foreign trade filing and customs registration before assuming they can handle export directly.

Is a getihu the same as a sole proprietorship (个人独资企业)?

No, though they are often confused. Both have unlimited liability and pay personal income tax instead of corporate tax. But a sole proprietorship enterprise (个人独资企业) is registered under the Sole Proprietorship Enterprise Law, can use “企业” in its name, and has slightly more formal requirements. A getihu is registered under the Regulations on Individual Industrial and Commercial Households and is simpler. On a USCI, both typically show entity type 2.

Can a getihu hire employees?

Yes. There is no legal cap on employees for a getihu — the old restriction limiting getihu to a small number of employees was removed years ago. However, getihu are still subject to the same labor and social insurance laws as companies when they hire. In practice, most getihu remain very small.

What does it mean if a supplier’s USCI starts with 92?

The first two digits 92 mean: registered by SAMR (9), entity type is individual business (2). This is the most common prefix for getihu. A company will typically start with 91 (SAMR + enterprise).

Can I sue a getihu in China?

Yes. You sue the operator personally, since the getihu is not a separate legal entity. The lawsuit would name the operator as the defendant. Enforcement can be challenging — especially from overseas — but the legal route exists. A getihu operator found liable faces judgment against their personal assets, which is a stronger incentive to settle than a company shareholder facing only capital-contribution liability.

Should I avoid getihu suppliers entirely?

No. Many getihu are skilled, reliable small operators — especially in light manufacturing, handicrafts, and specialized components. The right approach is to recognize the entity type, understand its limitations, verify the operator and registration, and size your orders and payment terms to match the risk. A $500 sample order from a getihu is a very different proposition from a $50,000 production run.

Published by the ChineseVerify Team