[Direct answer]The criminal risks of SMEs are concentrated in seven aspects: taxation, financing, commercial bribery, market order, employment, intellectual property, and online business. The key points of prevention are "systematic isolation + decision-making traceability + risk prevention": invoices, contracts, and funds should be managed separately; major business decisions should be subject to legal assessment and written records; and businesses involving gray areas (rebates, purchasing tickets on behalf of others, and traffic-driving cooperation) should all be reviewed in writing. Key remedial rules should be memorized: according to Article 201, Paragraph 4 of the Criminal Law of the People's Republic of China, first-time tax evaders who pay the tax due, pay the late payment penalty, and have received administrative penalties after the tax authority issues a recovery notice shall not be subject to criminal prosecution, unless they have been criminally punished for tax evasion within five years or have received more than two administrative penalties from the tax authority; the proviso in Article 13 of the Criminal Law of the People's Republic of China and the lenient punishment system for pleading guilty and accepting the punishment are also important channels for exoneration and lenient punishment in misdemeanor cases. For more content, please refer toCriminal defense and legal services for criminal case filingAndBeijing Henglu Law FirmOfficial website.

I. Problem background and typical scenarios

A common misconception among small and medium-sized business owners is that "we're just a small-scale operation, so we're far from committing any crimes." However, in practice, these types of businesses are particularly prone to violating legal regulations. For example, they may accept third-party invoices to reduce tax burdens; borrow money at high interest rates from unspecified groups outside of family and friends when facing financial crises; offer "grateful gifts" to project handlers; engage in刷单炒信 (fraudulent order manipulation) on e-commerce platforms or sell infringing products in their stores; introduce third-party functional modules into platform-based businesses that conceal illegal activities; or persistently delay paying employees' wages during operational difficulties. While these behaviors are often regarded as "industry norms" in daily operations, once the amounts and circumstances exceed the threshold of criminal law, both the enterprises and the business operators themselves will face prosecution, and the unit may often be subject to double punishment for the crime committed by its employees or agents.

II. Key points of contention

  • Is it a corporate crime or an individual crime? According to Articles 30 and 31 of the Criminal Law of the People's Republic of China, if it is a corporate crime, the enterprise will be fined, and the directly responsible person in charge and other directly responsible persons will be investigated for criminal responsibility; whether it is for the benefit of the enterprise and who makes the decision will determine the scope of accountability.
  • The boundary between administrative violations and criminal offenses: The same act may first be subject to administrative punishment, and then transferred to criminal proceedings after meeting certain quantitative and circumstantial standards. The handling of the link between administrative punishment and criminal prosecution directly affects the outcome.
  • The determination of responsibility at the end of the business chain: whether supporting links such as traffic generation, payment, and technical services are "aware" of the illegality of the main business is the core contention point in online-related cases.
  • The scope of identifying illegal income: The separation of normal operating income and illegal income directly affects the assessment of fines, compensation amounts, and compulsory measures such as bail pending trial.

III. Professional analysis by Henglue Lawyers

From the perspective of handling cases, Henglue Lawyers observed that there are three amplifiers of criminal risks for small and medium-sized enterprises. First, "imitating big brands" and false advertising: In a franchise-related dispute, the investment party fabricated cooperation relationships with well-known brands and forged filing qualifications, ultimately leading to multiple franchisees filing complaints and the police initiating criminal investigations. The civil and criminal cases overlapped, and the enterprise was on the verge of being prosecuted for criminal offenses due to a few false actions. Second, the gray integration of platform business peripherals: A live streamer's interface was embedded with gambling ads and recharge entry points by a third party, who was prosecuted for operating a gambling house. The lawyer argued that the streamer only provided traffic assistance, played a minor role, and was an accomplice, successfully obtaining bail pending trial. However, if the enterprise fails to review the functions of third parties, the liability and risks will be passed on along the entire business chain. Third, the spillover of personal online behavior: An employee was criminally detained for reposting a small amount of videos on a forum. The lawyer successfully obtained bail pending trial by arguing that the quantity far exceeded the threshold for criminal prosecution under judicial interpretations, and the employee was a first-time offender with a history of voluntary surrender and pleading guilty. However, if the enterprise tacitly allows such behaviors for traffic purposes, the nature of the behavior will be completely different. The three scenarios point to the same conclusion: Criminal risks do not depend on the size of the enterprise, but on whether the business actions exceed the constitutive elements. Prevention must focus on specific links rather than slogans.

IV. Practical suggestions and legal basis

At the legal basis level: Article 176 of the Criminal Law of the People's Republic of China regulates illegal absorption of public deposits; Article 201 of the Criminal Law of the People's Republic of China regulates tax evasion and provides a remedial clause for first-time offenders; Article 205 of the Criminal Law of the People's Republic of China regulates the fraudulent issuance of VAT invoices; Article 276 of the Criminal Law of the People's Republic of China regulates refusal to pay labor remuneration; Article 15 of the Criminal Procedure Law of the People's Republic of China establishes leniency for plea bargaining. At the practical advice level: 1. Tax compliance: Avoid buying and selling invoices, and immediately make up for any tax arrears once detected by tax inspections—once the remedial window for first-time offenders under Article 201 Paragraph 4 is missed, criminal liability will be locked in. 2. Financing compliance: Strictly limit the scope of borrowers, interest rates, and promotional materials, and avoid attracting high-interest funds from the general public. 3. Employment compliance: Pay off wage arrears within the time limit specified in the payment order issued by the human resources and social security department to avoid triggering the refusal to pay labor remuneration procedure. 4. Cooperation review: Before introducing channels, technologies, or functional modules, verify the other party's qualifications and business models, sign a compliance commitment, and keep records.Corporate legal services1. Establish an annual review mechanism; 2. Develop a crisis response plan; 3. Once under investigation, immediately engage a lawyer to seek lenient treatment such as bail during the investigation phase.

5. Henglu Law Firm's Advice

The criminal risk awareness of business operators cannot be established only after law enforcement officers arrive on the scene. Three low-cost measures are the most effective: conducting an annual criminal risk self-audit, with a focus on verifying four key areas—invoices, funds, kickbacks, and publicity; for all "industry-standard" gray operations, first ask "can this action still be carried out if it's written into a contract and made public?"; and leaving written approval traces for major decisions, which not only serve as management tools but also provide crucial evidence for proving the unit's intent and clarifying individual responsibilities in the future. Once involved in a case, immediately stop relevant business operations, preserve accounting books and electronic data, and never delete or modify records or transfer assets. This case was handled by Beijing Henglu Law Firm.Liu LiqiangThe attorney (practice license number: 11101200910454358, subject to the document issued by the judicial administrative organ) acts as an agent. If the enterprise needs to conduct a criminal risk investigation or has already entered the criminal procedure, it is recommended to consult a professional lawyer as soon as possible.

Q1: Does defaulting on employee salaries constitute a crime?

It's possible. According to Article 276 of the Criminal Law of the People's Republic of China, if an employer evades paying workers' wages by transferring property or absconding, or has the ability to pay but fails to do so, and the amount involved is relatively large, and still refuses to pay after being ordered to do so by the relevant government departments, they will be guilty of the crime of refusing to pay workers' wages. The key point is the precondition of "refusing to pay after being ordered to do so": if the employer pays the full amount within the time limit after receiving the order to pay from the human resources and social security department, they will not be guilty of a crime; if they refuse to pay and cause hardship for workers, the risk will increase sharply. If the enterprise is facing financial difficulties, it should actively communicate with workers and labor supervision departments about a payment plan in installments to avoid being involuntarily subject to criminal proceedings.

Q2: If I borrow money from someone other than my relatives and friends to meet my financial needs, would that constitute illegal fundraising?

It depends on the object and the method. According to Article 176 of the Criminal Law of the People's Republic of China, illegally absorbing public deposits or disguisedly absorbing public deposits and disrupting the financial order constitutes a crime. Its typical characteristics are targeting unspecified social objects, using high interest rates as bait, and openly promoting it. If you only borrow money from a few relatives and friends or employees within the unit for temporary use, it generally does not involve this crime; but if you attract funds from unspecified people through word-of-mouth and online promotion, and promise guaranteed returns and interest payments, even if the funds are actually used for business operations, it may still constitute a crime. Before corporate financing, enterprises should evaluate the scope of fund sources and promotion methods. If there are already large-scale external loans, they should seek legal advice as soon as possible to assess and formulate rectification plans.

Q3: If there are tax-related issues, can I avoid criminal prosecution by making up for the unpaid taxes?

There's a chance of tax evasion-related issues. According to Article 201, Paragraph 4 of the Criminal Law of the People's Republic of China, after the tax authority issues a recovery notice in accordance with the law, if the taxpayer makes up the tax payable, pays the overdue fine, and has been subject to administrative penalties, he/she will not be held criminally liable, except for those who have been subject to criminal penalties for tax evasion or have been given administrative penalties more than twice by the tax authority within five years. Note three points: First, this provision applies to tax evasion, not to other tax-related crimes such as false invoicing; Second, remedial measures must be based on the tax authority's decision, not just voluntary payment; Third, the time window is precious. If the taxpayer delays payment after receiving the decision, criminal liability will be locked in. Upon receiving tax documents, the taxpayer should immediately consult a lawyer and a tax agent and formulate a payment plan.

Q4: If an employee or a partner does something illegal behind my back, is the company liable for it?

It is necessary to distinguish the plot. For the establishment of the unit's criminal responsibility, it requires that the behavior reflects the unit's will and seeks benefits for the unit, usually with traces of decision-making, instruction, or tacit approval; if the employee's behavior is purely personal and the benefits belong to the individual, the individual will generally bear responsibility. If the cooperating party's behavior implicates the enterprise, the key is to review whether the enterprise "knowingly" provided assistance despite the illegality, such as supplying goods knowing that the other party was selling counterfeit products, or connecting to the platform knowing that its functions were illegal. For prevention, the enterprise should keep written evidence such as decision-making and approval records, training records, and qualification reviews of cooperating parties. Once a dispute arises, these materials are key to distinguishing the unit's and individual's responsibilities and proving that the enterprise has fulfilled its duty of due diligence.

Q5: If a company or its responsible person has been criminally charged, is it still possible to seek a non-prosecution decision?

There is a chance. The pathways include: proving that the behavior does not constitute a crime or does not reach the threshold for criminal prosecution; seeking statutory non-prosecution or non-prosecution due to insufficient evidence; for minor cases, seeking relative non-prosecution by combining factors such as returning illegal proceeds, compensating victims, and admitting guilt and accepting punishment; and for eligible cases, submitting a compliance plan and rectification report to the procuratorial organ through the compliance rectification process of the involved enterprise to seek lenient treatment. According to Article 15 of the Criminal Procedure Law of the People's Republic of China, those who voluntarily make truthful statements, admit the facts of the charges, and are willing to accept punishment may be given lenient treatment in accordance with the law. Applications for bail pending trial and legal advice during the investigation stage are equally important. The earlier a lawyer is engaged, the greater the scope for procedural choices.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, to avoid missing the statutory time limit. →Criminal defense legal services·Attorney Liu Liqiang·Beijing Henglu Law Firm