This was a guest post by Startupr, and has been updated.
As a record-holder for the world’s freest economy in the last two decades, and with a minimum level of restrictions and bureaucracy, Hong Kong is an excellent choice for setting up a company for many entrepreneurs. According to government statistics, the number of registered companies totalled 1,407,743 in Hong Kong by the end of June 2018.
As a top financial hub for many entrepreneurs, Hong Kong is one of the most competitive economies in the Asia-Pacific region and ranks 6th in the World Economic Forum’s Competitiveness Index. Hong Kong is also governed by a reputable, regulated international jurisdiction where business is booming.
The Hong Kong government has contributed approximately HKD 5 billion to the Technology and Innovation Fund in order to encourage venture capital flow to startups. Setting up a company in Hong Kong is perhaps easier than in many other cities throughout the world. However, foreigners who are wanting to start operations in Hong Kong should not underestimate the challenges they may encounter while setting up their business venture.
So, are you ready to make your mark as an entrepreneur in the Hong Kong startup market? Great! The first step is setting up your company. Below are some steps to take in order to establish a new company in Hong Kong.
Determine Your Company Name
The first and foremost step in setting up a new company in Hong Kong is to select a name for your company, which can be in Chinese, English or both. You need to be careful while selecting a name because you cannot use a name for your business entity that anyone is already using or has used in the past. You can conduct an online session at Startupr in order to familiarize yourself with all the guidelines for the registration of a Hong Kong Company.
Choose A Legal Structure For Your Business
By now, you are done with the market analysis and research for your startup. The next step is determining the legal structure for your business before registering your company. Determine the structure for your startup based on your company’s needs and requirements. The structure of the company affects everything from how you do your business to how you file taxes for your business entity. If you are looking for the best business structure of a company, you can consider the below business structures:
- Branch Office
- Sole proprietorship and partnerships
- Limited company
- Company limited by guarantee
- Company limited by shares
Register your Company
To set up a new business in Hong Kong, you will need to register your business with the Companies Registry. The Companies Registry is responsible for the incorporation of your company.
Most entrepreneurs choose to register and incorporate their companies as a limited company in Hong Kong because of the numerous advantages associated with it. Limited companies are a separate legal entity and offer protection of personal assets from business risks. Moreover, the process for transferring ownership and raising funds or capital is more straightforward for limited companies, compared to other business entities.
Incorporate your Business Entity
The process of opening a company in Hong Kong is relatively straightforward, but you have to submit these forms before incorporating your company.
- A copy of the directors’ and shareholders’ identification documents
- Proof of address
- Signed Incorporation form by the authorizing partners.
To incorporate and register your company, you need to pay the applicable fee along with the above documents. You can submit the form online through Hong Kong’s 24-hour Companies E-registry or you can submit a hardcopy at the government department at Queensway.
But what do you do after incorporating your Hong Kong business? The next step is to get your company up and running.
Open a Company Bank Account
The most pertinent thing you have to do is to open a corporate bank account in order to start funding your ventures. While the process for opening a personal bank account is quite straightforward, you will need to prepare more paperwork and documents to show to the bank to open a corporate bank account. Mentioned below are some of the documents you need to prepare before heading down to a traditional bank to open a corporate bank account.
- Most of Hong Kong's banks require the registered address of the company as well as the contact information of the company and its business owners.
- All documents required and specified in the bank’s application form including certification by either a company secretary, public accountant, banker or lawyer.
- The incorporation documents of the company
- A certified true copy of the company’s identification documents.
- Proof of business such as audited financial statements or business plan.
- Details of ultimate beneficial owners for nominee shareholders/stockholders of a company.
- A certified true copy of the company’s Business Registration Certificate.
Looking for something better suited for a new business?
An alternative option is to apply for a Neat Business Account, which can be done fully online. All you need is a passport copy and Business Registration Certificate. All other company documents are obtained directly from the companies registry by Neat, and do not have to be provided by the client.
Get Permits and Licenses
The next step in setting up your business in Hong Kong is to obtain any permits and licenses your specific business entity may require. There are various types of permits and licenses that might apply to your business depending upon the nature of your services and products. In order to determine which permits and licenses best suits your business entity, check out the government websites and online license services.
Hong Kong Tax
Hong Kong has a territorial tax regime. In short, there is no profit tax enforced for companies conducting their business outside of Hong Kong. Hong Kong has some of the lowest tax in Asia, and in the world. In addition, there are numerous deductions from which your business will be able to benefit. The current profits tax rate that is applied to businesses operating in Hong Kong is 8.25% on the first HK$2 million of profits, and 16.5% on everything thereafter, and no capital gains tax. For more information and updates regarding the rules and regulations for Hong Kong tax, you can check the GovHK websites.
Pensions and Insurance Requirements
Before starting a new business in Hong Kong, you will also need to enroll your employees in an MPF scheme (Mandatory Provident Fund). This is a requirement under the ordinance of Employees Compensation and guarantees that you have a proper policy in place to cover all the employees of your business entity. In addition, you need to make sure that all the employees of your company that are working as part-time or full-time employees, are aged between 18-65.
Annual Filing Requirements
In order to maintain the success of your company, you are also required to follow all the rules and regulations regarding the annual filing for your company. You also need to be aware of the deadlines that are administered by the Companies Registry. The requirements that you need to follow during the annual filing of your business entity are as follows:
- Under the Companies Ordinance (CO), you need to file an annual return each year
- A tax return must be filed to the Inland Revenue Department (IRD) every year, together with audited accounts
- The requirements for filing an annual report varies with the type of business structure, whether you are a Registered Non-Hong Kong Company or a Local Limited Company in Hong Kong.
Access Resources and Funds
As a financial hub for many entrepreneurs, Hong Kong also offers grants to small business. Are you seeking funds and resources for your startup in Hong Kong? In that case, below are some of the resources available in the Hong Kong market which can help you provide funds for your business entity.
- Startup programmes such as HKTDC offer various services to startups from operational management to sales promotions.
- For setting up a new business to expanding an existing startup, entrepreneurs can meet with InvestHK, a government organization which helps foreign entrepreneurs set up in Hong Kong.
Bonus: Coworking Spaces in Hong Kong
When you're just starting out, if you want a proper office space (as opposed to a corner of your apartment) to work out of, you can consider a coworking space.
The great thing about coworking spaces is that they offer the flexibility many new businesses need at the beginning. For example, WeWork, one of the most popular coworking spaces in Hong Kong and internationally, offers hot desks and private offices, on a month-to-month membership (and options for longer-term leases as well).
What's more, in coworking spaces there's already someone in place to take care of your working environment, and making sure it's a pleasant place to go every day.
Taking WeWork as an example again, each location has amenities such as phone booths, well-kept meeting rooms, common areas, coffee, and social events with other members of the space. These are nice-to-haves that you may not be able to have when you're just starting out and finding an office space of your own – but possible with a coworking space.
WeWork brands itself for beautiful office spaces that allow you to thrive, while being a more economical choice for what you get. Prices vary from location to location – they have 9 locations in Hong Kong (as of May 2019!).
We have now covered the main areas related to setting up a new business in Hong Kong. One must make sure to follow all the rules and regulations, such as arranging finances, opening a corporate bank account, pensions and insurance requirements, and annual return filing in order to stay away from any legal problems.
As, we mentioned earlier, Hong Kong is one of the best places for doing business and setting up a company can be done in a matter of days.
If you want to set up your company without having to come in person, Neat offers incorporation services which includes the opening of a Neat Business Account. It only takes 10 minutes to apply!