Hong Kong has one of the most prosperous economies in the world. The island-nation offers an abundance of opportunity to everyone. With minimum bureaucracy and restrictions, starting a business in Hong Kong is easier than you think. If you are an entrepreneur, starting a company in Hong Kong is always the right decision. Research shows that there were about 1,407,742 registered companies in Hong Kong in June 2018 and that number has only increased ever since. According to the Competitive Index by the World Economic Forum, Hong Kong ranks in 6th place for the most competitive economy. Thus, business is thriving in this megacity.
The Hong Kong government encourages startups to set up shop in the city. It even contributes as much as 5 Billion HKD to boost innovation. Starting a company in Hong Kong is a lot easier than many other places across the globe. However, it is crucial for foreigners and locals alike to know what to expect. There are certain requirements that need to meet if one wishes to set up a business venture in Hong Kong. If you are interested in starting a business in Hong Kong, our full guide will come in handy. Read on to learn more about how you can establish your very own company.
Determine the Company Name
To register a company in Hong Kong, you need to first determine the company name. Entrepreneurs have the option to name their company in English, Chinese, or both. However, you should keep in mind that you cannot use a name that is already in use by a business entity. Instead, you need to come up with a unique name for your business. Be careful when selecting the name as you do not want to get in any legal trouble. You should hire an expert to help you choose a name for the company.
Company Name Guidelines
- The name should not be offensive as it would be considered a criminal offence.
- The word “limited” has to be included with the English company name.
- Entrepreneurs cannot combine English and Chinese characters.
- A company should not give the idea/ impression that it has any ties to the Hong Kong government or any of its departments.
- An existing company name cannot be used.
Company Name Check
To make sure that an existing company name is not used, a company name search should be conducted using the Intellectual Property Department Online Search System, the Public Search Center, the Company Search Mobile Service, and the Company Registrar’s Cyber Search Center.
Choose the Right Legal Structure for the Business
Once you have decided a name for the business, the next thing that you need to do is choose the right legal structure. You need to choose a legal structure that not only allows you to start a business but also thrive. Before you proceed to register the company, you should go over the different legal structures to get an idea about which legal structure would suit your business best.
Consider the needs and requirements of the business when determining its structure. Remember, the structure you choose for your business would impact how the business operates and how it files taxes. Choose from the following business structures.
- Company limited by shares
- Company limited by guarantee
- Limited company
- Partnerships and sole proprietorship
- Branch office
Register the Company
Before you can start doing any business, you need to first pay a visit to the Companies Registry to register the business. Every business has to be registered with the Companies Registry as it is the authority that is responsible for company incorporation.
Limited companies are the most common form of business in Hong Kong. There are numerous benefits of setting up a limited company. For instance, limited companies are treated as a separate legal entity. Thus, business owners benefit from protection of their personal assets against business risks. Besides, limited companies can easily transfer ownership and raise funds unlike other business entities.
Incorporation of the Business Entity
To incorporate the business entity, you will need the following forms.
- Incorporation form duly signed by the authorized parties.
- Proof of address.
- A copy of the identification documents of directors and shareholders.
When you submit the business incorporation forms, you will also be required to pay an application fee. Hong Kong has a Company’s E-Registry that operates 24/7 where you can convenient submit all the forms online. Moreover, you can also submit the hardcopy at the relevant government department in Queensway. It is rather straightforward to open a company in Hong Kong.
Open the Business Bank Account
The next thing you need to do is set up a corporate bank account. It is crucial that you create a business bank account before you start any transaction. Opening a personal bank account is very easy. However, when you apply for the creation of a corporate bank account, you would have to bring along a ton of paperwork and documents to demonstrate that you represent the business. Some of the documents you would be required to take with you when you visit the bank are mentioned below.
- The company’s registered address and contact details including the business owners.
- The company lawyer, banker, public accountant, or company secretary will need to provide a certification stating all the documents included in the bank application.
- The company’s incorporation documents.
- A certified true copy of the identification documents of the company.
- Proof of the business plan or audited financial statements.
- List of the ultimate beneficial owners.
- A certified true copy of the business registration certificate.
Obtain Licenses and Permits
To start and run a business in Hong Kong, you need to obtain relevant licenses and permits. Depending on the industry you wish to operate in, you will need licenses and permits for the business entity. There are different types of licenses and permits that may apply to the business. Hence, you should determine which licenses and permits you would need to operate. Make sure to check out government websites about which documents you might need.
Taxation
Businesses that operate in Hong Kong need to follow its territorial tax regime. This means that companies that conduct business outside Hong Kong will not need to pay tax on their profits. This makes Hong Kong the ideal destination for entrepreneurs that wish to do business with different countries. Moreover, Hong Kong boasts some of the lowest tax rates in Asia. Besides, there are plenty of deductions that businesses can claim. Businesses in Hong Kong only have to pay a tax rate of about 8.25% on their profit for the first 2 Million HKD ant 16.5% on higher profits. There is no capital gains tax that one has to worry about. Therefore, businesses get to keep a major chunk of their earnings.
Insurance and Pension Requirements
Before you can start running your new business in Hong Kong, all the employees need to be enrolled in the MPF scheme (Mandatory Provident Fund). Employees Compensation is a requirement that employers have to meet. Businesses must develop a proper policy that covers every employee in the business. Furthermore, whether you hire full-time or part-time employees, they need to aged between 18 and 65.
Annual Filing Requirements
To maintain operations in Hong Kong, every business has to follow all the regulations involving annual filing. There are deadlines in place by the Companies Registry. These that have to be met to ensure you comply with the regulations. The annual filing requirements for businesses are mentioned below.
- When it comes to the requirements concerning the filing of annual reports, the type of business structure you choose influences whether you need to file or not.
- Every year, the tax return has to be filed with the Inland Revenue Department (IRD) along with audited accounts.
- An annual return needs to be filed every year as per the Companies Ordinance.
Access Funds and Resources
Hong Kong is a financial hub for all types of entrepreneurs. The city even provides grants to small enterprises. If you are seeking resources and funds to launch your startup, there are some resources that are available to you in Hong Kong as mentioned below.
- HKTDC is one of the startup programs that provide startups with various services such as sales promotions and operational management.
- Invest HK is a government organization that is dedicated to assisting foreign entrepreneurs start business in Hong Kong. It helps foreign entrepreneurs meet their financial requirements and more. It is important that you take advantage of Invest HK.
Finding Working Space for Your Business
When you start a business in Hong Kong, it is important that you have a proper office space as compared to operating from your apartment. You could opt for a flexible or coworking space. Most entrepreneurs are opting for coworking spaces these days as they provide them with greater flexibility to succeed. Hong Kong has no shortage of coworking spaces to set up your business. We Work is one of the creative spaces where you can get a private office. All you have to do is make monthly payments or choose a longer-term lease.
The reason why coworking spaces are popular among entrepreneurs is because there is already someone who will help take care of all your working needs. When you choose a coworking space, you will benefit from a location that is equipped with world-class amenities like conference rooms, common areas, free tea, and social events where employees can get together to boost their morale. Each of these is important when starting out in Hong Kong. Hence, it might be best to choose a flexible working space. Besides, it is a much more affordable option. We Work is known for its beautiful offices. There are plenty of coworking spaces which provide you with a more economical choice. Keep in mind that prices vary depending on the location. After all, Hong Kong is one of the most expensive cities in the world.
Visa Application for Starting a Business
If you are an investor, Hong Kong has a lot to offer. It is well worth the wait. There are some government initiatives that you can utilize to take your business to the next level. With a growing economy, Hong Kong is the perfect place to launch your business.
It is vital that you have an understanding of the Hong Kong market before you consider starting a business in Hong Kong. You can even set up a representative office while you establish professional contacts and improve your Chinese skills. To succeed in a major market such as Hong Kong, you need to be patient as it will take some time for the business to become an empire. Having a business plan is only the first step you can take. It is always a good idea to hire a team of experts to help point you in the right direction when it comes to consultancy, taxation, or accountancy. To invest in Hong Kong, you will also need to apply for a visa or you can search for a job in the meantime. Fill the required visa application form and make sure you meet the criteria for professional and education qualification. Moreover, you cannot have a negative police record or criminal history if you want to obtain a visa. You can download the visa application form online from the Immigration department. The following are required to obtain a visa.
- Background information about the business.
- A business plan for at least two years.
- Proof of professional and education qualification.
- Copy of your entire passport.
- Two to three passport photographs.
Conclusion
This guide should help you understand all the main requirements of starting a business in Hong Kong. Make sure you follow the regulations regarding annual return filing, pension requirements, creating a corporate bank account, and arranging finances. Since Hong Kong is a great place to do business, you can set up a company in record time.