Many entrepreneurs from all over the world have chosen Hong Kong as a location in which to start a business. Due to its business-friendly atmosphere, lack of legal barriers to starting a business, and low company incorporation costs, Hong Kong has proven to be an excellent choice for this purpose.
Reasons Why Foreigners Should Start a Business in Hong Kong
There are many reasons why it is advantageous for foreigners to start a business in Hong Kong. Foreigners should start a business there so that they can take advantage of following key benefits of incorporating a company in Hong Kong:
Low cost of company incorporation and preservation
Lack of capital gain tax
Lack of requirements with regard to share capital
Clear and consistent regulations for appointments of directors and secretaries
Due to the fact that Hong Kong is one of the world’s leading trade locations, the incorporation of a Hong Kong company is likely to be viewed by the relevant authorities as “legitimate” and therefore less likely to be seen as a tax avoidance vehicle
Language is an advantage for many foreigners who live in Hong Kong. English is an official language and used as a main business language. All the information related to reporting and documentation can be found in English
The tax procedures of Hong Kong are trouble-free and its regulations are clear-cut
For the formation of a limited liability company, only one director and shareholder is needed.
Hong Kong can boast of an excellent banking system and world-class communications infrastructure
Business Entities that Foreigners Can Set Up in Hong Kong
Generally, the most common types of business entities used by most of the foreigners who do so in Hong Kong are business entities such as sole proprietorships and partnerships. However, some also choose to set up limited liability companies and foreign service offices.
Limited Liability Company
In Hong Kong, one of the most prominent business entities is the limited liability company.
The advantage of owning such a company is that it keeps the owner’s personal assets protected from any kind of business risks and liabilities. A limited liability company is regarded as a separate legal entity.
This type of business entity is usually suitable for small and medium enterprises (SMEs) and is best suited to those who cannot afford too much loss, as well as those who want a low-risk business with a sole owner. However, for entrepreneurs, this business structure is not recommended due to the fact that it does not protect the owner’s personal assets from business liabilities.
Two or more people can be the owners of a single business in this type of business structure. In partnerships, the responsibility is shared between the owners. The ability to raise funds is also increased. However, the partners are jointly and individually liable for the actions of the other partners. In general, the most common form of partnership found in Hong Kong is a limited partnership because such a partnership offers limited liability to the limited partners.
Foreign Company Office
Most of the foreign companies which show interest in setting up an office in Hong Kong can register a branch office, subsidiary, or representative office.
Process for Foreigners to Start a Business in Hong Kong
To set up a business as a foreigner in Hong Kong, all one needs to do is to pay the fee of the agency and then select the name of the new company. A licensed agency will then verify whether the name is available in Hong Kong or if it has already been taken.
To complete the next step, prospective owners will have to send a photocopy of their passport, a photocopy of the official credentials as proof of residence, and a questionnaire with the standard questions which are likely to include information about the prospective owner’s address, passport number, and the name of the company’s director and the shareholders to be based in Hong Kong.
For those seeking a simpler company structure, fulfillment of these requirements are enough for the licensed agency to set up the company through e-registration. However, those who plan to start up a business at a large scale will have to meet some specific requirements as required Hong Kong officials. This is the only way that can get the new large company’s certificate of incorporation and business registration certificate. It will happen following the certification of all involved parties’ passports online. This process is usually completed in less than two hours.
Owners whose projected company is to have several business layers will be given a set of pre-signed documents (NNC1 Form, Incorporation Form, and the Articles of Association) for the shareholder and the director to sign and will subsequently be required to resend the original credentials to a licensed agency via an international courier. The process is likely to be completed within around five business days.
Online business registration is also possible. After paying the appropriate fees for the online service, a copy of a valid business registration certificate in Hong Kong will be required. Once this is done, the online process may begin.
Thus, there are many ways that would-be business owners can register a company in Hong Kong.
Steps to Be Taken After the Business Has Been Started
The following steps are to be taken after the business has been started in Hong Kong.
Opening of a Bank Account
After the registration of a company in Hong Kong, the first step to be taken the opening of a bank account. The duration of the opening of an account varies from bank to bank. The following documents are required for opening a bank account in Hong Kong:
An authorized copy of the Articles of Association of the company
An authorized true copy of the business registration information of the company
An authorized copy of the certificate of the incorporation of the company; this certificate is issued by the Companies Registry
A copy of the company owner’s Hong Kong ID (Identity Card) and passport supported with residential proof including utility bills, bank statements, and driving license among others.
Appointment of Directors
After the registration of the company, the company must appoint directors and a company secretary before business operations may commence.
How Foreign-owned Businesses Contribute to Hong Kong’s Economy
Foreign-owned businesses add to Hong Kong’s incremental GDP growth. With regard to GDP per capita, Hong Kong was ranked fourth of 190 economies in 2019. This is due to the fact that Hong Kong encourages foreigners living there to work, invest, and start a business in the country. The country provides them with a suitable environment and workforce to make their country one of the world’s economic powerhouses. Foreign-owned companies in Hong Kong also contribute to Hong Kong’s economy by their payments of corporate tax to the government.
Starting an SME in Hong Kong
One can start an SME in Hong Kong either through the assistance of the government or by one’s own volition. Among the easiest ways to start an SME in Hong Kong is by connecting with mentors and acquiring resources for social enterprises with the SIE Fund. Angel investors can also help those who have plans to start SME in Hong Kong. Nevertheless, there are also many other ways of starting a successful SME.
Cost of Starting a Business in Hong Kong
There are fees to be paid for the incorporation of a company limited by shares in Hong Kong. These fees are as follows:
HK$1,720 for the registration of the company; if the process is unsuccessful, an application with a refund of HK$1,425 may be acceptable
HK$2,000 for the registration of the business with a certificate valid for one year and HK HK$5,200 for the registration of the business with a certificate valid for three years.
Taxes for the security of earnings in a bankruptcy fund are HK$250 for businesses with a one-year certificate and HK$750 for those with a three-year certificate)
Foreigners Who Plan to Start a Business in Hong Kong
Foreigners are also eligible to register a business in Hong Kong. In fact, Hong Kong encourages foreigners to set up businesses in the country. The following key points must be taken into consideration by foreigners who wish to register an offshore limited liability company in Hong Kong;
A foreigner has the complete right to be the individual director and shareholder of a company in Hong Kong. There is no requirement for a local resident to do so.
For the registration of the company in Hong Kong, there is no need for the physical presence of the owner. The owner can register the company through online sources but will have to be physically present for the opening of the bank account in Hong Kong.
Foreigners who do not intend to relocate to Hong Kong have the right to operate their Hong Kong offshore company from abroad.
The documents required of foreigners who are planning to register a company in Hong Kong are the same as those required of locals. These documents are to include such important information as the company name, a copy of the prospective owner’s Hong Kong identity card, residential address proof, parent company registration documents, liability of members, and registered address, just to name a few. When these have been confirmed and approved, the foreigner may proceed with the registration of the company.