Hong Kong economy is governed under positive non-interventionism and is highly dependent on international trade and finance. For this reason, it is regarded as one of the most favorable places to start a company. Among the top reasons on why starting a a business in Hong Kong include:
- Easy Business Setup
China does not only welcome foreign business owners to develop businesses in Hong Kong but also provides them with the tools to grow successfully with minimal stress in the company registration process – a commodity that is not easily offered to foreigners in many countries.
- Solid Infrastructure Facility
Hong Kong is an ideal location in the heart of the Asia-Pacific region, with its air and sea transport facilities providing world class service in terms of shipping, logistics and freight forwarding services, topped by its advanced telecommunication infrastructure allowing cost effective prices for frequent travelers.
- Simple Tax System
Hong Kong charges some of the lowest tax rates worldwide thus permitting maximum earnings at minimal costs.
- Fair and Transparent Legal System
Hong Kong’s legal system leans to favor business environment by providing fair business surroundings at all times.
- Free Economy
Hong Kong’s free trade policy, no trade barriers and no limit for foreign onshore and offshore investments as well as no tariff quotas or fees for general import and export trade make it one of the world’s most liberal economic systems with the sky being the limit for trade and earnings from trade.
Of these top reasons, this article will focus on the first reason in the list; easy business setup in Hong Kong. The ease and convenience of company registration in Hong Kong especially for foreigner entrepreneurs and business owners is something that’s rarely seen in other countries.
Which is your Business Entity?
It is vital to take the first step on determining on a right business entity before setting up a company. To begin, the following guide will provide you with a comparative view on the types of business entity that you can start in Hong Kong.
Let’s look at the four types of business entities available in Hong Kong are:
- Limited Liability
A limited liability company offers protection of personal assets from business risks/ liabilities and is a separate legal entity from its owners. A limited liability company can be private or public and limited by shares or by guarantee. The most common type of company registration in Hong Kong is the private limited liability company, limited by shares, mainly because it is a separate legal entity with limited liability for its owners.
- Sole Proprietorship
A sole ownership business is easy to setup and is suitable for small scale and low risk businesses mainly. However, it is not advisable as it does not constitute a separate legal entity and therefore does not protect the owner’s personal asset from business risks/ liabilities.
A single business that allows two or more partners to share ownership, thus enabling the sharing of responsibilities with increased ability to raise funds. Partners are, however, jointly and individually liable for the actions of each other. The most common type of partnership is a limited partnership as it offers limited liability to limited partners.
- Foreign Company Office
Foreign business can register for a branch office, subsidiary or a representative office in Hong Kong.
How to Consider Your Business Structure?
To ease comparison and weighing of the pros and cons of each of the above business structures, business entrepreneurs shall consider on the following factors:
- The nature and purpose of the business
- Size and scope of the business
- Extent of personal liability
- Capital required for startup.
- Can the business attract investors?
- Startup procedures, costs, timeline, etc.
- Tax implication for the chosen business structure
- Current and future business needs
- Extent of control desired over the business
- Extent of business risks
For one to establish a low-risk small scale business where he/ she is the sole owner with sufficient financial resources at hand, it will be simpler and easier to register a Sole Proprietorship business. However, there is no distinction between the sole owner and the business entity and therefore the sole owner’s liability is unlimited and there’s no protection of personal assets.
If one wishes to share responsibilities of running a business or has insufficient financial resources, then Partnership could be the answer. However, under General Partnership, every partner is personally liable for the debts/ liabilities of the business and is liable for each other’s actions. On the other hand, with Limited Partnership (where at least one partner is a general partner), the limited partners are not personally liable for the business liabilities or wrongful acts of the other partners but will have no say in day-to-day operations and shall remain a passive investor. Partnership can be difficult to maintain due to suitability and potential conflict.
Companies can also be limited liability or unlimited. Due to its risks towards personal liabilities, rarely does an investor opt for an unlimited structure.
Incorporating a private limited company is usually the best choice despite a more complex setup and ongoing compliance. The benefits are many to say the least and are considered by most to override the downside of ongoing compliance requirements.
Basic requirements for company registration in Hong Kong
Based on the Hong Kong government, any individual that is age 18 years old and above is eligible to set up a company in Hong Kong provided that the complete procedures are done. While starting a company in Hong Kong may sound straightforward and easy, there are certain requirements that foreign investors should take account to. Here, you will be able to understand on the requirements on opening a company in Hong Kong.
- Company Name: Guidelines
- A company name cannot be one that is already currently in use or in the process of being registered.
- Company name must not imply any associations with the Hong Kong government or its government departments.
- Company name must not be deemed offensive or constitute criminal offence.
- Company name can be in Chinese or English characters but must not be a combination of both for company registration.
- Must have the word ‘Limited’ either in English or Chinese for a Limited Liability company. Tips: It is advisable to conduct a search from any authorize search engine for the company name for approval before incorporation.
- Directors of Limited Company
- Minimum one director at all times with no maximum number of directors.
- At least one director must be a natural person i.e., an individual who is at least 18 years of age; can be a foreigner or non-Hong Kong resident who is not declared bankrupt or convicted for criminal offences (Nominee Director appointment is allowed).
- Board of Directors meetings can be held anywhere globally.
- Shareholders of Limited Company
- Minimum one shareholder with a maximum of fifty.
- Shareholder can be a company or a person who is at least 18 years of age and can be a foreigner or a non-Hong Kong resident (Nominee Shareholder appointment is allowed).
- A director and shareholder can be the same or different person.
- No restriction on foreign shareholding. 100% of foreign or local shareholding is allowed.
- Shareholder meetings can be held anywhere globally.
- Significant Controllers Register and Designative Representative
- The Significant Controllers Register can be kept in hard, or softcopy stored in the company’s Hong Kong Registered Office Address or a venue in Hong Kong.
- The Register spells out the particular details of those with significant controlling interest of the company.
- The company is responsible to obtain and identify updated information of its Significant Controllers and is responsible to prepare, keep and make the Register available during inspections. The company must appoint at least one person as the Designated Representative who is a Hong Kong resident of at least 18 years of age who is an employee or a shareholder or director. Alternatively, this person can be a Hong Kong accounting/ legal professional or a registered licensee of ‘Hong Kong Trust of Company Service Provider’. This person will be the one responsible to assist the Law Enforcement Officers to access the company’s Significant Controller Register.
- Company Secretary
- A company secretary must be appointed and can be either an individual residing in Hong Kong or a corporate body with a registered business address in Hong Kong.
- A sole director cannot himself/ herself acts also as the company secretary (Nominee Company Secretary appointment is allowed).
- Share Capital
- Share capital can be expressed in any major currency and there is no minimum share capital for company registration in Hong Kong.
- Subject to a stamp duty fee, shares can be freely transferred.
- To have at least one shareholder with one ordinary share issued.
- Registered Address
- Company registered address must be a valid local Hong Kong physical address (P.O. Box is not a valid physical address).
- Public Information (of Shareholder/ Director/ Company Secretary)
- Company Officers’ details must be updated with the Hong Kong Registrar of Companies (Nominee Service appointment is allowed).
If you are would like to keep your company details confidential, you can appoint a non-executive director with the incorporation professional company, Paul Hype Page for advices.
- Only profits generated in Hong Kong are subjected to Hong Kong’s income tax (No capital gains tax, no dividend withholding tax, no GST/ VAT).
- Under the two-tiered profits tax rates regime, corporate profit tax rate is lowered by half to 8.25% for the first HK$2million of assessable profits and 16.5% for assessable profits above HK$2million.
- Annual Compliance Requirement
- Like any other countries, annual returns must be filed with Companies Registry.
- Annual Business Registration fee must be paid.
- Hong Kong Business Registration Certificate must be renewed at least a month before expiry either annually or once every three years.
- Accounts must be audited annually by Hong Kong Certified Public Accountants. Audited accounts and income tax returns must be filed annually with Inland Revenue Department by Private Limited Companies. Annual General Meeting (AGM) must be held every financial year within 15months after its financial year end date. The holding of AGM can be dispensed by a written resolution or a resolution at a general meeting passed by all members. AGM is not required for a single member company.
Once we have gone through the requirements and details, foreign investors can refer to our guide below to understand on the authorities involved to registering a business efficiently:
- Companies Registry
- Administers and enforces the Companies Ordinance.
- Responsible for the incorporation of local limited liability companies (Companies setup in Hong Kong) and the Hong Kong business registration of non-Hong Kong companies (Companies that were not incorporated in Hong Kong but have a place of business in Hong Kong).
- Business Registration Office
- Operates under the Inland Revenue Department
- Administers the Business Registration Ordinance.
- Responsible for registering businesses carried out by an individual, a partnership, a local private limited company or a non-Hong Kong company.
- Trademarks Registry
- Operates under the Intellectual Property Department
- Responsible for providing trademark registration services to members of the public under the Trademarks Ordinance and the Trademarks Rules.
Notes: Company Registration vs. Business Registration
It is important to note that Hong Kong company registration and Hong Kong business registration are not the same. To get a limited company status, a company will need to be registered with the Companies Registry. A Company Registration Number (CRN) is akin to a company’s social security number and can be found in the Certificate of Incorporation.
In order to be able to do business in Hong Kong, registration is done with the Business Registration Office. A Business Registration Number (BRN) is issued by the Inland Revenue Department and can be found as an 8-digit sequence at the front of a Business Registration Certificate Number and is in actuality, a Tax Identification Number (TIN).
Documents needed for company registration in Hong Kong
To set up a Hong Kong limited liability company, the following documents are required with officially certified translated versions for any non-English documents provided:
- Company’s Article of Association
- A Notice to Business Registration Office
- A duly completed incorporation form that includes the following:
- Company Name
- Registered Address
- Brief Description of Business Activities
- Particulars of Shareholders, Directors and Company Secretary
- Liability of Members
- Share Capital Registered on Corporation
- Number of Shares taken up by Subscribers
- For non-resident shareholders and directors:
- Copy of passport and proof of overseas residential address
- For resident shareholders and directors
- Copy of Hong Kong identity card and proof of residential address
- For corporate shareholders and directors
- Copy of parent company registration documents such as Certificate of Incorporation and Articles of Association
The company incorporation process
With the simplified company incorporation and registration in Hong Kong, foreign investors and entrepreneurs one can easily manage the application online without having to visit the office physically. The incorporation process at the Hong Kong Companies Registry (CR) is made fast and easy through three available methods of application:
- Online application: 24-hour portal e-registry
- ‘CR eFiling’ mobile application: Can be downloaded free from App Store/ Google Play
- Hardcopy documents: To be submitted to the Hong Kong Companies Registry
In a nutshell
The dynamic city of Hong Kong, while serving as the perfect launch platform for companies looking to trade in China, is also one of the most tax friendly jurisdictions in the world. Despite months of social and political unrest that have knocked Hong Kong off the top of a widely regarded index ranking the world’s freest economies, a position that Hong Kong held for 25 straight years before giving in to its regional rival, Singapore, Hong Kong remains one of the most favourable places to start a company worldwide for all sizes of business
With its obvious benefits, investors would be wise to look into taking advantage of Hong Kong’s free economy as well as its easy business setup even for foreigners, to maximize their earnings at minimal costs while enjoying the solid infrastructure facilities in Hong Kong.
This guide to company registration in Hong Kong should serve as your starting point. Ready to start a business registration in Hong Kong but not sure how to begin? Our business experts are always pleasure to assist you with minimum hassle for you and you don’t even need to physically present in Hong Kong!
Steps to Company Registration in Hong Kong FAQs
Failure to comply with timely business registration is considered an offence and is liable to fine and/ or imprisonment.
Any person who applies for business registration more than 12 months after commencement of business has to pay BR fee and levy for current year plus any fee and levy for back years.
The Business Registration Ordinance requires every person who carry out a business in Hong Kong, whether except for sole proprietor, a partnership, to apply for business registration (BR) within one month from the date of commencement of the business.
If the registered particulars of the business have changed, the business operator has to notify the Inland Revenue Department in writing within 1 month of the change. The registered particulars are available for public information at a fe
No, it’s not necessary to be physically present at the time of company incorporation. However, depending on the chosen bank, the director may need to meet with the bankers personally in Hong Kong at the time of account opening.
‘Businesses’ are required to be registered when the activities include:
- Any form of activities carried out for the purpose of gain e.g. trade, commerce, craftsmanship, profession etc.
- Any club with facilities, services and exclusive club premises to its members.
- Every company incorporated in Hong Kong or non-HK company that has established a place of business in Hong Kong, regardless of whether it is actually carrying out any business in Hong Kong.
- Every non-Hong Kong company that has a representative or liaison office in Hong Kong, or has let out its property situated in HK, regardless of whether it has established a place of business in Hong Kong.
Note: A person who is only holding an office or employment is not regarded as carrying out any business and is not required to apply for business registration.