Setting up a company in Hong Kong – all you need to know
This was a guest post by Startupr, and has been updated September 2019.
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 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. The name 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. This will help you familiarise yourself with all the guidelines for the registration of a Hong Kong Company.
Choose a legal structure for your business
By now, the market analysis and research for your startup is finished. 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, compared to other business entities the process for transferring ownership and raising funds or capital for limited companies is more straightforward.
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 authorising 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 account
The most pertinent thing you have to do is gain access to financial services in order to start funding your ventures. The process for opening a personal bank account is quite straightforward. However, you will need to prepare more paperwork and documents to show to the bank as a business owner. Below are some of the documents you need before heading to a traditional bank.
- Most of Hong Kong’s banks require the registered address of the company. They also require 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?
It’s not always easy for young businesses to provide all the information banks require.
So, built with startups and SMEs in mind, Neat offers a modern alternative, which can be done fully online. Documentation is straightforward: 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. Of course Neat conducts robust KYC and proper due diligence on all applicants (using an award-winning KYC process). However, just because a company is new, doesn’t mean they’ll be turned away.
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. Check out the government websites and online license services. These will help you determine which permits and licenses best suits your business entity.
Hong Kong tax
In short, profit tax for companies conducting their business outside of Hong Kong is not enforced. 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 here.
Pensions and insurance requirements
Before starting a new business in Hong Kong, you will also need to enrol your employees in an MPF scheme (Mandatory Provident Fund). This is a requirement under the ordinance of Employees Compensation. It guarantees that you have a proper policy in place to cover all the employees of your business entity. In addition, 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
- You must file a tax return 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? Below are some 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: finding co-working or flexible spaces to set up your office
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 co-working or flexible shared creative spaces.
The great thing about co-working spaces is that they offer the flexibility many new businesses need at the beginning. In Hong Kong, you’ll find no shortage of flexible spaces for you to set up your office. For example, WeWork, one of the most creative spaces in Hong Kong and internationally, offers hot desks, private offices as well as global access throughout their locations around the world, on a month-to-month membership (and options for longer-term leases as well).
What’s more, in co-working 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.
Let’s take WeWork as an example again. Each location has amenities such as phone booths, well-equipped meeting rooms, common areas, free coffee and beer, 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. However, they may be possible with a flexible working space.
WeWork brands itself as providing 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. This includes things like arranging finances, opening a corporate bank account, pensions and insurance requirements, and annual return filing in order to stay away from any legal problems.
Hong Kong is a great place to do business. You can set up your company in a matter of days.