Deciding on which countries to expand your business to can be a complex and difficult decision. As an aspiring entrepreneur, you might have heard of the lucrative business environment of Hong Kong and might be wondering about the process of starting a company in hong kong as a foreigner. In this article, Tetra Consultants will provide the ultimate guide on starting a company in hong kong as a foreigner so that you may better understand this business phenomenon and make a more informed decision about whether you should register company in hong kong.
1. Company Naming Conventions
One of the first steps to starting a company in hong kong as a foreigner is deciding what your business name should be. In terms of language, your business name can be in English, Chinese or both. However, one must ensure that the name chosen is one which has not previously been used by someone else. While this initial step may seem simple, choosing your business name wisely is critical as this name represents your company’s identity and how the market will view you.
2. Deciding on your business’ corporate structure
Once you have decided on the name of your business, choosing what type of corporate structure to set up your business as is the next step before officially registering your company. In Hong Kong, there are many different types of business structures, ranging from sole proprietorships and partnerships to limited liability companies, branch offices, and companies limited by guarantee or shares.
In order to determine which corporate structure to register company in Hong Kong as, one must analyse the company’s preferences and requirements and see which structure fits these characteristics most. Making a right decision about your company’s business structure is crucial as it influences almost all business activity ranging from the filing of taxes, extent of personal responsibility and liabilities, submission of important information to government registrars, and its day to day operations.
For example, many business owners opt to register and incorporate their companies as a limited liability company in Hong Kong given the multitude of benefits it provides. Firstly, limited liability companies are viewed as a separate legal entity from its business owners and as such, ensures that one is not held personally liable for debt obligations or legal charges against the firm itself, meaning that personal assets are well secured. Additionally, in contrast to other types of business structures, the process for transferring ownership and raising funds or capital is much simpler and more convenient.
3. Officially register your business
Upon selecting the corporate structure most suitable and apt for your business, you can begin the process of register company in Hong Kong. The registration and application must be sent to the Companies Registry, an organisation in charge of the incorporation of various foreign companies.
In order to successfully complete the incorporation of your company with the Companies Registry of Hong Kong, a series of documents have to be provided. These application documents must include important information such as your firm’s proof of address, a list of directors and shareholder names with their accompanying identification documents, signed incorporation forms by authorising partners etc. The aforementioned documents can be provided to the Companies Registry either through hardcopy at the official government department located as Queensway or virtually via Hong Kong’s 24 hours companies E-registry online. Once all of these vital information has been provided, do keep in mind that a registration fee has to be paid.
4. Open a corporate bank account
Once your business has been registered and incorporated, the next step to starting a company in hong kong as a foreigner is establishing the appropriate platforms to conduct business activities and your daily operations. One of the most critical platforms is a corporate bank account, allowing access to financial services which aids in the engagement of various business transactions or obtaining funding for your business ventures.
Unlike the relatively straightforward process for a personal bank account, in order to open a corporate bank account, you as a business owner must prepare the necessary documents and paperwork before going to a traditional bank. These documents should include information such as but not limited to
- The registered address of the company
- The contact information of the company and its business owners
- The incorporation documents of the company
- A certified copy of the company’s identification documents
- A certified true copy of the company’s Business Registration Certificate.
- Audited financial statements or business plan submitted as proof of business
- Details of ultimate beneficial owners for nominee shareholders/stockholders of a company.
Furthermore, all of these documents need to be certified by a company secretary, public accountant, banker and lawyer before they can be officially considered by the bank.
5. Obtain the relevant licenses and permits
Once your business has been set up with a corporate bank account, ready to begin its operations, business owners must consider if there are any specific permits and licenses that your business entity may require. Given the wide variety of different permits and licences which could fall under your business, do consider the government’s online business license information service to decide on which ones best suit your specific business entity.
6. Filing for taxation
Across the Asian region, the country of Hong Kong has one of the lowest tax rates, with profit tax for businesses conducting activities and operating outside of Hong Kong not even being imposed on them as well. Furthermore, there are multiple different tax cuts which your company would stand to benefit from. For example, the current profits tax rate imposed on companies doing business within Hong Kong is 8.25% of the first HK$2 million of profits, and 16.5% on all profits earned beyond the 2 million mark. There is also no additional capital gains tax companies are required to file as well, further lowering costs and maximising profits retained for the business.
7. Pensions and insurance requirements
However, even after official business incorporation, opening of a corporate bank account and filing of taxes, before looking to employ any workers under your company, you are required by the ordinance of Employees Compensation to register them under the Mandatory Provident Fund (MPF) scheme. The MPF scheme ensures that there are appropriate policies present to cover all the employees working under your business. In fact, companies must also ensure that all employees of the company are either working as part time or full time workers, and are aged between 18 to 65.
8. Further annual filing requirements
Finally, based on the Companies Ordinance (CO), your business is required to submit an annual return yearly, as well as a tax return to the Inland Revenue Department (IRD) annually alongside the audited accounts. Specific regulations regarding the submission of aforementioned annual reports is dependent on the specific type of corporate structure, such as whether your business is a Registered Non-Hong Kong Company or a Local Limited Company in Hong Kong.
Navigating the country of Hong Kong’s complex business climate might be a challenging process – a hassle to say the least. However, with key benefits regarding tax rates and a business friendly environment outlined above, it is easy to see why many businesses would choose to set up in Hong Kong. As such, Tetra Consultants hopes that this article has provided you a much better understanding about the key steps to starting a company in hong kong as a foreigner so that you can truly decide on whether you should register company in Hong Kong yourself.
So, what are you waiting for? Contact us to find out more about the process of starting a business in Hong Kong, and our dedicated and experienced team will respond within the next 24 hours. Tetra Consultants will not only empower you by helping to navigate the different regulations of Hong Kong, but also aid in facilitating the registration of your company there while providing invaluable, nuanced insights into any potential challenges.