How to Set Up a Business in Hong Kong


The current economic crisis has hit most countries across the globe to varying degrees. Some countries are already on the path to recovery, but other countries are taking a longer time. Hong Kong is one of the countries that is recovering faster than others mainly due to the increasing support of China. The other factors that have helped its economy to grow faster are its political stability, attractive tax and business incentives, and its free market environment. Its reputation as a desirable place for offshore companies to set up business has held its ground in spite of the current worldwide economic downturn.

Advantages Of Setting Up A Business In Hong Kong

1) Setting Up Business is Easy: Hong Kong is one of the most efficient places in the world for incorporating an offshore company mainly because of its free market and trade policies and its free business environment. Moreover, as there are relatively fewer restrictions on investment, it is an investor-friendly business city. It has the reputation of being the world's freest economy because there are no controls on foreign exchange transactions and corporate ownership. It has maintained this status for more than 10 years. As such, there is complete business freedom for offshore entrepreneurs.

2) Low Start-Up Cost: As per the Milken Institute's Opacity Index, Hong Kong ranks second in five key measures, such as lower risk, low cost of doing business, corruption, policy effectiveness, and efficiency. The Hong Kong dollar is fully convertible, and it is not linked to the Yuan. An offshore company can be started in Hong Kong with very little cost.

3) Favorable, Convenient, and Low Taxes: With a maximum corporate tax of 16.5% and a maximum income tax of 15%, Hong Kong has the third lowest tax burden in the world. Moreover, there are no auxiliary taxes, such as tax on dividends, sales tax, capital gains tax, withholding tax, and individual estate tax.

4) Availability of Skilled and Productive Workforce: The work is productive, efficient, has good work ethics and a good can-do attitude, and is proficient in English. Hong Kong also has a liberal immigration policy, and the official language at the work place is English, making it a highly desirable place to start a business. Starting a business is also without any hassles.

5) Confidentiality of Operations: Nominee directors and a company secretary can be elected by an offshore company owner to maintain confidentiality of the company's operations. Nominee services are normally provided by professional consulting companies.

Setting Up An Offshore Company In Hong Kong

The procedure for setting up an offshore company in Hong Kong is simple, fast, and inexpensive because its free economy provides low business costs and corporates taxes, strict privacy laws, and an efficient workforce. Normally, it takes less than 4 days to set up a company in Hong Kong, and if help from a professional consultancy firm is taken, the procedure is relatively simple.

Deciding The Type Of Company To Be Formed

For incorporation of a company, it is necessary to register it with the Companies Registry under the Companies Ordinance. However, as a first step, the entrepreneur has to decide the type of company that he / she wishes to form. Basically, there are two types of companies: private and public. A private company is usually formed for operating a small business, and its characteristics are that there are restrictions on the right to transfer its shares; the number of members is limited to 50, which does not include employees and former employees; and the public can not subscribe for any of its shares or debts. A public company, on the other hand, has none of the above restrictions. Private companies far outnumber the number of public companies. Moreover, most companies are limited companies, implying that the liability of the shareholders is limited to their relative shareholdings. In case of a financial crunch, where the company accrues high debts and liabilities, the assets of the company may be used to pay off the creditors, but the shareholders of the company would not be required to settle the balance in case there are insufficient funds to settle all the debts. A prospective entrepreneur would need to decide the type of company to incorporate in consultation with a professional consultancy firm.

Company Formation Procedure

The required services for setting up the company are confirmed by the corporate services firm after it has collected the required diligence. The legal, accounting, and tax implications of company incorporation are settled with this firm. The availability of the company name is reviewed. Thereafter, the client and the corporate services firm finalize the optimum corporate structure for starting the new company. This structure includes the number of directors and shareholders. The consultancy firm then delivers the incorporation documents for signing to the client. The client signs the documents and returns them to the corporate services firm. The interaction with the relevant government bodies for the business incorporation is done by the professional consultancy firm, leading to completion of the incorporation process.

Once the company is set up, the entrepreneur will have to open a corporate bank account, get corporate and trade finance and merchant accounts, and then look for a suitable local office space or a virtual office. It is easy to open multicurrency accounts of the highest quality, along with Internet banking facilities. Many international banks operate in Hong Kong, and entrepreneurs can choose any of them for opening their corporate bank accounts. Due to the fact that there are no foreign exchange controls or restrictions on inward or outward remittances, operating an international business from an office in Hong Kong is without any hassles at all. The other necessary adjuncts for starting a business, such as launching a company website, establishing a company logo and search engine advertising, are easily accomplished. One of the major advantages of operating a business from Hong Kong is that it has an easy corridor to China, which is the world's third largest economy.

Company Structure

The composition of the company must necessarily have the following elements: at least one shareholder; one director of any nationality or residence; a company secretary; a registered Hong Kong office address; auditors from a Hong Kong accountants company; and a business registration certificate. It is possible for one person to operate as a director, shareholder, and secretary, but if there is only one director, then he / she can not act as secretary. There is no minimum requirement for the amount of share capital.

It is advisable to appoint a good corporate service provider for opening bank accounts and fulfilling all the other formalities, as they would be aware of whatever needs to be done. It is well recognized by international banking institutions that doing business in Hong Kong is without any hassles and is straightforward with positive aspects, such as the ease of obtaining construction permits, investor protection, and no restrictions on trading in international markets or paying taxes abroad. If the structure of the company is legal and proper, it can benefit from legal tax exemptions for profits earned from across the borders.

The decision to set up a business in Hong Kong should, however, be made only after taking into consideration all the pros and cons of doing so with the business objectives in mind. It would also be worthwhile to get an expert opinion from an offshore company specialist who will give a third-party perspective and a clear picture of the prospects of business success.


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