Starting A Business In Hong Kong

Business Opportunities in Hong Kong

Hong Kong has a robust business environment due to its talented finance and marketing workforce, modern infrastructure, and proximity to mainland China’s manufacturing centers. The country is a Special Administrative Region of China and serves as the region’s trade and services hub leading several manufacturers to set up production facilities in the Greater Bay Area. 

Hong Kong is a popular location for consultancy services, particularly for small businesses in Asia. Consultancy services help set up procedures and other necessary services for businesses entering the Hong Kong market. 

Another growing business opportunity in Hong Kong is offering accounting services. It is a profitable business idea as many startups in Asia require assistance with their bookkeeping and taxes. Cleaning and home organization services are also in high demand due to busy lifestyles, and the fitness industry is booming as people prioritize their health and well-being. These business ideas require varying initial capital and marketing efforts, but all have the potential for high profitability in Hong Kong.

Businesses seeking to expand globally can take advantage of Hong Kong’s growing economy and establish operations in the region. One can refer to the following guide to understand the prerequisites for starting a business in Hong Kong.

Benefits of Starting a Business in Hong Kong

Hong Kong is a vibrant and dynamic city that offers many advantages when starting a business. Here are some benefits of starting a business in Hong Kong:

• Strategic location: Hong Kong is situated at the heart of Asia, making it an ideal entryway to the region’s dynamic markets.
• Business-friendly environment: It has a business-friendly environment with low taxes, simple and transparent regulations, and a robust legal system. The World Bank ranks Hong Kong as the world’s third most accessible place to do business.
• Access to capital: Hong Kong is a hub for international finance with a deep pool of capital available for startups and established businesses. This can help you secure funding for your business.
• Skilled workforce: The country has a highly educated and skilled workforce with a strong focus on innovation and entrepreneurship. Companies can leverage the high adult literacy rate of 95.7% to expand their business.
• Entrepreneurial culture: With a vibrant startup ecosystem, Hong Kong offers a robust entrepreneurial culture and a supportive community of investors, mentors, and accelerators.
• Infrastructure: Hong Kong has world-class infrastructure, including modern transportation, telecommunications, and IT facilities. This can help you build and scale your business.
• Low startup costs: Compared to other major cities in the region, Hong Kong has relatively low startup costs, including office space, salaries, and other expenses.

Requirements for Starting a Business in Hong Kong

To successfully set up a business in Hong Kong, companies need to fulfill the following requirements:

Choosing a business structure

• You can opt for a suitable business structure depending on the business operations. 
• Private limited companies are a popular business structure in Hong Kong. This type of corporation is a separate legal entity that provides its shareholders with limited liability protection. Other business structures include partnerships and sole proprietorships but do not offer limited liability protection.

Registering your business

• All businesses operating in Hong Kong must be registered with the Companies Registry within one month of commencing operations. 
• You must provide the company’s name, business structure, directors, shareholders, and registered office address. 
• You can complete the registration process online or by submitting the necessary documents in person.

Obtaining a business registration certificate

• All businesses operating in Hong Kong must get the Inland Revenue Department’s  business registration certificate. 
• This certificate must be renewed annually. 
• The fee for the certificate varies depending on the nature of the business.

Opening a bank account

• To conduct business in Hong Kong, you must open an account with a Hong Kong bank. 
• You must provide the company’s incorporation documents, business registration certificate, and identification documents for the directors and shareholders.

Employer’s obligation under the MPF system

• To comply with the MPF System, employers must enroll all employees aged 18 to below 65 who are employed for 60 days or more in a suitable MPF scheme. 
• As an employer, you can choose one or multiple MPF schemes from those available in the market.

Types of Business Structures in Hong Kong

When setting up a business in Hong Kong, you can choose any of the following business structures:

Sole proprietorship:

• A sole proprietorship is the most straightforward and common business form in Hong Kong. 
• The owner maintains complete control over the business, and all profits and losses are attributed to them. At the same time, the owner is personally liable for all the business’s debts and liabilities.

Partnership: 

• A partnership is owned and operated by 2 to 20 partners. 
• The partners share the business’s profits and losses based on the terms of their partnership agreement. 
• Partners are individually and personally liable for the debts and liabilities of the business, including those incurred by the other partners.

Public limited company (PLC): 

• A public limited company has at least 50 shareholders. 
• The shares are offered to the public.
• A PLC has more stringent reporting requirements than other business structures. 
• Most larger organizations set up PLC by expanding their shareholder base.

Branch office: 

• A branch office is a foreign company’s extension in Hong Kong. There is no legal separation between a branch and its parent company, and all debts and liabilities of the branch office are the parent company’s responsibility. 
• Branch offices must register with the Hong Kong Companies Registry and comply with all relevant regulations.

Representative office: 

• A representative office is a non-trading entity established to conduct market research, promotional, and liaison activities on behalf of a foreign company. 
• A representative office cannot engage in any profit-making activities in Hong Kong and is not permitted to enter into contracts or undertake any commercial activities. 
• It must register with the Hong Kong Inland Revenue Department and comply with all relevant regulations.

Company Registration Process

The company registration process in Hong Kong begins by determining the legal structure to be used for the company. The following steps are involved in offshore company registration in Hong Kong:

Choose a unique name for your company:

• When selecting a company name, make sure it is unique and distinguishable from other registered business names in Hong Kong. 
• The name should not be offensive, misleading, or used by another company. 
• You can check the availability of your desired name using the Hong Kong Companies Registry website.

Register your company and obtain a business registration certificate:

• To register your company, you must complete and submit a business registration application form to the Inland Revenue Department. 
• The application form requires the company name, business address, directors’ details, and business nature. 
• Once your application is approved, you receive a business registration certificate required to conduct business in Hong Kong legally.

Open a local bank account:

• You must provide the bank with the necessary documents, such as your business registration certificate, passport, and proof of address, to set up a local bank account. 
• Hong Kong offers many banking services, including multi-currency accounts and online banking.

Register a local business address:

• You need a registered business address in Hong Kong to receive official communication and business mail.
• You can use a commercial office, virtual office, or coworking space as your business address. 

Pay taxes to the government and submit annual financial reports:

• Hong Kong has a low tax regime and a simple tax system. You must pay profits tax on the income earned in Hong Kong and file an annual tax return. 
• You must also prepare annual financial statements under Hong Kong accounting standards.

Hiring an auditor for tax returns and business operations:

• Engaging an auditor can help you ensure compliance with financial reporting standards and identify areas for improvement in your business operations. 
• The auditor can provide recommendations on internal controls, risk management, and accounting practices.

After completing the company registration process in Hong Kong, the next step is registering your company as an employer. Once done, you can officially launch your company and recruit additional employees.

How Much Does it Cost to Incorporate a Company in Hong Kong?

The cost to incorporate a company in Hong Kong depends on various factors, such as the type of company, the services required, and the professional fees charged by the service provider. Here is a breakdown of the costs required to incorporate a company in Hong Kong:

Are Foreigners in Hong Kong on Certain Passes Allowed to Start a Business in Hong Kong?

The permits required to set up business in Hong Kong are listed below: 

• The Hong Kong Employment Visa is designated for individuals aspiring to work with a Hong Kong-based corporation and reside in the city. Prospective applicants must exhibit exceptional academic qualifications, specialized knowledge, or unique expertise. The Immigration Department scrutinizes each application based on the applicant’s qualifications and the credentials of the sponsoring company.
• The Hong Kong Investment Visa is tailored to foreign entrepreneurs who aim to establish or affiliate with a business in Hong Kong. The evaluation process concentrates on verifying that the proposed business will contribute significantly to the growth and prosperity of Hong Kong’s economy. Each application is assessed based on the entrepreneur’s qualifications and the projected impact of the new business.

Government Assistance for Foreign-owned Businesses in Hong Kong

Foreign-owned businesses in Hong Kong may be eligible for government grants or funding schemes. Here are some government schemes for starting a business in Hong Kong:

Dedicated Fund on Branding, Upgrading, and Domestic Sales (BUD Fund)

• The Fund provides a maximum of HKD one million per enterprise. The funding can be used for various activities, such as upgrading product design, packaging and branding, and developing e-commerce platforms.
• Foreign-owned companies with a valid Business Registration Certificate in Hong Kong who have been in operation for at least one year are eligible to apply for the BUD Fund.

Enterprise Support Scheme (ESS)

• Under the ESS, eligible companies may receive a maximum of HKD 10 million in funding. It is a significant funding initiative by the Government to encourage investment in R&D by the private sector.
• Foreign-owned SMEs registered and operating in Hong Kong with a valid Business Registration Certificate are eligible to apply.

SME Export Marketing Fund (EMF)

• The EMF provides funding for SMEs to participate in export promotion activities.
• Foreign-owned SMEs registered and operating in Hong Kong with a valid Business Registration Certificate are eligible to apply.

How Multiplier Can Help

Before launching a business overseas, extensive planning, research, and financial considerations are necessary. After the initial company incorporation, it’s crucial to assemble a competent team to ensure seamless operations. However, this can be challenging and time-consuming, especially without the support of a global PEO-EOR firm like Multiplier. By partnering with Multiplier, you can delegate your HR workload to our experts, who oversee your international employee team, manage employee payroll, and facilitate new hire onboarding. Our experienced professionals assist you in recruiting employees worldwide and expanding your business internationally, all without the need to establish a subsidiary. You can focus on exploring new markets and attending to the administrative aspects of your company while we handle the day-to-day HR tasks.