Hong Kong is a world trade hub and an excellent Asian location for establishing a business or launching a startup. Because the government spent $5 billion in the Innovation and Technology Fund (ITF) and plans to set up a $2 billion Hong Kong Innovation and Technology Venture Fund in 2020 to empower private enterprise investment capital in startup companies, establishing a business in That Country will appeal to international investors. There business owners can form a company with almost any type of property and thus are frequently provided tax breaks.
In Hong Kong, the most popular areas for starting a business are:
- Commerce over the internet.
- Monetary technology
- Services for Professionals.
- Data examination.
- Education and training are essential.
The Perks of Opening a Business in Hong Kong
The chief reason businessmen select Hong Kong to enroll and perform company is just because of its strategically advantageous geographical location - close to China, with a reasonably significant market foundation. Another appealing feature for businesspeople from all across the globe is the country's rapidly developing economic model.
Furthermore, the following are the primary advantages:
- The rules for forming a company have been simplified, and you can now start a business online within 24 hours.
- Due to the country's free economy, it has a diverse range of activities.
- The tax system is competitive, with all income earned outside of Hong Kong being tax-free.
The steps are as follows:
- select an appropriate form of ownership;
- select a company name;
- select a framework of a company;
- and submit a request to the Hong Kong Companies Registrar (CR).
Acquiring a business license
Getting a Hong Kong business permit doesn't really ensure that you'll be able to trade. It is a statutory necessity for doing business in Hong Kong. As a consequence, prior to actually starting commercial interests, you must ensure that you get all of the licenses necessary by this jurisdiction.
Additional licenses are required to conduct activities in some areas:
- Services in finance.
- Application development is an example of technology.
The Hong Kong Department of Trade and Industry website lists all types of permits, licenses, and certificates required to conduct business in Hong Kong. Certain types of businesses must always be licensed.
Basic requirements for forming a company in Hong Kong
Following that, we will look at the key elements that must be present when forming a company in Hong Kong.
- Authorized capital – There are no minimum authorized capital requirements. Share capital may be held in any currency, not just local currency.
- Appointment of a secretary following the formation of a Hong Kong company - the law requires the appointment of at least one local secretary. The director is not authorized to carry out these responsibilities.
- Company name – You may not use the name of a company that has already passed the incorporation or registration stages. It's also illegal to use government names.
- Director – he can be of any nationality.
The final item on the list is a business plan, which is really the main document used to organize a company.
It should include all of the following corporate information:
- Commercial purposes of all kinds.
- Marketing strategies
- Employee personal information.
Business types in Hong Kong
Certain factors must be considered when choosing a business structure:
- depending on the size of the company;
- the amount of money invested in fixed assets;
- and the presence or absence of employees.
Hong Kong's main business structures
- A minimum of one chairman and shareholder is required for an LLC. This type of business, on the other hand, does not necessitate the existence of capital.
- The parent company forms the branch, which regulates all of its activities and is responsible for all obligations.
- Subsidiary – comparable to a branch, except it is responsible for its own obligations.
- Representation – lacks the authority to engage in profitable commercial activities.
- IP - suitable for small businesses; the owner bears full responsibility, but the profit is solely his.
- Partnerships are formed when two people agree to work together for the purpose of conducting business.
There are two kinds of such businesses:
- The GP – investor is fully responsible.
- The LP – investor is accountable for his contribution but has no control over the activity.
Formation of an LLC
Essentially, this form of company is popular among investors who own smaller businesses. It is a separate organization whose shareholders are liable for obligations in proportion to the amount contributed to the authorized capital. The stockholders could indeed exceed 50 people, regardless of where they live. In addition, there are no approved conditions for the least authorized capital - it does not exist in limited liability companies. In 2022, How to Form a Limited Liability Company The procedure for forming an LLC consists of several major steps:
- make a charter;
- complete the registration form;
- make a notification to the Registration Bureau;
- prepare data on authorized capital and shareholders;
- documents should be translated into English if necessary.
All registration documents can be obtained from the Commercial and Industrial Information Department.
Following the selection of the company's original name, it will be necessary to apply for registration and, if necessary, special permits and licenses for the relevant business areas.
The registration certificate is available in two formats: electronic and printed, and both have the same legal force. Some businesses will be required to register with the Internal Revenue Service.
The preparation and submission of annual reports to the appropriate authorities is one of the mandatory requirements for businesses. Companies must also meet the following criteria:
- appointment of an auditor;
- renewal of the enterprise registration certificate;
- annual meeting;
- renewal of business licenses.
Companies are required to report any change, such as a change in address or secretary, the amount of share capital, or the number of shareholders. It is important to remember that traditional offshore companies are not permitted in Hong Kong.
In this jurisdiction, the procedure for forming an LLC is more complicated than for other types of business registration. There are also requirements for the disclosure of confidential information, such as information about directors, capital, and other registry details. If the company goes bankrupt, you can close it down.
Taxation of LLCs
The benefit of establishing a privately owned company is preferential taxation.
In 2022, an LLC is subject to the following tax categories: The income tax rate ranges from 8.25 percent to 16.5 percent; social security fees are paid by both employees and employers, with the rate equal to 5% of the employee's corresponding income.
Business Registration Certificate (BRC)
This is the Business Registration Certificate, which contains all of the company's precise data. Obtaining this document is among the essential factors for forming a company in this jurisdiction. A BRC application must be submitted no later than 30 days after the start of operations. The credential shows that the firm is legally valid.
Company identification number
The Internal Revenue Service (IRS) assigns an eight-digit unique number to each registered business. It is essentially required when reporting to the IRD regulator.
How to Form a Company
- Registration is done electronically.
- «CR eFiling»: A mobile application available from the App Store.
- Paper documents should be sent to the Registrar of Companies.
The registration of a company can take anywhere from one hour to four working days. It is determined by the application method you select: the online option is the quickest.
The income tax rate is two-tiered: the first $2 million USD is taxed at 8.25 percent, and everything above this amount is taxed at 16.5 percent. Income earned in this jurisdiction is subject to taxation. The declaration must be submitted at the end of the fiscal year of the company. All companies registered in this jurisdiction must comply with filing requirements with the Inland Revenue Department (IRD) and the Registrar of Companies.
There are numerous banks in the country that are eager to offer advantageous terms of cooperation to both individuals and legal entities. They differ in terms of how to open an account and commissions.
The jurisdiction is strategically located, allowing access to the Chinese market, which is Asia's largest. The government makes every effort to attract foreign entrepreneurs and investors to set up a company in Hong Kong. This is a stable business environment with low tax rates.
The first step in starting a business in Hong Kong is to decide on the type of company, its name, and to gather all of the necessary paperwork. Government assistance is also appealing to investors. Tax benefits and an accelerated and simplified registration process.
It is important to remember that in order to conduct business in this jurisdiction, certain types of commercial activities will require the appropriate licenses and permits. Following a thorough examination of all types of businesses in the country, we determined that the most popular today is Ltd. YB Case specialists can advise you on all aspects of incorporating a business in Hong Kong.
The documentation required varies depending on the BPF selected.
To establish a limited liability company in Hong Kong, you will need:
- registration application form;
- shareholder information;
- capital information;
- business plan;
- payment of state fees.
You will need to notify the appropriate authorities (Business Registration Office).