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Setting up a Business in Hong Kong

Due to the city’s importance as a financial center and free port, lots of foreign entrepreneurs go for running their own business in Hong Kong. Are you considering it too? Our expat guide on starting a business in Hong Kong provides an overview of key issues, from visa over business entities to tax.
Quite a few expat entrepreneurs set up offshore companies in Hong Kong.

Although starting a business in Hong Kong is more complicated than an international assignment, it is by no means impossible. The government offers some advice for those willing to start their own company or invest in an existing one. However, you should not underestimate the time and effort opening a business will take!

While there are visa options if you want to establish a company or join an existing business, you still need a sponsor. You should establish a professional network before trying to start a business in Hong Kong. Get to know the local business world and Hong Kong business culture, and try to improve your Chinese skills.

Despite all the support you may get, running your own business in Hong Kong does take a lot of time, work, and money. Ensure that you have a thorough business plan and local support for your new business. In the following, we offer some first guidelines, however, these cannot replace expert advice! Make sure to hire a local lawyer, accountant, or consultant to help you.

Visa for Self-Employment or Investment 

There is an extra category of Hong Kong visa granting entry to international investors who want to join in a company or establish their own business in Hong Kong. Thus you can be your own boss. There is no requirement to prove that your firm will be filling a niche which local entrepreneurs cannot fill. However, your business should make a substantial contribution to the economy. Plus, this visa does not include residents from Mainland China and nationals of Afghanistan, Cambodia, Cuba, Laos, Nepal, North Korea, and Vietnam.

For your application, you have to fulfill the usual criteria of having a good education and professional qualifications. Additionally, you should not have a police record with any serious crimes (jaywalking probably doesn’t count).

As with any other work visa, you require a sponsor to set up a business in Hong Kong. Your sponsor can be a company or an individual who fits the following requirements:

  • at least 18 years of age
  • a Hong Kong resident
  • acquainted with you

You can download the application forms for you (ID 999A) and your sponsor (ID 999B) from the Immigration Department, or you can obtain them at any Chinese mission.

In order to support your visa application for a business in Hong Kong, you also have to hand in a number of documents, e.g. the following:

  • a recent passport photograph
  • a copy of your passport
  • proof of academic qualifications and professional experience
  • detailed two-year business plan
  • copy of business registration (investors)
  • background information on business activities (investors)

Choice of Name

Choosing the name of your business in Hong Kong can be nearly as important as deciding on a legal entity. You can search the Hong Kong Companies Registry to find out whether the name of your choice is already taken. You may still be able to use it, but you should consider if the recognition value is high enough. Once you have made your choice, you need to get the name approved.

Business Entities

The next thing to figure out is the kind of legal entity you’d like to select for your business in Hong Kong. You have the following options:

  • Limited company: Most people who have their own business in Hong Kong choose a private limited liability company. Small and medium-sized enterprises are often set up as private LLCs. You just need a name, one or several directors, one to 50 shareholders, a company secretary, a (physical) address in Hong Kong, and some capital. There is no legal requirement for minimum capital, but one should start out with at least HKD 10,000 in the bank.
  • Branch, Subsidiary, or Representative Office: Foreign companies can establish a branch office in Hong Kong. However, the main company is responsible for all debts and liabilities of the Hong Kong branch office. If you’d like to avoid this, you’d better choose the subsidiary option. This type of business is considered a separate legal entity. Lastly, representative offices are the option for market research. They cannot make any legally binding deals or engage in profit-making activities, though.
  • Sole proprietorships are best suited for a small-scale business in Hong Kong with only one owner. However, it should be low risk. Unlike the shareholders of a limited company, the sole proprietor is liable for his or her business with all personal assets.
  • Partnerships: As the name implies, a partnership is a business owned and run by at least two people. However, general partnerships have the disadvantage that you are fully liable for the company and responsible for your partner’s actions. You can invest in a limited partnership as a silent partner, but you have no say in the day-to-day running of said company.

Of course, getting a visa, choosing a company name, and settling for a legal entity is not all there is. We’ll deal with registration, banking, taxes et cetera in the second part of our guide to setting up your own business in Hong Kong.

 

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