Hong Kong is a good place to form an enterprise because of its relatively low taxes and simple incorporation system. This article will show you the steps involved in Hong Kong company formation.
Advantages of Formation of a Company
- It makes your business look more professional to customers, suppliers, and vendors.
- It allows you to secure financing via loans or equity sales.
- You can open corporate bank accounts, which makes it easier to keep accurate financial records.
- It guarantees legitimacy for your business in the eyes of the government.
- You can enjoy limited liability, meaning you won’t be personally responsible for debts accrued by the firm.
- You can reduce your tax liabilities by deducting corporate expenses.
Major Features of the Corporate Taxation System in Hong Kong
Since 2017, Hong Kong-based companies have been subject to a two-tiered tax system. The tax rate is 8.25% for assessable profits of up to HK$2 million and 16.5% on any profit above that figure. The region uses a territorial taxation system, so you only pay taxes on commercial activities conducted within its borders.
Some businesses can access incentives to reduce their tax burden, e.g., the deduction of expenditure on manufacturing equipment and machinery.
What Is the Procedure for Forming a Company in Hong Kong
1. Choose Company Type
There are various types of companies to incorporate in the region. The main ones are:
- Sole proprietorship: A one-person show. The owner is personally liable for corporate debts and losses.
- Partnership: This is when two or more people agree to incorporate a firm and jointly manage it. The partners are personally responsible for debts accrued by the firm.
- Limited Liability Company (LLC): The corporation has a distinct legal identity from its owners, meaning they aren’t personally responsible for corporate debts and losses. The firm can be limited by shares or by guarantee.
2. Choose a Name
You must choose a name that hasn’t been taken by a registered corporation or is similar to an established trademark. It can be an English name or a Chinese name, but a combination of English and Chinese characters isn’t allowed.
3. Pick Directors, Shareholders, and a Company Secretary
Every corporation must have at least one director, and there is no maximum number. Directors are responsible for managing corporate affairs, including filing annual financial reports, setting strategy, and day-to-day management. The director can be local or foreign-based and must be at least 18 years old.
The firm must also have at least one designated shareholder. Shareholders can be of any nationality but must be at least 18 years old.
It is mandatory to appoint a secretary who is a local resident. The primary role of this secretary is to ensure that the business complies with regulations.
4. Fill out the Application Form
With the aforementioned requirements ready, you can fill out the application form either online or at a government office. The form demands the details we have mentioned above, so you shouldn’t have a problem filling it out.
5. Collect Certificate
If your application is approved, you will receive a Certificate of Incorporation acknowledging that your business is now recognized by the government.
Things to Consider by Foreigners that Want to Start a Company in Hong Kong
Foreigners are allowed to incorporate an enterprise in the region. They just need to provide valid identification (a passport) and proof of residence in their country. They also need a registered office address within the region.
What Are the Documents Needed for Hong Kong Company Formation?
- Proposed name;
- Registered address;
- Description of commercial activities;
- Particulars of all shareholders, directors, and the company secretary, including contact information, valid identification, and proof of residence;
- Share capital;
- Articles of Association;
- Memorandum of Association.
We have shown you the steps involved in forming a corporation to benefit from Hong Kong’s large economy. If you want to save yourself the time and energy of following these steps, you can enlist Osome to handle the registration for you. We can provide the requirements you might not have and register your corporation with ease. Contact us today to see how we can help you.