Why set up a limited company in Hong Kong?
Hong Kong is an excellent choice if you want to make a presence in Asia.
Hong Kong is a dynamic city with high growth, which is why it has become a haven for new startups. And since it is the 5th fastest-growing business environment and is also ranked the 25th most developed place in the world, Hong Kong has an estimated value of USD 3.2 Billion in the startup field! These figures attract many people to set up a limited company in Hong Kong, being a business-friendly and stable cosmopolitan.
Before understanding the main reasons for why a person should set up a limited company in Hong Kong, it is better first to understand why is it a good thing to open a business in another country. Many big companies like Facebook, PepsiCo, etc. have reached out at every corner in the world, and the reasons are simply because:
- Better shelter the business
- Save money
- Lower the tax burden
- Reduce the business risk
Why set up a Limited company in Hong Kong?
Hong Kong is an excellent choice if you want to make a presence in Asia, as it acts as a gateway to many other Asian countries and is also a business-friendly city. Other than these, some of the main reasons are mentioned below as:
Strategic Location To Access Asian Markets
As it is located in the heart of Asia, it is an excellent place for a person to grow their business and reach out to other business markets. Hong Kong is also the best choice for startups as it acts as a geographical and commercial gateway to penetrate into the China business market, being the largest populated country in the world. In addition, Hong Kong benefits from a different legal system as compared to that of mainland China.
Great Banking Facilities With Low Corruption Rate
Being a global leader in banking, Hong Kong offers multi-currency bank accounts to anyone who is about to set up a limited company in Hong Kong. As per the CPI, which is the Corruption Perceptions Index by the Transparency International, Hong Kong is ranked 18th with a corruption index of 75 points during the year 2016. Countries such as the USA, the UK, Japan, and Germany are all behind Hong Kong in this respect. This is great for those who do not want any hurdles to come in between their business plans and a corrupt government.
Government Announces Special Programs For Startups!
Due to the support from the government and the few legal complications, it has become easier for a person to set up a limited company in Hong Kong and make a presence within no time. There are many marketing funds, loan guarantees, and incubators programs for startups that attracts outsiders to begin a business in Hong Kong.
Hong Kong Businesses Are Recognized Worldwide!
The open market, the rule of law, and political stability in Hong Kong assist outsiders in enjoying business growth. Both local and foreign companies have equal growth opportunities through international forums to get recognized worldwide.
Hong Kong Permits Easy Selling Of Corporate Shares!
This is something that is not easy in the other countries, as business owners can attest to, where the owner may sell their shares in the market. With the amount collected after selling the shares, the person can contribute to a charitable cause, diversify the assets, pay down the business debts, and even can expand their business.
It is Easy To Get Started In Various Sectors!
A person can easily set up a limited company in Hong Kong under some of the leading sectors in the industry without much hassle. And it is these startups that help the country grow. The sectors of the startups in Hong Kong are:
- Data analysis
- Healthcare
- Financial technology
- Education and learning
- Design
- Professional services
- E-commerce
- Hardware
- Information and technology
Also, there is no need for a physical address, as you can hire Startupr for a registered address to set up a Limited company in Hong Kong.
World Top Economy With Maximum Freedom
The main reason to set up a limited company in Hong Kong is that it is the one of the freest economies worldwide. Hong Kong stands the first in the world for economic freedom. The other indexes that are attracting customers to open a business in Hong Kong are:
- Financial freedom 90.0
- Investment freedom 90.0
- Trade freedom 90.0
- Property rights 90.0
- Monetary freedom 81.8
- Labor freedom 89.0
- Business freedom 97.4
Regulatory efficiency, secured property rights, transparent legal environment, prudent economic policy, and open markets are the key reasons behind the growing Hong Kong economy.
Other than the above mentioned advantages of owning a Limited company in Hong Kong, there are some other added benefits that stand out as well.
Limited liability
A Hong Kong company is made up of at least one director, a company secretary, and a shareholder, where the director and the shareholder can be one person who does not have to be a local of Hong Kong. And to set up a Limited company in Hong Kong, the person gets an advantage where they would have the reassurance of a limited liability.
A person would not be personally liable for any financial losses that have been made by the company in the absence of any fraudulent business activities.
Hence, the limited company gives a person enough protection if something goes wrong. For those who run any business as a self-employed person, they would not be able to enjoy such protection from financial disputes.
Separate Entity
When a person decides to set up a Limited company in Hong Kong, they need to know that the limited company is an entirely separate entity from its owners. Everything from involvement in contracts and tenders, to the company bank account, and the ownership of assets is altogether the company business and is separate from the shares of the shareholders of the company. This can provide protection to the owner knowing that the business is separate from them.
A sole trader and their business are treated as a single entity for administrative and tax purposes, which means that the person is not treated as someone different from the company. There are some risks of being a sole trader or proprietorship and they are:
- The sole trader would have unlimited liability for debts since there is no legal distinction between the business and private assets.
- The sole trader is taxed as a single person.
- Taking any holidays can be tough.
- Retaining high-caliber employees can be tricky.
- All the responsibility for making any day-to-day business decisions is dependent on the sole trader.
- The Sole trader’s capacity to raise capital is limited.
Ownership and Control
In the case of the private limited companies, the directors are also customarily the principal shareholders of the company for small startups. Hence, both the ownership and control of the company remain in the director’s hands. And due to this, the decisions can be made easily and quickly, with little to no fuss, permitting a more successful business management platform.
Taxation Benefits
It is easy to set up a limited company in Hong Kong and run it in an environment like Hong Kong where the taxation is based entirely on the territorial source principle rather than on residency or management and control. This means that the tax is paid for the profits based on the place where it has been earned.
Usually, the tax paid on profits that are sourced in Hong Kong is 16.5% of the profits earned, while no taxes for the company whose profits are sourced out of Hong Kong. This means that the profit tax on the incomes of the company, in this case, is 0% of the profits that are earned out of Hong Kong.
Other than that, there are no capital gains tax, no withholding tax on dividends and interest. Also, there are no VAT or sales tax in Hong Kong, making it the best choice for a person to set up a Limited company in Hong Kong
Management Efficiency
The management of a company is taken care of the shareholders of the firm where they appoint the directors to represent them. These directors then, in turn, have to ensure that the business is obeying to the policies and regulations, while they also monitor the progression of the daily affairs of the business.
To set up a limited company in Hong Kong suggests that the company has stability and is committed to responsible and effective management. It gives both the customers and suppliers a sense of confidence. Also many companies, particularly the larger businesses, usually do not deal with a firm that is not a limited company.
Hence, incorporating a limited company in Hong Kong would open up new opportunities for the business that were otherwise not available. A sole trader runs the risk of selecting a name for their company, which someone else is already using or can use in the future. Whereas in a limited company, there can only be one specific Hong Kong company with any particular name, where no one else can use it or any name that is similar to it.
After a person registers a company name with the Companies Registry, the new company name is protected, and no person can use the same name or even a name that is too similar.
Register Your Hong Kong Limited Company
All these advantages of both owning a limited company and that too in Hong Kong make it one of the best choices a person can make. With the help of Startupr, you can easily set up a limited company in Hong Kong without having to visit the country as Startupr would take care of all the necessities.
FAQ’s on Registering Hong Kong Limited Company
Establishing a Limited Company in Hong Kong lets you trade worldwide and adapt to regulations easily. Ready to begin? Find quick answers to common questions here!
What are the minimum requirements to set up a private limited company in Hong Kong?
- Having attained 18 years of age or more.
- Possession of a valid identity card of Hong Kong or passport of any country.
- Having an address in Hong Kong as the registered address of the company.
- Issuance of at least one share.
- Appointment of at least one director and shareholder.
- Appointment of a company secretary.
Is it possible for people who are not from Hong Kong to create a company in Hong Kong and become directors or shareholders of the same?
Yes, any nationality (citizens or residents) can establish and own shares in a Hong Kong-based firm.
However, it should be noted that if all directors/shareholders are non-Hong Kong residents, then the limited company must appoint a company secretary according to the laws of Hong Kong. This person should be either a natural citizen residing in Hong Kong or a body corporate registered in Hong Kong.
Do we need to have a company secretary when setting up a company? And what qualifications do they need?
Under the Companies Ordinance, every limited company incorporated in Hong Kong is required by law to have at least one Company Secretary. Their duties include organizing meetings, preparing minutes of meetings and statutory documents, and ensuring compliance with the requirements of the Ordinance.
Do I need both English and Chinese names for my Limited Company when incorporating it in HK?
You may choose to incorporate your company with either an English name, a Chinese name, or both. However, the lack of an English name may affect future bank account openings.