Hong Kong is recognized as Asia’s top business and financial center, providing a tempting environment for foreign investors seeking to establish businesses. Its stable political climate, transparent legal system, low tax rates, and proximity to the Chinese market make it an attractive option for businesses seeking to expand in the region. In this comprehensive guide, we will walk you through the process of corporate founding in Hong Kong and discuss the benefits it offers as a gateway to the greater Asian market.
What Is a Limited Liability Company?
In Hong Kong, the private limited company is the most common legal structure for conducting business and trade. As a distinct legal entity, it is able to acquire assets, enter into contracts, accrue debt, and engage in activities under its registered name.
Company Structure
The share capital of a limited liability company is divided into shares of defined value. These shares are owned by shareholders, who receive dividends proportional to their ownership percentage if the company generates a profit. Nevertheless, shareholders might lose their investment if the company experiences a loss.
There are limitations on share transfers and public offering of shares. In addition, while there is no maximum number of directors, who can be individuals or corporations, the total number of shareholders is limited to 50.
The requirements
A private limited liability company must have at least one natural person serving as director. If there is only one director, that person cannot also serve as the required company secretary. If an individual, the company secretary must reside in Hong Kong, and if a corporation, it must maintain a registered office in Hong Kong.
Even if operations and shareholders are overseas, the company’s registered address must be in Hong Kong. This gives the organization legal jurisdiction.
Foreign Ownership of Hong Kong Private Limited Companies
Flexibility is one of the most significant advantages of establishing a company in Hong Kong for foreign investors. Hong Kong permits foreigners to own 100 percent of their private limited companies, granting them complete operational and managerial control. As the sole shareholder, you are able to make independent decisions with minimal bureaucratic interference, affording you greater flexibility in running your business.
In addition, having a limited liability company in Hong Kong enhances your credibility in the eyes of potential clients, business partners, and investors. Your company’s legitimacy and stability are enhanced by Hong Kong’s global reputation as a business center with a robust legal and regulatory framework, instilling confidence in your stakeholders. For foreign investors seeking to invest and establish a business presence in Asia, this credibility is indispensable.
Benefits of a Private Limited Company in Hong Kong
Hong Kong offers numerous advantages for businesses, such as:
1. Favorable Tax System
Hong Kong has one of the most business-friendly tax regimes in the globe. A significant tax advantage is the exclusion of foreign income from taxation, which allows individuals and businesses to retain earnings from overseas sources. This policy has strengthened the city’s position as a global center for commerce and investment by attracting international businesses and entrepreneurs.
In addition to foreign income exemption, Hong Kong’s Tax Holiday program provides a valuable incentive for small and medium-sized enterprises (SMEs). This initiative exempts new enterprises from paying profits tax on their first HKD 2 million in assessable profits for their first five years of operation.
In addition, Hong Kong does not impose a value-added tax (VAT), easing businesses of the obligation to charge or pay additional taxes on their goods and services. This is especially advantageous for businesses, especially those operating in countries with high VAT rates. By establishing your company in Hong Kong, you can reduce your tax liability and navigate the complexities of VAT with ease.
2. Access to Double Taxation Agreements (DTAs)
Hong Kong features an extensive network of Double Taxation Agreements (DTAs) with numerous countries, a significant benefit for businesses operating within the city. These agreements prohibit businesses from being taxed twice on the same income, thereby reducing their tax burden.
DTAs allow private limited companies to pay lower tax rates on certain categories of income, such as dividends, interest, and royalties, received from foreign countries.
3. No Restriction on Business Activities
Hong Kong imposes no restrictions on the business activities a company may pursue. Certain specialized circumstances, such as operating a travel agency, recruitment agency, financial services firm, or school, may require licenses from the appropriate approving authorities prior to beginning operations.
Requirements for Establishing a Limited Liability Company in Hong Kong
In order to setup a limited liability company in Hong Kong, you must comply with certain legal and regulatory requirements. Here is what is required:
1. Executive/ Director
Every limited liability company is required to have at least one director, who must be at least 18 years old and can be a local or foreigner.
2. Shareholder: A limited liability company must have at least one shareholder, with no restrictions on nationality or residency.
3. Invested Capital: There is no minimum share capital requirement, but it is typical to have an authorized share capital of HKD 10,000, represented by 10,000 ordinary shares priced at HKD 1.00 each.
4. Company Name: Your chosen company name must be distinct and not in use by any other Hong Kong-based business.
5. Registered Office Location: Your business must have a registered office in Hong Kong, which must be a physical address and not a post office box.
6. Corporate Secretary: Every Hong Kong limited liability company is required to have a company secretary who is either a Hong Kong resident or a corporate entity with a registered office or place of business in Hong Kong.
7. Annual Compliance Obligations: After establishing your company in Hong Kong, you will be required to comply with a number of annual obligations, such as filing annual returns, conducting annual general meetings, and renewing the business registration certificate.
Establishing an global business in Hong Kong with Iris International
The stages involved in establishing a limited liability company in Hong Kong with Iris International are as follows:
Step 1: Choose a name for your business that is distinct and available for registration. Iris International verifies name availability using the Companies Registry Search Centre.
Step 2: Iris International is going to prepare the necessary documents, including the Articles of Association, Incorporation Form (Form NNC1), and Notice to Business Registration Office (IRBR1), on your behalf. The documentation is then submitted to the Companies Registry.
Step 3: Iris International submits an application to the Business Registration Office for a Business Registration Certificate.
Step 4: Iris International assists you in establishing a corporate bank account for conducting business in Hong Kong in the fourth step. The bank receives the necessary documents, including the Articles of Association, Certificate of Incorporation, and Business Registration Certificate.
Step 5: Iris International submits an application to the Inland Revenue Department for tax registration.
We estimate that registering a company in Hong Kong will take between 3 and 8 business days.
Iris International Simplifies Abroad Business Registration
Iris International provides a vast array of services to corporations seeking to establish companies in Hong Kong. Our services include company registration, business registration certificates, corporate administrative services, bank account assistance, accounting and finance, tax and audit services, monthly payroll assistance, and serviced office space assistance.
By utilizing Iris International’s services, Hong Kong’s business registration procedure is simplified. Our team of specialists assists with all aspects of the registration procedure, ensuring that all legal requirements are met. We also offer ongoing administrative support, including bookkeeping, accounting, tax submission, and payroll administration.
In conclusion, forming a business in Hong Kong has numerous advantages, including a favorable tax regime, access to Double Taxation Agreements, and the freedom to engage in a variety of business activities. With Iris International as your partner, you can effortlessly navigate the process and capitalize on the benefits of conducting business in this dynamic global center.
Contact Iris International today to learn more about our incorporation services in Hong Kong and how we can assist you in business setup.
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