How to Start a Business in 10 Steps — 2024 Complete Guide

Starting a Business in Hong Kong

Hong Kong has a dynamic economy and established itself as a haven for startups and entrepreneurs looking to set up their own limited company. Not only that, but it's also a shopaholic's paradise and a breathtaking tourist destination. With all these enticing factors, it's no wonder Hong Kong is a fantastic place to kickstart your business and establish a private limited company.

1 Develop Your Idea 

Do some research on existing companies in that industry. Learn from the leaders and find ways to do things better. If you can offer something unique or provide the same thing faster and cheaper, you've got a solid idea.

Define your “why?”

Before diving in, ask yourself, "Why?", as Simon Sinek advises. Understand your motivation. Differentiate between personal and marketplace needs. A business driven by meeting a marketplace need has more significant potential.

Consider franchising

Consider another alternative: opening a franchise of a well-established company in Hong Kong. With a franchise, you'll benefit from an established concept, a loyal brand following, and a proven business model.

Brainstorm your business name

Stephanie Desaulniers, the owner of Business by Dezign and a former director of operations and women's business programs at Covation Center, advises entrepreneurs to write a business plan or brainstorm a business name before determining their idea's true value.

Identify your target audience

According to Desaulniers, one common mistake is diving headfirst into launching a business without considering who their target customers are and what would motivate them to choose their products or services.

She emphasises the importance of understanding why you want to serve these customers. By identifying these motivations, you can gain clarity on your mission.

2 Create a Business Plan

After solidifying your idea, it's time to ask yourself a series of important questions: What is the purpose behind your business? Who is your target audience? What are your ultimate goals? How will you secure the necessary funds to kickstart your venture? These questions can be effectively addressed through a well-crafted business plan.

Many aspiring business owners need to thoroughly contemplate these fundamental aspects.

Do market research

To create a comprehensive business plan, it is crucial to engage in extensive market research. This entails conducting surveys, organising focus groups, and delving into SEO and public data to gather valuable insights. Starting a business in Hong Kong will require tailored research compared to starting a business elsewhere.

Formulate an exit strategy

As you construct your business plan, it's wise to spare a thought for an exit strategy. Contemplating how you will eventually exit the business encourages you to consider its future in Hong Kong.

According to Josh Tolley, CEO of Shyft Capital and Kavana, new entrepreneurs often get caught up in the excitement of their business and assume that everyone will be their customer, neglecting to allocate sufficient time to plan their eventual exit. Not having predetermined exit routes can result in diminished company value and strained relationships.

Evaluate Your Finances

It's crucial to determine how you will finance those costs. Can you fund your startup from your resources, or will you need to secure a loan? If your plan involves leaving your current job to focus solely on your business, do you have savings until you start generating profits? What are the company registration costs? It's essential to ascertain the exact amount required for your startup costs.

Conduct a break-even analysis

Conducting a break-even analysis is a valuable approach. This integral aspect of financial planning aids business owners in determining the point at which their company, product, or service will become profitable.

A break-even analysis reveals the minimum performance required to avoid financial losses and provides valuable insights into the sources of your profits. Armed with this knowledge, you can establish production goals that align with your profitability objectives.

Keep an eye on your expenses

It's crucial to avoid excessive spending. Take the time to understand which purchases align with your business objectives, and refrain from splurging.

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Consider your funding options

The most suitable funding method depends on factors such as your creditworthiness, the required amount of funds, and the available options.

Choose the best bank

The institution's size plays a significant role. Founders of start-ups suggest considering smaller community banks in Hong Kong as a starting point. These banks have a better understanding of local market conditions and are more likely to work with you based on your overall business profile and character.

When choosing a bank in Hong Kong, it's important to ask yourself the following questions:

• What is important to me?
• Do I want a close relationship with a bank willing to assist in any way possible?
• Do I want to be treated as just another bank account, as is often the case with larger banks?

4 Choose the Right Business Structure

You have several options for choosing the appropriate structure.

Each structure has advantages and considerations, so it's important to evaluate your specific needs and consult with professionals to determine the most suitable option for your business in Hong Kong.

 Private Limited Company

The most common structure in Hong Kong is a private limited company. It offers legal entity status, providing liability protection for its owner. Ownership of shares in the company can belong to a single individual or multiple individuals.

Sole Proprietorship

Sole Proprietorship is the simplest form of ownership, owned and operated by a single individual with full financial control. However, as the company is not a separate legal entity, the sole proprietor is personally liable for all debts and has unlimited liabilities.

General Partnership

Partnerships involve two or more individuals jointly owning the business. In general partnerships, all partners have equal management rights. Like Sole Proprietorships, partnerships are not considered separate legal entities, meaning partners bear personal liability for debts and liabilities.

Limited Partnership

Limited Partnerships consist of both general and limited partners. General partners have unlimited liability, while the liability of limited partners is limited to their capital contribution to the partnership.

You can establish a wholly-owned subsidiary company in Hong Kong, which enjoys the same incentives, tax exemptions, and legal obligations as locally based companies. This subsidiary operates as a private limited company formed in Hong Kong.

Branch Office

Branch Offices allow foreign-based companies to establish a presence in Hong Kong. This structure provides a formal business setup, with the foreign parent company assuming responsibility for the branch office's debts and liabilities.

5 Register Your Business With the Government

It is essential to obtain the necessary business licences in Hong Kong. This typically involves registering your business with relevant federal, state, and local government entities. You must prepare and submit several required documents to complete the registration process.

Articles of Incorporation and operating agreements

You must undergo a government registration process to establish your business as an official and recognised entity in Hong Kong. For corporations, this involves preparing articles of incorporation documents. These documents provide crucial details, such as the business name, purpose, corporate structure, stock information, and other pertinent company information. Similarly, certain Limited Liability Companies (LLCs) may be required to draft an operating agreement that outlines the operational guidelines and structure of the company.

Doing Business As (DBA)

If you still need articles of incorporation or an operating agreement, the next step is to register your business name. In Hong Kong, you can choose your legal name, a fictitious DBA (Doing Business As) name if you are a sole proprietor or the unique name you have selected for your company. To enhance legal protection, you might also consider trademarking your brand name.

Employer identification number (EIN)

Obtaining an employer identification number (EIN) from the IRS may still be necessary, depending on your circumstances. While sole proprietorships without employees are not obligated to have an EIN, it is advisable to consider applying for one. Doing so allows you to separate your personal and corporate taxes and save you from potential complications if you hire employees. The IRS offers a checklist to help determine whether you need an EIN. If you need an EIN, you can conveniently register for one online at no cost.

Income tax forms

To meet your federal and state income tax responsibilities in Hong Kong, it is necessary to complete specific forms. The forms required depend on the structure of your business. It is important to visit the official websites of the relevant tax authorities in Hong Kong to obtain information regarding any specific tax obligations at the state or local level. Once you have all the necessary information, utilising reliable online tax software can assist you in accurately filing and paying your taxes quarterly and annually.

Federal, state, and local licences and permits

In addition to the requirements above, certain businesses in Hong Kong may need to acquire federal, state, or local licences and permits to operate legally. You should contact the relevant local government office or city hall to obtain a licence.

Certain trades and professions in Hong Kong mandate professional licences for businesses and independent contractors. A commercial driver's licence (CDL) is an example of a professional licence. This licence allows individuals to operate specific types of vehicles, including buses, tank trucks, and tractor-trailers. CDLs are classified into three categories: Class A, Class B, and Class C.

 6. Get Insurance Coverage

It is crucial to recognise the importance of acquiring appropriate insurance coverage — incidents such as property damage, theft, or customer lawsuits can have significant financial implications.

While considering various types of insurance, there are a few fundamental plans that most startups in Hong Kong can greatly benefit from. For instance, if you will employ staff, obtaining workers' compensation and unemployment insurance is essential to meet legal requirements.

It is generally advisable for SMEs in Hong Kong to acquire general liability (GL) insurance or a business owner's policy. GL insurance covers property damage, bodily injury, and personal injury to yourself or third parties.

7 Assemble Your Team

It's important to recognise that building a strong team is essential, especially if you don't plan on being the sole employee. Joe Zawadzki, a general partner at AperiamVentures, emphasises that entrepreneurs should dedicate the same level of attention to the "people'' aspect of their businesses as they do to their products.

 8. Select Your Suppliers

For aspiring entrepreneurs, managing every aspect on your own can be overwhelming. This is where third-party vendors can play a significant role. Regardless of your industry, some companies specialise in various services, such as HR or accounting services, and are dedicated to partnering with you and enhancing your corporate operations.

There are certain products and services that almost every business will need. Consider the following essential functions:

• Enabling multiple customer payment types: Providing customers with various payment options ensures convenience and increases the likelihood of making a sale. Compare different credit card processing providers to find the one that offers the best rates for your business, as small business credit card processing can directly contribute to revenue growth and expand your customer base.
• Facilitating customer payments: Set up a state-of-the-art point-of-sale (POS) system to streamline sales transactions. The best POS systems combine payment technology, including credit card processing, with inventory and customer management features. This becomes especially important if your business sells products rather than services.
• Managing finances: While many business owners handle their own accounting functions during the initial stages, as your business grows, hiring an accountant or selecting the right accounting software provider can save you valuable time and streamline financial management processes.

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9 Establish Your Brand and Promote It

For individuals looking to start a business in Hong Kong, it is crucial to establish a strong brand presence and cultivate a loyal customer following even before launching your products or services.

• Company website: Take your business online by building a company website. As many customers rely on the internet to learn about businesses, a website serves as digital proof of your small business's existence. It also provides a platform for engaging with current and potential customers.
• Social media: Use social media platforms to generate buzz and spread awareness about your upcoming business. Consider using social media as a promotional tool to offer exclusive coupons and discounts to your followers upon launching. Select the social media platforms that align with your target audience.
• CRM (Customer Relationship Management): Implement an effective CRM system to store customer data and enhance marketing strategies. A well-planned email marketing campaign can greatly contribute to reaching and engaging with customers. It is crucial to build your email marketing contact list strategically.
• Logo: Create a distinct logo representing your brand and use it consistently across all your platforms. A recognisable logo helps customers easily identify and connect with your brand.

Ensure your digital assets are regularly updated with relevant and captivating content related to your business and industry. According to Ruthann Bowen, chief marketing officer at EastCamp Creative, many startups underestimate the value of their websites and see them as expenses rather than investments. In today's digital age, this mindset is a significant mistake.

10 Expand Your Business

For individuals embarking on their entrepreneurial journey in Hong Kong, it is important to recognise that the launch and initial sales of your business are just the beginning. To sustain profitability and thrive, continuous business growth is essential. This requires dedicated time and effort, as the outcomes of your business directly correlate with the input you invest.

One effective strategy for achieving growth is collaborating with established brands in your industry. Reach out to other companies and propose mutually beneficial partnerships, offering free product samples or services in exchange for promotional support. Additionally, consider partnering with charitable organisations and contributing your time or products to enhance your brand visibility.

Why Set Up a Company in Hong Kong?

When considering why you should establish your business in Hong Kong, there are several compelling reasons beyond the city's abundance of attractions and breathtaking natural beauty. Hong Kong's jurisdiction, culture, and business environment present unique advantages for entrepreneurs.

Streamlined and Cost-Effective Setup Process

Registering your company in Hong Kong is seamless and affordable. It only takes 48 hours to complete, making it one of the fastest in the world. Hong Kong's business regulations also offer numerous benefits uncommon in other countries. These include no minimum registered capital requirement, no necessity for a local director, no restrictions on foreign investment, and more.

Dynamic Business Environment

Hong Kong is renowned for its vibrant business landscape, ranking as the third most competitive economy according to the World Economic Forum's Competitiveness Index 2019. Many entrepreneurs choose Hong Kong as a strategic gateway to expand their businesses throughout the region. With a thriving community of 340,000 SMEs and a bustling startup hub, the city fosters innovation and offers excellent growth opportunities. Moreover, the Hong Kong government has committed to investing HKD 100 billion in innovation and technology, further enhancing the business ecosystem.

Favourable Taxation System

Hong Kong's business-friendly tax structure is another compelling advantage. Corporate tax is only 16.5%, with the first HKD 20,000 of profit being exempted. Additionally, no value-added tax (VAT) or tax on capital gains provides further business incentives.

Affordable Social Charges

In Hong Kong, companies are not burdened by monthly social charges, with the maximum payment capped at HKD 1,500 per employee. This favourable arrangement helps businesses maintain a cost-effective approach while operating in the city.

Hong Kong’s Economic Growth

The dynamic economy of Hong Kong serves as a primary motivation for entrepreneurs looking to start a business in the city. Hong Kong's economic freedom ranks high both regionally and globally, and several key factors influence it:

1. Favourable Economic Policies: Hong Kong implements policies that promote business growth and encourage investment, fostering an environment conducive to entrepreneurial success.
2. Transparent Legal Laws: The legal system in Hong Kong is known for its transparency and reliability, providing a solid foundation for conducting business operations with confidence.
3. Open Market: Hong Kong boasts an open and competitive market, offering many opportunities for businesses to thrive and expand. This market openness facilitates trade and encourages innovation.
4. Efficient Regulatory Systems: Hong Kong is recognised for its efficient regulatory frameworks, enabling businesses to navigate processes smoothly and with minimal bureaucracy. This efficiency streamlines operations and supports a conducive business environment.
5. Protection of Property Rights: Hong Kong upholds the security of property rights, ensuring that businesses can operate confidently and safeguard their intellectual and physical assets.

By capitalising on these factors, entrepreneurs can tap into the vibrant and dynamic economy of Hong Kong, benefiting from its economic freedom and conducive business environment to launch and grow successful ventures.

Investment Opportunities in Various Sectors

Starting a business in Hong Kong is comparatively easier than in other countries. The registration process is streamlined and cost-effective, making it an attractive destination for entrepreneurs with well-defined business plans. As a result, the region has witnessed a surge in start-ups, positively impacting the local economy. Hong Kong is experiencing notable growth in various sectors, including:

1. Information & Technology: The tech industry is thriving in Hong Kong, with advancements in software development, artificial intelligence, and digital innovation driving its growth.
2. Ecommerce: The rise of online retail has created opportunities for ecommerce businesses in Hong Kong, leveraging the city's robust logistics infrastructure and tech-savvy consumer base.
3. Hardware: Hong Kong serves as a hub for hardware manufacturing and innovation, attracting businesses involved in electronics, consumer goods, and hardware development.
4. Financial Technology: The fintech sector is flourishing in Hong Kong, with companies specialising in digital payments, blockchain technology, and financial services revolutionising the financial landscape.
5. Professional Services: Hong Kong's position as a global financial centre has fostered the growth of professional service providers, including legal, consulting, accounting, and advisory firms.
6. Healthcare: The healthcare industry is expanding in Hong Kong, driven by advancements in medical technology, pharmaceuticals, and healthcare services.
7. Data Analysis: The demand for data analysis and business intelligence solutions is rising in Hong Kong, with companies specialising in data-driven insights and analytics experiencing significant growth.
8. Education and Learning: Hong Kong is witnessing developments in educational technology, e-learning platforms, and specialised training services to cater to the continuous learning needs of individuals and businesses.

By venturing into these growing sectors, entrepreneurs can capitalise on the thriving business landscape of Hong Kong and contribute to the region's economic prosperity.

Appealing Government Policies and Programs

Foreign investors are attracted to jurisdictions where the government actively supports business ventures. In Hong Kong, foreign entrepreneurs can have full ownership of their businesses, granting them the opportunity to hold top executive positions within their companies. The Hong Kong government has established InvestHK, a dedicated department that provides free investment promotion and valuable services to foreign companies. This initiative aims to facilitate the growth and success of businesses operated by foreigners in Hong Kong.

Hong Kong’s Geographical Location

Located in Central Asia, Hong Kong serves as a gateway to various trade markets, notably mainland China. Its strategic position is a significant factor that attracts investors to the region. The accessibility Hong Kong provides to diverse markets is highly appealing to investors eager to expand their business. With its advantageous location, Hong Kong presents abundant opportunities for businesses seeking growth and expansion.

Exceptional Banking Services

Foreign investors in Hong Kong can take advantage of the availability of multi-currency bank accounts. Hong Kong's banking sector is renowned worldwide for its exceptional services. In addition to the comprehensive range of banking facilities, Hong Kong maintains a comparatively low corruption rate compared to countries such as the UK, USA, and Germany.

Lower Taxation Burden

Hong Kong stands out with its exceptionally low corporate tax rate compared to other countries. Moreover, no VAT or dividend sales taxes are imposed in Hong Kong. The current tax rates in Hong Kong are 16.5% for profit tax, 15% for property tax, and 15% for salaried taxes. This favourable tax regime established by the Hong Kong government is a significant driving force behind the increasing number of companies choosing to expand their business in Hong Kong.

Government’s Special Initiatives

To draw foreign investment, the government has implemented effective programs that have yielded successful results. Recognising the direct correlation between investment and economic growth, the Hong Kong government has supported foreign investors.

The government of Hong Kong has established various special programs, including loan funding, market funds, and incubator programs, specifically designed to attract foreign investors. These initiatives have proven to be enticing factors for foreign investors considering business opportunities in Hong Kong.

Apply for a Visa To Start a Business in Hong Kong

The wait to start a business in Hong Kong is worthwhile considering the numerous advantages it offers. With attractive government initiatives and a rapidly growing economy, Hong Kong has the potential to enhance your company's financial prospects significantly.

Before venturing into the Hong Kong market, it is important to understand its dynamics. Establishing professional contacts for supply and sales and improving your Chinese language skills can be achieved by setting up a representative office. However, patience is key, as building a successful business takes time. It is crucial to have a comprehensive business plan in place. Rest assured, our team of highly experienced professionals is here to guide you in areas such as accounting, taxation, and consultancy, ensuring local support throughout your journey.

To invest or seek employment in Hong Kong, you must apply for a visa. This entails completing a visa application form and meeting specific educational and professional qualifications requirements. A clean criminal record is also necessary.

You can access the visa application form (ID 999A) from the Immigration Department's website and submit it online. The required documentation includes a copy of your passport photograph, passport copy, evidence of your educational and professional qualifications, and a two-year business plan. Background information about your business should also be provided.

Hong Kong Business 101: The Official Stuff

The Hong Kong government imposes certain obligations on businesses. Here is a summary:

1. Local Address: You must have a physical address in Hong Kong for your business. P.O. boxes are not permitted.
2. Corporate Secretary: You are required to appoint a local corporate secretary. They ensure compliance with government regulations and document any structural or managerial changes.
3. Business Registration Certificate: To formalise your business, you must obtain a Business Registration Certificate, which must be renewed annually. Contact the Business Registration Office at the Inland Revenue Department for this purpose.
4. Local Director: You must maintain at least one director for your business, who can be a local resident or a foreigner. The director must be at least 18 years old.
5. Shareholder: Your business should have at least one shareholder, an individual or an entity. If the shareholder is an individual, they must be at least 18 years old.
6. Annual General Meeting: Hold an Annual General Meeting and keep a record of the meeting minutes.
7. Accurate Accounting Records: Maintain precise and detailed accounting records, including receipts, payments, income and expenditure, invoices, bank statements, and a daily record of money received.

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