Starting my own company in Hong Kong has been a long process. When I started to think about opening ZhuZhu Limited, I had a lot of questions and not enough answers.
I’m the kind of person that tends to do a lot of research before taking action. This is the case for something as simple as buying a new pair of headphones, to, well, starting my own company.
Why Hong Kong?
Before we get into the why, a little background about myself.
First, I’m a US citizen that has been living and working in east Asia for the past four, almost five years. Since 2016 I’ve lived and worked in China and developed connections, both friendships and business relationships.
Eventually, I secured my first real gig as a software developer with Georepublic. After working with them for a few months, I knew that I wanted to quit my teaching career and focus on developing my new career in software.
I knew that at some point, perhaps a year from now, I would want to secure an extra contract or two, perhaps even hire someone to help me out, and maybe even help Georepublic expand the Sensor Atlas project beyond their current market. The best way to do this would be to start my own business, one that can (hopefully) become useful in east Asia, especially in Japan, Taiwan, Hong Kong, and mainland China.
Methods to open a company in Hong Kong
Quite frankly, I found there were only two surefire ways for a foreigner to open a limited company in Hong Kong.
1) Do it on your own. Go to the offices yourself and do all the legwork.
2) Hire a company to do all the work for you.
Option One: It will cost about $500-800 USD in HK government fees, getting a virtual office address for registering your business address, certified paperwork for bank accounts, etc.
Obviously, if you live in Shenzhen / Guangzhou, then it might just be worth spending the time to go to Hong Kong and doing it yourself. Having friends will help. This will be, by far, the cheapest way to do it.
However, most of us looking to open a Hong Kong based Limited company do not have that luxury.
Option Two: Hire a company to help with the start-up process.
Research and Indecision
Quite frankly, whenever I wish to make a big decision involving money, I do a lot of research. Money can be tight, especially when starting a company.
I suspect that many people have the same problem that I do; Who do I trust with my money?
I read a lot of articles about which company to help me with the opening process. I came across two companies that I found to be the best: Startup-Registry and Bridges.
This guy already wrote about how he set up shop with Bridges.hk. The article is a few years old however, and their price has increased since then. It’s about 18000HKD to start up a company with Bridges, including a virtual office.
Personally, I went with Startupregistry.hk (also known as Startupr.hk). Startupregistry is a bit cheaper than Bridges by a few hundred USD.
Identify, Research, Execute!
Well, I hope that I can help you, dear reader, with the research.
Between Startupregistry and Bridges, I found Startupr to be the cheapest. However, it wasn’t all smooth sailing. There are a couple of things to keep in mind.
First, the requirements. Let’s keep that short and simple:
1) Director and Shareholders. As a foreigner, you can be the sole director and shareholder (you hold 100% of shares)
2) Share Capital. Minimum is 1000 shares, and you can do 1000HKD in shares (One HKD per share). Some companies (like Bridges) will ‘recommend’ 10,000HKD in shares, but that is not a requirement. To keep costs down, 1000HKD is my recommendation.
3) Scanned copy of your passport.
4) Registered address. StartupR will provide this for free (Bridges as well, I believe, will do this). Note that this does not fulfill the requirements set by a Hong Kong bank.
5) Company secretary. StartupR and Bridges will provide this.
And that’s basically it. If that’s all you need, then StartupRegistry will be a cheaper option versus Bridges.
Here’s the Kicker
Do you want a Hong Kong bank account? If so, be prepared to spend more money!
Unfortunately, StartupR doesn’t make it obvious that you need a business address specifically for invoicing, contracts, mail, and, most importantly, registering a bank account. So you will spend $399 USD to purchase that service.
This is pretty useful though. With this service, the people at StartupR will hold on to your physical mail and send it wherever you need it to go, or they can scan and email it to you. That service alone will be quite useful if you feel you will need a business mailing address.
However, it is a requirement if you want to get a bank account in Hong Kong.
Hong Kong Bank Account
First of all: if you are a US citizen like me, you are going to have a very hard time getting an account in Hong Kong.
So far I have found only two possibilities: Neat.hk, and OCBC Wing Hang.
Neat.hk is fairly simple to set up. You can get both a personal card and a business account. I won’t go into the process here, but it’s quite simple and they give you all the information that you need on their website.
OCBC Wing Hang, and any other Hong Kong bank, is going to be a lengthy process.
A couple of points that you need to know about Hong Kong Banks : the majority of them will want some sort of established history. This means phone or utility bills being mailed to your Hong Kong business address.
OCBC Wing Hang does not have this requirement. They are also complient with FATCA, which is the US’s way of butting into everyone’s business as they try to keep track of busy people like you and me (and subsequently make our lives harder).
StartupR will give you a list of things to know before you have your interview with the bank. Suffice it to say, be prepared and look good.
Personally, I gave them a signed contract proving that I was already doing business. I made a business plan. I gave the bank my CV. Essentially, I tried my best to make myself look like a good candidate for a business bank account.
Oh yeah, I also wore a good suit.
Simply put, the bank is interviewing you to make sure you aren’t there to just launder money. My own interview lasted about 20 minutes, where they asked me questions about my past, the work I’m doing, my current contract, and so on. They also gave me information about the bank.
As of today, I’m waiting for word on whether I am approved or not. I am not holding my breath; although the interview seemed to go well, it will take up to six weeks to receive a reply.
I will update this section once I hear back from OCBC.
Hong Kong has a pretty great tax law. Any money made from within Hong Kong is taxed at 8 or 15%, depending on the amount of money for that year. However, foreign income is not taxed.
This is great for freelance developers or other kinds of remote workers. As long as your income doesnt come from any Hong Kong clients, you will not be taxed.
US Citizens still get taxed
Yes, we all know about the foreign income exclusion. If you are a US citizen, you will not be charged income tax, as long as it’s below 100k per year. However, you are still required to pay 15% of your net income towards social security and medicare because you are now self-employed.
Yes, it sucks. I learned about this recently when I was talking to my tax accountant back in the States. However, keep in mind that this is 15% of your net income (not total income). So, deduct as much as you can. Keep all your receipts. A lot of your expenses can be deducted, and that tax won’t be as bad in the end.
Do you really need a Hong Kong business?
This is a pretty serious question. If you are an expat like me, and are doing business in east Asia or other countries, you don’t necessarily need a Hong Kong based business. In fact, for US citizens, it might be better (and cheaper) to just register a business in the States, and use your States-based bank account.
However, if you intend to do business in Hong Kong or mainland China, then having that business (and subsequently, the bank account) can be very beneficial. Being based in Hong Kong gives you easier access to mainland China. People who see your Hong Kong registered business will trust you a bit more easily than, say, Estonia.
Finally, having a Hong Kong account can be good if you intend to invest some money in RMB.
I’ll update with more information!
This is just the start for me. I will update this article from time to time, especially once I hear from OCBC about my bank account. Hopefully I am able to get it!
If you have any questions, please let me know!