Written By: Peony Wong @ Ooosh Coworking
Whether you are a local entrepreneur in Hong Kong, or an overseas brand about to set up a regional office in this global city, there are both administrative and cultural factors that you can address to help your business succeed. This guide helps entrepreneurial-minded individuals and teams strategically approach doing business in Hong Kong, from checking off administrative boxes, to longer-term business decisions, such as talent recruitment, B2B and B2C market considerations, local marketing channels, as well as business culture.
This post includes the following:
FAQ for starting a business in Hong Kong
Getting to know Hong Kong’s startup ecosystem
Setting up a company
Accounting
Recruitment
Local market culture: B2B and B2C
Marketing
FAQ for starting a business in Hong Kong
Before we dive into business considerations, here are some quick answers to common questions from overseas entrepreneurs and businesses:
Do I need to live in Hong Kong to start and run a company?
No, and you do not need to be a Hong Kong resident. If you have a co-founder who is a local resident, it will simplify some administrative processes, such as opening a bank account.
Do I have to open a Hong Kong bank account?
Registering a company in Hong Kong and opening a bank account are separate steps. You can register a company without opening a bank account. However, if you intend to be doing business in the city, it is more advantageous to open a local bank account.
How long does it take to set up the company.
There are now three ways to set up a company. They include the following:
24-hour e-Registry portal
via the “CR eFiling” app (available on iPhone and Android), and
delivering hard copy documents in hard copy with payment for the direct fees.
Online applications can now be completed in about one hour while hard copy applications usually take four working days. Please note that these times are estimates and could vary case to case. You can also look into a pre-incorporated company or local agencies that can help you complete the business registration and set up a bank account for a fee.
Getting to know Hong Kong’s startup ecosystem
Hong Kong has a vibrant startup, tech, and small medium enterprise (SME) ecosystem. Entrepreneurs and founders doing initial research should also look into government support from InvestHK, startup hubs such as WHub, and startup community events on StartupGrind and Eventbrite to get a sense of the business landscape. Ooosh has seen our community members, from local startups to global brands, gain industry networks and resources by tapping into Hong Kong’s entrepreneurship ecosystem.
Tip 1: Use major events as launchpads
Sign up for key startup, tech, and industry events in town, such as the RISE Conference or StartMeUpHK, and make sure to attend satellite networking events. Events can range from socials at bars to invitation-only talks at coworking spaces. Staying a few extra days can help with follow-up meetings that cement business opportunities.
Tip 2: Visit coworking spaces to see if they have a business culture fit
Hong Kong has over 200 coworking spaces, each with their unique offering and community. Don’t work out of cafes. Instead, ask co-working spaces about their short-term passes, such as Ooosh’s hot desk pass, which is designed to let businesses get a taste of our coworking culture and meet other businesses and potential partners. As a tip, reach out to coworking spaces before your visit and ask them to introduce members who may have synergies with your business.
Tip 3: Leverage Hong Kong’s accelerator programs
Hong Kong has a formidable list of startup accelerators, from early-stage to growth stage. Increasingly, accelerator programs have become industry focused, such as ones for FinTech and AI. Where relevant, apply for one to land in Hong Kong with support system. Do your research on the past cohorts for each accelerator, but here are some to start: SuperCharger Fintech Accelerator (FinTech), Brinc (IoT), HKAI LAB (AI), zeroth.ai (AI), Betatron.
Setting up a company
As our guide is aimed to help you map out the high level considerations for your business to succeed, we encourage you to search for step-by-step guides for setting up your company. The Hong Kong Government website also provides detailed information. Apart from taking the necessary steps of deciding on a legal company name, registering and incorporating your business entity, opening a bank account, and applying for the relevant permits and licenses, you should also consider the implications of administrative decisions for your business in the long-term.
In Hong Kong, there are four business entities: a sole proprietorship, a Limited Liability Company (LLC), Partnership, and Foreign Company Office. In most cases, the LLC is the best choice. The fastest way to set up a company in Hong Kong is to search for a service provider to help you register one for a fee, especially if you are not already in Hong Kong. When comparing across service providers, check the scope of services included, which may affect your company administrative work later on.
Assuming you are setting up an LLC, we have outlined considerations for business requirements:
Assuming you are setting up an LLC, we have outlined considerations for business requirements:
Company Secretary: This can be a person or company, which handles annual returns to the Hong Kong government. They should also handle related amendments in Board of Directors & Transfer of Shares.
Accounting: Filing annual returns requires a certified accountant. Also seek an accountant to provide taxation advice if your business involves overseas income.
Legal Solicitors: If your business involves IPR or government licensing, seek an appropriate solicitor. A reliable solicitor should be able to assist you items such as Articles of Association, Shareholder's Agreement, Employment Contract and IP matters.
Accepting Payments: Having a local bank account significantly helps with local bank transfers, salaries, and payment handling. For digital payments, Paypal and Stripe are both available in Hong Kong.
Summary Tip: Source reliable professionals through coworking spaces that have a focus on company founders and local SMEs, rather than places that cater to freelancers, agencies, or global brands. For example, the Ooosh Mentor and Ooosh Connect programs introduce network members to help businesses find relevant advice and services, from accounting and legal work, to fundraising and software development agencies for a prototype.
Accounting
All business entities apart from a Sole Proprietorship require annual tax filing with audited accounts by a certified accountant. Hong Kong’s profits tax is quite low at 8.25% for the first HK$ 2 million and 16.5% for revenue over HK$2 million, as outlined in the Inland Revenue Department website. Importantly, Hong Kong has no capital gains tax. The Hong Kong Government has also announced various tax incentives for technology companies in the 2019-20 Budget, which may be applicable for some business.
Finally, note that non-residents working in Hong Kong are liable to salaries tax, but not all income is chargeable.
Summary Tip: If you are registering an LLC, consider finding an accountant in addition to the basic accounting and auditing services provided by an agency that sets up your company. An experienced accountant will be able to advise you on how to best to optimise your tax returns.
Recruitment
After setting up your company, a key to local business success is hiring local talent. In addition to finding team members who are a cultural fit for your company, also consider their familiarity with the local markets that you are targeting. Below are some job boards that Ooosh and its members have found useful for recruiting local and expat talent in Hong Kong:
LinkedIn: For mid-senior level posts. Non-technical talent.
WHub: For junior to senior posts. Technical and non-technical talent.
Angellist: For junior to senior posts. Technical and non-technical talent.
Wantedly: For junior posts. Non-technical talent.
For local-focused positions, JobsDB is a popular job board for junior to senior posts with non-technical talent.
If you plan to hire employees, please note that employers must enroll employees in Mandatory Provident Fund (MPF) Scheme and that the legal working age for full-time or part-time staff is between 18-65.
Summary Tip: If you are registering an LLC, consider finding an accountant in addition to the basic accounting and auditing services provided by an agency that sets up your company. An experienced accountant will be able to advise you on how to best to optimise your tax returns.
Local market culture: B2C and B2B
The generalisation that Hong Kong is an East-meets-West city is not necessarily enough to provide actionables for businesses entering this market. Understanding the specific nature of how the cultures meet can help new businesses win the hearts of local users and customers
Localised Chinese is crucial to business
One crucial factor in Hong Kong, as well as its neighbouring markets of China and Taiwan, is language. Below are two important numbers from the Hong Kong 2016 Census:
93% of inhabitants speak some dialect of Chinese
88.6% of inhabitants speak Cantonese
Dialects are a crucial part of regional identity, and for both your future team members and customers to feel that you understand their culture. Consumer-facing marketing should take care to create localised Cantonese content. Copywriting should accurately reflect the target region, whether it is Singapore and China’s Simplified Chinese, or Taiwan’s Traditional Chinese.
B2C Businesses
For retail brands, fashion labels, household consumer goods, and other B2C businesses should note that Hong Kong as a 97% mobile penetration rate, with a global ARPU standard. Mobile leads as the main platform for internet browsing, according to a 2018 report by Nielson. For this reason, companies entering the Hong Kong market should take into account the following:
Price sensitivity: Local consumers will check price.com.hk Preference for imported goods: Consumers especially like products from Japan
Prevalence of cash: Many brands have O2O strategies and special cash offers
Popularity of mobile payments: AliPay, WeChat Pay and Apple Pay, and the local app PayMe by HSBC
B2B Businesses
For companies doing B2B business, Hong Kong’s dominant industries include financial services, real estate, tourism, and logistics. According to the Hong Kong Government, 98% of business establishments in Hong Kong are SMEs and they employ over 46% of the private sector workforce.
Businesses that are establishing themselves in Hong Kong should take into account Hong Kong’s business culture, including:
Communication tools: Whatsapp is a common business channel
Cultural practices: Face-to-Face discussions are best for delicate or urgent matters
Working languages: For local staff, English is often the official business language, and used in e-mails and messages. Cantonese is usually office language.
Payments: New customers are expected to make upfront deposits and terms can be negotiated after a relationship is established
Summary Tip: Founders should have a clear idea of their business model in order to address Hong Kong’s business culture, from consumers and clients through to managing a growing team.
Marketing
Finally, understanding the marketing landscape in Hong Kong is essential for building a successful local business.
In Hong Kong, Facebook generally has the greatest reach, as both English and Cantonese speakers use the platform extensively, for personal and business purposes. Whatsapp is also a frequently used channel for direct marketing as well as customer service. High-touch ecommerce companies should consider offering these communication. Social media users above the age of 30 generally use Facebook, while those under have gravitated towards Instagram in recent years. However, Hong Kong users are less engaged with posts on Facebook and do not give “likes” or leave comments unless there is a direct benefit from doing so (such as being entered into a lottery). Popular English social media platforms such as Twitter, Pinterest, and Snapchat are not widely used in Hong Kong.
Search marketing and SEO is not as mature in Hong Kong when compared to places like the US, which may be an opportunity for new companies to quickly acquire new customers. Note that locals who are above the age of 30 still use Yahoo!, while those below will likely use Google.
Finally, offline marketing remains important in Hong Kong. Major outdoor signage companies include JCDecaux, POAD, CODY, and Roadshow. Printed and digital editions for press, such as the SCMP and Apple Daily, and magazines remain important marketing channels as well, even for major technology companies.
Summary Tip: Hire a local manager or marketing team member so that they can create tailored content for the Hong Kong market.
While Hong Kong is a Westernised market in Asia, the best way to navigate the city’s cultural nuances is to broaden your business networks through exposure and casual settings. As you prepare to build your business in Hong Kong, it is important to remember that there is no silver bullet business model. Instead, leverage your unique networks and find suitable partners who can help you attract local talent, introduce business partners, and reach customers.
If you are a founder looking to build your startup or open an office in Hong Kong, reach out to business networks, startup communities, and coworking spaces to learn what ecosystem supports can benefit your business.
Feel free to reach out to our team (ask@ooo.sh) if you are looking to set up a company in Hong Kong. We’re looking forward to sharing our knowledge, learnings, and experience with you.