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Company Formation in Hong Kong

So you've decided to start a business in Hong Kong and researched your market. Now it's time to decide how you will register or set up the business in Hong Kong. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

The most popular form of incorporation is a limited liability company. Here are your typical options when starting a business in Hong Kong:

Limited Company

With just four days required to process an application, a limited company shares all of the tax benefits and concessions available to incorporated businesses in Hong Kong. The company can have between one and fifty shareholders and the liability is limited to the amount invested in the business. The company must have a registered office in Hong Kong and a company secretary who lives in Hong Kong needs to be appointed, to carry out tasks such as accounts, legal returns and audits.

Branch Office or Parent Company

A branch office can be established to carry out business on behalf of an overseas company expanding to Hong Kong. Registration is required within a month of setting up the branch and there is an application fee of HK$1,720 plus a fee of HK$20 for the registration of each document. The registration certificate cost HK$2,600 for a year.

Representative Office

Similar to a branch office but a representative office is not permitted to conduct business transactions in Hong Kong (generally they are used for researching a potential market venture). As with a branch office, registration is required within one month of setting up the business.

Partnerships/Sole Proprietorships

This form of business makes the proprietor or partner liable for any losses the company makes. A partnership is allowed a maximum number of 20 partners and a Business Registration Certificate, costing HK$2,600, is required for a both types of company.

Exporting

Exporting should be a natural step for any successful business. It not only abates reliance on your indigenous customers, but also allows for greater market reach and profit. But, as with most things in business, the theory is easier than the practical. Exporting can pose an entirely different set of problems than your business is used to.

Licensing

Licensing is the permission for someone else to use your intellectual property rights: either a patent, trademark, trade secret, or copyright. Different types of license include:

Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

Patent License - The allowance of another party to use your patented product, design or process.

Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.

Franchising In Hong Kong

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in Hong Kong include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in Hong Kong: although few, rely predominantly on your franchisees.

They include: poor quality franchisees; franchisees not declaring all income; poor performance.

Close to the target markets of Asia and the Chinese Mainland, Hong Kong offers a window into franchising opportunities and brands in the region. McDonalds and Tie Rack have established a presence in Hong Kong and it is a popular way for businesses to expand into the market. The HKCG (The Hong Kong General

Chamber of Commerce) has a specific website for franchising, offering assistance and information regarding franchising events, operators and regulations.

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