By Scott Thomson, Chief Operating Officer, Links International
Hong Kong has an inspiring energy and is a fantastic place in which to set up a business, as well as to work and live.
Consistently named as one of freest economies in the world and within close proximity to so many emerging markets in Asia, Hong Kong is a compelling place to set up a company. The sheer pace and volume of business in Hong Kong can be somewhat confusing at first! So, once you’ve come up with your amazing business idea and strategy, how do you make it all happen and set up your business in Hong Kong?
Here’s our list of essential aspects to cover when setting up your business in Hong Kong!
1. People – visa application, hiring and payroll in Hong Kong!
Can foreigners work in Hong Kong? How do I hire people? How do I pay people?
If you are a foreigner setting up a business in Hong Kong, sorting out your Hong Kong employment visa or investment visa is essential. At a high level, you legally cannot take any employment in Hong Kong, whether it’s paid or unpaid, without a working visa or investment visa. Accordingly, ensuring that you can obtain a visa as quickly as possible is critical to getting to market fast and a Hong Kong immigration or visa expert is a great way to free yourself from visa-related admin when you need to be focusing on business growth. In general, to work in Hong Kong on an employment visa you need to:
- have an in-demand skill set;
- hold at least a university degree with at least two to three years’ relevant experience; and
- generally speaking, earn over HKD20K to HKD25K per month (note: this is not an explicit amount from Hong Kong Immigration but is based on our experience).
There are a number of exceptions to needing an employment visa in Hong Kong. For example, speakers at conferences – read more here. In addition, investor visas are also obtainable for investors who do not want to be employees and satisfy certain requirements in terms of business, amount of investment etc. Take our instant visa assessment or contact us to find out more.
Once you start to develop or sell your product, you are probably going to start hiring people too (or say goodbye to your life as you know it!). Hiring the right people first time is critical to the success of a new business in Hong Kong and making a quick hire, without undertaking a proper recruitment process, will set you back three to six months, by the time you spend time finding people, waiting for a one-month notice period and take three months to realise that the person isn’t the right fit.
Once onboard, your newly hired Hong Kong employee is going to expect to be paid and Hong Kong has a lot of employment laws, MPF rules (Hong Kong pension) and tax calculations that need to be complied with. Outsourcing your payroll calculation to an HR expert in Hong Kong is a great, cost effective and flexible way of removing the distractions associated with keeping on top of your payroll calculation, changes in employment law and paying employees in Hong Kong. Links International was voted Best Payroll Outsourcing Partner in 2015 and 2016 and has start-up and SME packages that include recruitment, visa applications, payroll calculation, standard employment contracts and HR helpdesk support.
2. Legal – Company setup, useful contracts, protection of Intellectual Property
What legal entity is right for me? How do I protect my idea and IP?
Getting the right company structure first time is hugely important to ensuring you have the appropriate vehicle to move your business forward and achieve your commercial goals in a tax efficient manner. The appropriate entity for your business will depend on your business goals in Hong Kong (for example, what are your exit plans? What countries will you operate in?) and may change as your business grows. For example:
- Investor contracts – when in startup phase, any investors you have will want appropriate investor agreements in place to ensure clarity in respect of their investment. Sending a set of copied and pasted investor agreements that are completely inappropriate is a great way to sink any impressions of professionalism and a good investment your potential investors had of you.
- Protection of IP – if you are developing a technical product, you are going to need to protect your intellectual property, including your trademark, patents etc., before your idea springs up across the border.
The key here is to consult people early and invest a little resource up front to get everything right and save a lot of time and money down the road (note your initial consultation should be free). Cost efficient ‘new law’ partners are a great alternative to traditional law and accounting firms, and good people we have worked with in this space who have start-up/SME tailored packages include Korum Legal and Dragon Law.
3. Marketing – Creating brand awareness and generating leads
It’s such a good idea but no one knows about it!
Nearly all start-ups and SMEs face the initial challenge associated with setting up a business in that they have a great product but no one knows about it. Cashflow is king when you are setting up a business in Hong Kong, so creating brand awareness early on and getting the leads coming in is essential. At Links International, we are massive fans of online and inbound marketing and having an online presence and a great search engine ranking is massive for generating leads (approximately 50%+ of Links’ leads come from inbound online enquiries).
Where to start with your online marketing? The key here is to start early! If you don’t have a website, get one up ASAP – your website doesn’t need to look like a massive MNC’s website from day 1! Start a blog and start writing targeted content aimed at answering the questions your new Hong Kong business solves for clients. In general, the content you write can take anywhere from three to 12 months to start ranking well on search engines and start making an impact for you in terms of lead generation, so, the earlier you start, the better. In addition, running well targeted events and participating in relevant conferences, vendor shows, or demonstrations is great for creating brand awareness, as well as getting new ideas and meeting people and other companies that you could potentially partner with.
There are, of course, tons of other marketing channels that you can explore (e.g. influencer relations, awards, agency fees etc.) and approaching a marketing agency or adopting a marketing platform is a good way to prioritise your efforts and spend. We work with a ton of partners in this space and are happy to chat about the right partner, depending on your setup.
4. Accounting – Making sure you don’t run out of cash
Tracking your success in financial terms.
If you haven’t got a budget in place or aren’t able to track your spending, or monitor your cash flow, you are probably going to run into serious financial problems soon! While this may seem like common sense, the number of brilliant sales people and entrepreneurs that we meet who set up a business in Hong Kong but don’t track their finances well enough is all too common. Keeping your accounts in order may not be top of your priorities list, but it is essential to a successful business in Hong Kong. If accounting isn’t your skillset, getting a simple accounting system in place that is built for SMEs is crucial!
Some of the best accounting platforms that are common in Hong Kong and which we love are QuickBooks Online, Peachtree and Xero (the most recent entrant of these three). All these platforms are tailored for small businesses and are cloud-based, meaning you get a scalable product at a great price.
Partnering with an accounting provider in Hong Kong is usually inevitable, as most companies need to have their financial accounts audited annually, as well as annual company returns and declarations filed and tax returns submitted. A local accounting partner performing a basic audit and tax compliance for a small company will cost approximately $10K to $20K HKD per annum.
Scott Thomson is a Chartered Accountant and the Chief Operating Officer of Links International.
Setting up a business in Hong Kong? Let Links help! Contact us now to find out more about how we can help you streamline your new business set up.