Hong Kong Subsidiary
Before you conduct any official business in Hong Kong or hire employees, you must learn how to set up a Hong Kong subsidiary, which operates independently from your US parent company.
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Before you conduct any official business in Hong Kong or hire employees, you must learn how to set up a Hong Kong subsidiary, which operates independently from your US parent company.
How to Set up a Hong Kong Subsidiary
You have three options when setting up a business in Hong Kong — you can set up a representative office, a branch office, or a registered subsidiary company. All three require that you have at least one permanent resident in Hong Kong to represent your company. Hong Kong subsidiary setup typically takes longer than setting up a representative or branch office, but it allows you to receive tax benefits and other trade opportunities that are not a part of the other two options.
Registering a subsidiary starts with preparing a signed and completed application form. You’ll also need incorporation documents, your parent company’s memorandum, articles of association, and a certificate of incorporation. In Hong Kong, you’ll also need identification documents, proof of residence, and a bank letter for those serving as your company officers.
Hong Kong subsidiary laws also include fees. You’ll pay a registration and capital fee up front before receiving a certificate of incorporation after four to seven days. You’ll then have to register with the Inland Revenue Department for a business registration certificate. Based on your industry, you may need to apply for additional licenses.
Hong Kong Subsidiary Laws
Subsidiaries operate as private limited liability companies and are treated as separate legal entities from their parent companies. Therefore, under Hong Kong subsidiary laws, the parent company is not liable for anything the subsidiary company does.
Your Hong Kong subsidiary is entirely independent of your US parent company. Not only are you liable for any compensation issues, but you will also operate under different managerial aspects that fit the culture and will handle your own accounts while taking care of any compensation issues, litigation, or benefits management.
The laws also state that you can choose the same name as your parent company, or you can opt for a different name and listed activities. However, the subsidiary name needs to be approved by the Companies Registry. Other Hong Kong subsidiary requirements include:
- You need at least one director
- Every subsidiary requires at least one shareholder and no more than 50
- You need a company secretary
- The subsidiary must have an appointed auditor that is a member of the Hong Kong Society of Accountants with a practicing certificate
Benefits of Setting Up a Hong Kong Subsidiary
Although the Hong Kong subsidiary setup process is lengthy, your company can experience numerous benefits. For example, setting up a subsidiary allows you to operate under a limited liability structure, which helps your US parent company avoid costly litigation or other fines.
You’ll also enjoy incredible flexibility. Hong Kong has an excellent infrastructure, a thriving free economy, and low taxes that make it easy to operate a business. Because your business gets a degree of independence from the parent company, you choose how to run the subsidiary and can tailor it to meet the needs of the local culture.
Other Important Considerations
Hong Kong subsidiary setup can take months from start to finish. While you reap the rewards after you register the company and begin operations, you lose time, talent, and money in the meantime. You cannot hire any employees until you establish the subsidiary, which means you could lose qualified candidates who don’t want to wait around until the company forms.
You need plenty of time to travel to Hong Kong to establish a subsidiary, as well as a dedicated staff member willing to move to Hong Kong and operate the company under Hong Kong subsidiary laws. Or, you can choose to work with a Hong Kong subsidiary outsourcing company such as a global PEO.
Let Globalization Partners Help With Your Expansion
Globalization Partners can take the expansion process from months to days. We act as the Employer of Record, so you don’t even need to set up a subsidiary to operate in Hong Kong. Contact us today to learn more about our services.