3 Steps to Turning an Idea into a Business in Hong Kong

Are you considering starting your own business in Hong Kong? Let's take a look at the steps to create your business idea whenever you're confused about how to make it a reality.

They, like many other startups, will go through the following three stages:

• Form a corporation
• Make (and re-make) a business plan.
• Look for business partners.

Step 1: Establish a Company

Stepping into the world of business exposes you to the possibility of both success and failure. As a result, you must weigh the likelihood of profit against the risk of loss.

It’s critical to keep your losses to a minimum. The most basic risk-management measure is the formation of a limited company, which allows you to conduct business under the company’s name rather than your own.

Hong Kong, like many other free economies, offers entrepreneurs a legal structure called a “local private company limited by share” (“limited company” in short).

Technically, the limited company is a legal entity, and you are both the company’s shareholder and its director. You own and control the company in this arrangement, but it is your company that engages in business agreements and bears the risk, not you personally. As a result, your business and personal lives are legally divided. In other words, your company’s liability is limited to the capital you have invested in it; your liability is limited to the capital you have placed in it.

Consider the worst-case scenario before writing down your idea and plan: your business may lose all of its investment, or it may even get stranded in debt, but you will not be responsible for the debt or liability of your company in your own name.

If you are currently residing in Hong Kong, you can form a corporation in less than three hours. However, if you are not, your new business will be ready in 5 business days.

Let’s get the registration process underway now that you’ve mastered the notion of a limited corporation.

1.1 Developing your business structure

Because a limited company acts as a bucket for your business idea, goals, and activities, you will be the sole director and shareholder of your company at the time of incorporation, holding only 1 unit of the firm’s stock and leaving your company account empty. Because this is the most basic setup and is totally legal, it is usual for startups to stay flexible and adaptable.

1.2 Naming Your Company

Your first objective should be to get your business off the ground. We recommend that you avoid talking about branding and marketing for the time being. To complete the administrative need, quickly choose a name for your company.

No need to be concerned about the name; your firm is known for its versatility; it can operate multiple businesses under various trade names, some of which could not be identical to your company name or the “business nature” you have registered. You can also apply to have the company name changed afterwards.

Furthermore, your company should register all of its trade names and logos as registered trademarks in Hong Kong to protect them from infringement.

1.3 Outsourcing the compliance functions

Your company must adhere to administrative requirements that necessitate a presence in Hong Kong. However, you can legally follow these guidelines even if you are not present. By employing the law firms, accounting firms and trust and company services firms (AsiaBC is one of them, the TCSP license number is TC001346!) in Hong Kong, they take care of the paperwork and a shared presence here for a competitive price. It is a no-brainer to hire the professional to get rid of the hassle.

Hong Kong has joined the global push to improve the transparency of private companies and regulate service providers of company formation and maintenance services, which took effect in 2018. Only Hong Kong certified professionals, such as certified accountants (CPAs), legal professionals (oscillators), and Trust and Company Service Providers (TCSPs), are allowed to run their own enterprises.

These safeguards have also been implemented in the United Kingdom and Singapore.

It is a legal need to hunt for these pros to manage your Hong Kong company formation if you will (have to) hire external help.

Registered Office address (RO address)

Your company’s RO address is a legal prerequisite for company registration. The address must be a local address that the public and authorities can see.

You should not use your home address or any other personal address as the registration address for reasons of privacy and corporate image.

You will share its business address as your RO address if you hire the registered professional as your corporate service provider, and the address will be managed for you. Not to mention that you might choose a premium address in a prominent business district to provide your company a swift boost in marketing.

Company Secretary (CS)

Every company is required by law to have at least one person acting as the CS at all times.

Although any Hong Kong resident or Hong Kong company can serve in this role, they must be professional in their handling of compliance issues to avoid breaking the law and facing the consequences.

Just a reminder that if you are the company’s sole natural person director, you cannot serve as the CS at the same time, therefore hiring a service provider is the only option. Aside from that, any employee in your company can fill the position of CS.

It should also be mentioned that the name of CS, as well as that of the directors, shareholders, and RO are exposed to the public and authorities.

Designated Representative (DR) and Significant Controllers Register (SCR)

SCR is a private document containing the current details of the company beneficial ownership and contact information of these beneficial owners. DR is a statutory affiliate of your company.

When the details of SCR are sought for examination, your DR is accountable for acting as the local central point-of-contact between Hong Kong law enforcement agents and your company.

If you choose to nominate a natural person, your DR must be a Hong Kong resident and either an employee, shareholder, or director of your company; alternatively you can appoint an external party to fulfill this job, similar to your company secretary, but the party must be a certified professional in Hong Kong.

Step 2: Writing a business plan

Now is the time to start writing your business plan. The plan is in your company’s name rather than your own. If you’ve ever questioned why you should start your business with a company, it’s because a corporation is a legal framework that allows you to build up by attracting talent — potential investors and partners — and it provides everyone a good impression of how to do business.

Before you begin writing, remember that the goal of this document is to persuade yourself that the business you’ve established on paper will be profitable, because your entire effort — your time and money — is on the line.

2.1 — Writing to convince yourself

A business strategy should include at the very least:

• Be fundamental: Your business concept must be heard loud and clear here, albeit how you bring it to life may differ.
• Be objective: To put your idea into action, you’ll assess your initial funding, products or services, competitors, and sales and marketing plans, as well as the potential for profit, and you’ll have a good understanding of your chances of breaking even and succeeding.
• Be factual: Your assessment must be accompanied by factual evidence. The open data prepared by the authorities and market-related groups in Hong Kong are a good place to start.
• Be guidance: your business plan is also a blueprint for your company’s initial few months, and you and the other founders should be able to follow it easily.

Because you’re dealing with assumptions and projections, it’s natural to feel “risky” after drafting a draft of your business plan. However, you have already taken steps to reduce your personal losses as a result of the uncertainty by conducting business under the name of your limited Hong Kong company rather than your own. So move on with courage.

We’ve seen a lot of business concepts that appear to be wonderful ideas at first but are later discovered to be unworkable. The following are some of the specific reasons:

• Heavy competition: When you are going to operate the same business as your competitors, you will always face head-to-head competition.
• Non-existent market: Competition may arise indirectly, if your products or services can be replaced by existing ones, or if yours do not give better client solutions.
• Insufficient funding: If your business’s initial money runs out before you reach breakeven, it will fail. To maintain cash flow, your company should have a projection.

Keep calm, take a step back, clarify the issues, make modifications, and improve your plan if any aspect of your business does not make sense.

If a company idea fails to materialize in your business plan, it has aided you and your potential investors in avoiding spending money and time on an impossible venture.

2.2 — Convincing others through writing

It’s time to flesh out the rest of the strategy. The supplementary items you choose are determined by your target audience — who will read your plan?

Your potential business partners is the easy answer, but who are my potential business partners? We will investigate it further.

Step 3: Seeking business partners

In the scope of starting a new business, everyone who may contribute to its growth should be considered a partner. The idea is that your business plan will demonstrate to them that you are serious about doing business and that you will get them there.

The following are the kind of partners you will encounter:

• Bankers: A business plan is required in order to apply for a business account with a Hong Kong bank. The strategy should aid bankers and managers on the above level in understanding your business and quantifying the danger of misusing their account service, which you will meet during the interview.
• Skilled workers: You’ll need talents, then you’ll need to demonstrate to prospective employees that your company is more than just an idea because you’ve outlined your goals, action plans, and their role in helping you achieve these goals.
• Companies that work together: As a startup, you are likely to be an unknown participant in your industry. As a result, you will likely join with other businesses for mutual gain and thereby accelerate your business growth. Setting up a formal agreement with other companies could be crucial to getting your company off the ground. Then a business strategy that takes advantage of your company’s distinctiveness is a must.
• Lenders: Investors, such as angel investors or venture capitalists, typically want a business plan to evaluate your business, and financial projections outline your plans.

Takeaway

You must be able to adapt to changes and learn from your failures in order to thrive in business. Finally, your company is dynamic, whereas your business plan is static. Writing a solid business plan, on the other hand, allows you to have a deeper understanding of the prospects and problems without taking on significant financial risk. You can also demonstrate your strategy to attract the attention of potential partners. After all, a business plan is a free tool for determining the sustainability of a proposed firm and avoiding costly mistakes.