Whether you are selling on Instagram or running a Shopify store in Hong Kong, you will need to register your business and set up an accounting system. In this article, Binery shares four tips for starting an online store in Hong Kong.
Hong Kong is a thriving financial hub in Asia and an excellent place to start an e-commerce business. Besides having favourable tax laws, Hong Kong’s strategic location makes it easy to access merchants and suppliers.
In this article, we go over various aspects of starting an online store and what you need to consider when establishing an e-commerce business in Hong Kong.
Choose the Right Platform To Sell
Your store is an essential part of your online business since it is where you will be making the most revenue. As such, it is imperative to take your time and choose the right platform to host your shop.
The best option depends on the type of products you are selling, your target market, the platforms you use, the fulfilment options available, and the potential downsides you will need to compromise on.
Many e-commerce founders operate their shops through online store building software like Shopline and Shopify. These solutions have many useful features, including inventory management, payment integration, comprehensive accounting, and reporting tools that facilitate seamless business management.
Depending on your business model, you can also sell on social media platforms and adopt a strategy there to help you sell directly to customers. Platforms like Instagram and Facebook provide a native selling solution for online businesses. Besides being free, the platforms offer users an interactive and memorable shopping experience that can also help you engage with your customers more closely and offer invaluable insights about your industry, competitors, and audience.
Social media also streamlines the customer journey by allowing clients to shop directly from their feed, thus eliminating the need to move to an external website. This streamlining can greatly improve conversion rates for your business. Statistics show that at least 70% of online shoppers use Instagram to search and discover products.
In addition, social media platforms have advanced targeting solutions that you can leverage to carve a suitable audience for your business. By targeting the right niche, you can convert more customers to your collection of products.
Business Registration
Registering your business in Hong Kong is necessary for legal and tax purposes. Business incorporation is guided by the company’s ordinance of Hong Kong. You can either complete the registration process online or file the application physically.
Setting up a successful online store means choosing the right business entity. The most appropriate option for an eCommerce store is to establish a limited company because of its operational and legal flexibility.
Limited companies are recognised as separate legal entities that offer the founders limited liability, and it has an enduring structure and a great public perception. Unlike partnerships and sole proprietorships, a limited company structure makes raising capital or transferring ownership easy.
In order to register a limited company, there needs to be at least one stakeholder and one director applying. Both parties can be of any nationality and do not need to be Hong Kong residents. The director should be a real person, but the shareholder can be an individual or another company.
Once incorporated, the shares can be transferred seamlessly after settling stamp duty fees. The law requires a company to appoint a local company secretary, so if you’re based abroad, you can partner with a business management firm for their secretarial services to remain compliant.
Your online business does not have to share your legal name. Choose a name that matches your brand and niche. Depending on the nature of your products, you may need licences. It is essential to have a physical address in Hong Kong to receive legal correspondence.
Setting Up a Bank Account
Most of your transactions will be digital when you set up an online store, but you will still need a business account to handle transactions. Having a bank account is vital to your operations, especially if you want to access credit services to grow your business.
There are several e-commerce-friendly banks in Hong Kong, such as Standard Chartered, HSBC, and Citibank. Opening a business bank account in Hong Kong often requires the details of your company, including incorporation information. This is because financial institutions must comply with anti-money laundering and Know Your Customer (KYC) regulations.
Every bank must verify the legitimacy and authenticity of businesses they deal with and the people forming the company. This makes it easy to determine whether the cash flowing through the business is legitimately earned. Given the regulatory requirements, it usually takes two to four weeks to set up a business bank account in Hong Kong.
Fortunately, the rapid growth in technology makes it possible to operate a virtual account for business transactions. These types of accounts are not only easy to set up, but they are also cheaper to maintain and often offer more flexibility.
For instance, opening a business account with AirWallex only takes one to three days. On top of that, the platform is completely free to use and does not charge a monthly fee.
Accounting and Auditing
After 18 months of business incorporation, you will need to file your first tax returns to the Inland Revenue Department. Before you submit your returns, it is essential to prepare an audited accounting report. Typically, you need to maintain accurate business transaction records for financial accounting.
It’s prudent to prepare your reports before the transactions pile up and become overbearing. If you have too much to deal with, you are likely to spend too many resources balancing your accounts. If you find yourself in this situation, using an online accounting software or partnering with accounting experts like Binery can simplify the process.
Taxes are not complicated in Hong Kong, and you only need the BIR51 form to file your returns. Your online business can take advantage of the two-tier taxation system where the first HK$2,000,000 is subject to an 8.25% tax rate, and any amounts above this figure are often taxed at 16.5%.
One important but easily overlooked tip is that you should keep your business records for seven years.
Conclusion
Online commerce is gaining more traction thanks to technological advancements.
If you are starting your online store in Hong Kong, it is crucial to register your business for legal compliance. Then, you can either use social media to sell directly to clients or set up an online store. Either way, social media marketing is an essential strategy to jumpstart your e-commerce business.
Regardless of your business niche, partnering with accounting experts can go a long way in streamlining your business operations.
If you need some help with your business accounting tasks, get in touch with Binery to learn how they can help you manage your bookkeeping and allow you to focus on growing your business.
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