Looking for the right place to establish your import and export company? Hong Kong definitely should be one of your top choices! Let’s dig into why, what you’ll need, and how to put in place your business.
What Actions You Do For An Import and Export Company
First, what do you do with a trading company, or an import and export company. Breaking it down today into functions so that you can best find where to establish the corporation.
You will be:
- Buying (Sourcing) products
Sourcing is the common word here. You’ll be hunting through B2B directories like Alibaba and Global Sources. You will be going to trade shows and visiting factories. Building up a network of relationships with quality suppliers for you to buy in volume from. This will be for mass production. They will be doing production in at least 1,000 pieces (MOQ, minimum order quantity). You will order and pay an initial deposit so that they can get the materials and start the process. Most likely the countries you will be buying from are Mainland China and Southeast Asia. Maybe some India in there too.
- Selling These Sourced Products
Most likely you won’t be the one taking the end shipment. Instead you will immediately sell these products you sourced and then made your commission or your cut. You will be in charge of finding the quality suppliers. The big key is ensuring the manufacturing goes smooth and the products are of acceptable quality. Arrange the shipment to port and you’re paid. Most of the time your buyers are in the West like USA and Europe.
- Office and sourcing staff
You will employ, full-time or part time staff to help you manage the business. They could be in your customer’s market such as USA or Europe. They also could be on the ground in China working with the suppliers and logistics. If you are just starting out you may have freelancers helping out here plug holes. Soon you will get your volumes up big enough to have your own in-house team.
- Travel and conference expenses
You will be investing a lot of money in traveling and trade shows. You will need to often visit suppliers in China, and buyers in your target market. It is key to keeping your business stable and the main selling point and differentiator is your relationships.
Am I missing something?
Benefits of Hong Kong
A trading company and hong Kong are like 2 peas in a pod. With the rise of China, so has Hong Kong risen. And many companies, both in China and around the world, establish trading companies here to bridge China to the world.
- It has English on all corporate and banking documentation. It leverages the British influence it learned as a British settlement.
- Foreign currencies – no problem! Having a multi currency bank account is normal. No need to have to force exchanges of all your incoming remittances to USD or Chinese Yuan. You’re free to operate in the currency(ies) that make you comfortable.
- Chinese suppliers also have hong Kong companies and banks. A big one here is that a lot of times you can save big headaches by just transferring from your HSBC Hong Kong bank to their HSBC HK bank account. Same day, no fee, almost instantaneous. (See related post on Chinese suppliers also like HK companies)
- Can operate in Chinese Yuan (RMB). Only Mainland china and Hong Kong have permission to hold this restricted currency. Pay your factories direct in the currency the operate in and hedge the foreign currency risk of USD/CNY
There are plenty more, but I’m sure you’re aware. These are the specific benefits for an import and export company.
Main Features You’ll Use
So what do you need to operate an import and export company via Hong Kong? Here we go:
- Bank Account
Yup, you don’t have a business without a bank account. Unfortunately it has been getting harder to get a bank account (read related post). But once you have it, this is where you’ll be doing you’re buying and selling from. Most likely you’ll use HSBC – and most of your factories will have it too.
I don’t recommend using Paypal to buy and sell from factories. Yet you may use it for purchasing small things online and paying freelancers. See our related post on Paypal Hong Kong guide.
- Accounting Software
Well every business needs it. I’m a Quickbooks Pro Advisor in HK, and I do feel it stands out here as it integrated with HSBC online banking – see full post . You should also use this software to create purchase orders for suppliers and invoices for buyers. Keep track of all income and outcome here to manage your P & L (profit and loss).
- Credit Card
You’ll want a business credit card to separate your business purchases from your personal. While it may be hard to get a “true” credit card, you’ll need to put up a security deposit. You’ll use this to book your travel expenses and other online tools and systems.
I think that is it! A trading company is pretty straight forward. You find your suppliers, line up your buyers, make sure the production goes good. Then the magic of getting paid, and keeping the profit and paying out to the supplier. Some Paypal too, but try not to get paid in Paypal as you’ll lose a lot of money on the exchange rate.
Keep Your Books Simple & Up To Date
Keep all your invoices together. Use a system. And then when your audit comes up, things will be straightforward. A B2B (business to business) trading company won’t have a ton of transactions. So the auditor shouldn’t charge too much.
Also, run monthly reports to check your profits. Many times when I did sourcing I wasn’t watching my expenses and only looking at my profit margins. Things creep up and by staying on top of your expenses and other fixed costs, you will know your monthly break even.
Hong Kong is your Top Choice For Trading Businesses
This to me is a no brainer. If you’re buying and selling between China and the world – Hong Kong is your number one choice. Check with your suppliers, and see what banks they are using. Then you have a company with a bank account doing your deals. You may still keep a company open in your home country for local operations there (staff, office, local salary). Keep a trading company over in HK for the B2B deal flow and quicker wire transfer turnaround time.
What do you think ? I’d love to hear your comments and feedback in the comment section below!