This article is originally found here: https://www.globalfromasia.com/makingstaffhappy/
Coming to Asia to do business? Hiring staff in Asia?
Then today we will teach you how to lose them as soon as possible. How to get them to quit and tell everyone you are a horrible boss.
Well, sure you shouldn’t do these things – but we want to get the point across by learning what you should NOT do.
Hope this is fun as well as informative.
Lose Your Temper and Yell
I worked on Wall Street for almost 5 years. I know all about high-pressure situations and getting yelled at. As a trading assistant on a junk bond desk, I was often on the receiving side of the yelling. They told me it was good for me to get toughened up.
Also I was in a fraternity in college. As a pledge (trying to join the fraternity) there was “light” hazing. I don’t want to make it seem like those newspaper article horror stories – but there was some sessions that were challenging.
They also said that was to toughen me up.
So when I came over to China and hired my staff in Asia, I was still in this mentality. I was still in the New York mode, fast paced, aggressive.
There were those “China times” when I started to lose my mind. Bank account transfer issues, miscommunication with factories, and countless other headaches. Just some things that a foreigner will face when getting accustomed to China business.
I lost my cool often.
That definitely didn’t make things better. Maybe even when I was on Wall Street that wasn’t the correct way to behave, but it seemed to work.
Not in China. The Chinese staff will see you as an unpredictable and “weak” minded person. And this is a big difference I have seen in business personalities between East and West. Chinese managers do not show emotion to their staff. Or to anyone.
If you look a Chinese boss, most of the time you’ll see they are calm and cool in the office. Never raise their voice, never show anger or even much happiness. It is kind of this calm overtone.
Chinese staff respect that more. This person is in control of themselves and their mind. Maybe it’s the Zen / Buddhist mindset culture. But a leader is more cool and calm in China.
Whereas a lot of leaders in the West (of course can’t say all) are more vocal and “flamboyant”.
Won’t say which is right. But back to this point, if you want to have your Chinese staff, as well as other staff in Asia, lose respect for you – lose your temper. They will get annoyed (whether they say it to your face or not). Especially when you complain about issues doing business in China. They may agree with you that it is cumbersome to do business here, but they don’t like to hear you complain about it over and more.
Take it from me, I’ve learned a lot from my own staff in Asia over the years.
Don’t Care About Their Family Life
I don’t have too much management experience in America in a corporate setting, so this may be true there too. But in Asia, to be a good manager means you care about the team and their personal / family life.
Especially if you’re a Western manager here, they will feel so happy that you even care about them / their family! But once you start to show a little bit of interest, they will share out in the open. You can do this in the workplace or at a company outing. Yet however you do it, even if it is a little small to you – means a lot to the staff.
If you’re in China, some examples are to ask about their hometown. Is their family living with them in the city (assuming your office is in a “big city”) or they are in their hometown “village”. This is a common question because a lot of Chinese moved to the big cities only in the last generation or two. A lot of the “older” family members didn’t have interest/desire to leave their hometown. It can go into some fascinating stories about their complex family structure. Then you can show some interest in their hometown, what kind of food comes from there, what their favorite hometown dish is.
While it might not be a smart idea to ask about their dating life. Yet if you have staff with their own family, it would be cool to know a bit about the family. Do their parents live with them? Will they go to hometown for Chinese New Year? As a new parent myself, I would love to hear how they are raising their children and what is important to them.
You can get creative here, and keep in mind China is a vast landmass! There are so many provinces with various cultures. You’ll start to learn that your staff all come from different backgrounds.
A little tip here, some managers try to hire staff all from the same province. Its not as big of a deal nowadays, but having a team that is all from similar backgrounds can make them work better together. They might have their own dialect (local language), as well as trust each other more than “other Chinese” people. Could be a fun topic to discuss with your Chinese senior management, maybe they’re already doing that and you didn’t know!
Main summary here – “care” about the Chinese culture. Care about where your staff has come from. Appreciate the hardships they have been through to get to the big city and build their career in your company!
Play The Blame Game
This is a tricky one that took me years to master – or well, maybe understand as I’m still a student of Chinese management myself!
Problems and mistakes happen, in life, and especially in a company. Let’s take website design as an example. Your company designs websites, and you are working on a new client’s request. After you make some tweaks, you show the client.
Client sees an obvious mistake in the design and becomes upset. You talk to the client and say you will resolve it. Getting off the phone, you go into the staff area and talk to the staff assigned to this project.
Going up to their desk, you put the paper down and say “this design had X on it, but they wanted Y”. You’re doing this in a public setting, with other staff able to hear (and most likely everyone’s listening to every word). The team member, let’s call him Rocky, gets defensive.
He’ll immediately deny it was his fault. Getting embarrassed as well, and maybe a bit aggressive, he will fight to the bitter end that it wasn’t his fault.
I remember when this happened to me quite a few times, I was so confused. As a Westerner, I’m used to going straight up to someone and saying “this is a problem”. They are quick to say “sorry, my mistake” and fix it. Or maybe it wasn’t their fault and they’d have a counter-argument. But it was pretty painless.
We’re talking about pretty minor issues here, not major company threatening ones.
So when I deal with Chinese staff now in a problem situation, I try my best to make it look like I am not blaming them. I try to be as indirect as possible and show the project and re-iterate what is wrong and not finger point.
I know, you may be saying – but if it is their fault, they should admiit to it.
I think it boils down to culture. And face. Especially if you do it in the room with everone else there, they will defend. They will treat this as a form of demotion. Even if you didn’t demote them, but in the “face score” in the company. Its hard for me to write down in words, but there just seems to be an invisible point system for “face” in the Chinese office.
Heck, maybe there is something similar like this in the Western workplace.
So the summary of this point, don’t blame and to solve the issue, just make it as non-“offensive” as possible. I know, it goes against the way you work, and the way your mind thinks. Just think and plan out the conversation before having it.
Be a Weak Leader
This one is a tough one for me to describe. My style is to be more of an open and level playing field kind of leader. But it is a dangerous act to play in the Chinese workplace.
We covered this a bit in the “Yell At Your Staff” point above, but it is worthy of its own section. On top of being “calm and cool headed”, you also need to show vision and clarity in the company direction and decision making.
If you look wishy washy, or you ask the staff to make decisions, it will not be a good outcome. They want the boss, the leader, to make the decisions.
This is why when you try to do business with a Chinese company, you need to wait for the CEO to sign off on almost everything. It is hierarchal and subordinates are not expected to make big decisions.
Again, this is a mind shift from your Western way of thinking and modern management training. At least for me, I enjoy having my team involved in the decision making process, and I don’t mind to admit I was wrong.
But in the Chinese workplace, if I am admitting I made a mistake, the team will see this as weakness. Just like the “blame” point earlier, if the boss admits fault – then the staff in Asia will question his or her experience and vision.
Tricky one here – and a reason a lot of Westerners don’t end up being the daily operations manager in a Chinese company. Most of the time a you need a local manager or a Chinese partner in the company who manages the staff in Asia. Things like this are so hard to describe – it’s a lot of indirect power measuring and balancing.
Take Positive Steps To Improve Daily
I’m no saint here, I have made many of the mistakes listed above. But the key is to be aware of them. To catch yourself making these mistakes and working towards improving.
Mediations is my favorite thing to do now to ground myself and act better under pressure. Especially away from your home country in China or other parts of Asia – we need to realize this is a foreign place. Respect the land and the people. Take a deep breath.
Or, if you really can’t handle it – hire an office manager and go back to your home country. No shame in that, many great business people have done it.
Looking for a Hong Kong online business bank account that you can connect your Paypal and Stripe / Braintree merchant account to? Wouldn’t that be amazing, without the utter nightmare Hong Kong business owners are going through now begging these archaic banks to allow them to deposit their money.
Here at Global From Asia – we know the pain our entrepreneur and hard-working global business owners have been going through. As digital nomads and e-commerce sellers and FBA business owners, we feel the pain ourselves. This is why our clients for our corporate services enjoy working with us – we understand you.
And we know the biggest pain point for almost 2 years now has been – such a basic need – a business bank account solution in Hong Kong.
One with credit cards – for you and your staff. One that can link to your Paypal and Stripe.
We’ve been testing so many and talking to so many – and today we’re talking about one we’ve been following for years.
Neat.HK Business Banking for Online Business Owners
So I am focusing today on their business banking product – Neat Business Account. I know exactly what you guys are looking for – and here is a list of their features:
* Unique Account / IBAN number – you will have your own dedicated account number with Standard Chartered. This isn’t like some other solutions where you have a sub-account and need to put in your TT (telegraphic transfer) banking notes your sub-account number. This is a dedicated account number ONLY FOR YOU And your business. I’m not sure the technical way they got this – but this is the amazing part – that allows you to do the following
* Connect /Verify your Paypal Hong Kong – we have a Paypal Hong Kong guide that gets a lot of attention on how to verify your Paypal. You need a “unique” or dedicated IBAN number. This Neat Hong Kong business solution give you that – unlike other online / virtual banking solutions I have come across.
* Connect / Verify your Stripe HK or Braintree merchant account – similar to Paypal, you need a unique bank account in your company name in order to get Stripe and any other merchant account setup. Don’t worry – this will work here too. We have a full list of merchant account comparison here that is popular as well.
* Issue Company credit cards – You can order credit cards! Yes – finally – you can see a company credit card in your company name here in HK without having to sign your life away and deposit your life savings! Seriously, readers know it is hard to get a Hong Kong credit card.
* Deposit paper checks – many ask how to deposit checks (yes, Hong Kong does still use quite a bit of paper checks). This works too. You need to go to Standard Chartered Bank – in person – and deposit. Can’t do it at the ATM.
* English, Online Banking – and of course, it has online banking. Well, that is actually something we need to write as a bullet point, as some banks we are forced to work with in our partner corporate services agency, don’t have online banking. Or it takes forever to get issued. And the banking is in English.
I think this has huge potential, and I may finally be able to rest well at night when we get new clients for a Hong Kong company (read our Hong Kong registration guide here) setup and – yes – their request to get a local HK bank.
Big Plus – Don’t Need To Come To Hong Kong To Apply
Here is the big – big one – that I know our readers at Global From Asia will love – you can apply and get approved online. So now, once we get this moving smoother – we can help clients open a HK company and HK bank account without needing to fly here.
Can you say…
Game changer!?!
Wow, Hong Kong may be back open for business. It’s been a rocky road since March 2016 but we may be out of the ice age and entering normal business climate.
How I Came Across Neat
I met David Rosa, the founder of Neat.hk a couple years ago when they were in their early stages. He visited me in my TST office and we chatted about the struggles of banking in Hong Kong and Asia in general. I had been doing my podcast already for a couple years then and was helping clients open up companies and banking. I explained the utter nightmare it was to beg a bank like HSBC to please let us deposit money with them.
At that time Neat was focused on the consumer banking side (individual accounts) but he said once that was going he’d work on their business banking solution and let me know.
I also have gotten to know others on his team, and he had been merging with other local Hong Kong fintech startups I had been following.
It’s true – Global From Asia is a great blog and media source for Fintech in Hong Kong and Asia. So I am always getting startups trying to solve this nightmare banking issue find me and send me their new products and solutions.
It is my biggest pleasure to be able to blog about this and give everyone hope. There is light at the end of the tunnel and I really hope this disrupts these archaic banks who destroy small business owners livelihood.
Let’s give power back to the SME and let’s leverage online banking – who needs to visit a corporate banking branch anyway?
Can You Trust This New Fintech Startup?
As I have been telling clients about this new banking solution – some are still a bit nervous. A startup holding your funds is a big ask, not as simple as a social media app where you share what you ate for dinner.
True, I always have to disclose you need to use any financial solution at your own risk. But they are recognized in Hong Kong as an accredited Fintech company and work inside Cyberport. I should get him on the podcast as well.
Ready to go and get this new Hong Kong Business Banking solution? How To Signup?
So I probably have you on the edge of your seat (I hope!) and I have you excited to apply.
If you are starving and about to die of starvation as you have a HK company already and just need a freaking bank account – you can browse over to Neat Business Account and get on their waiting list. I do have a special code that can help you get expedited but am not allowing to link it publicly so if you’re a client of our corporate services division (Unipro) then talk to our client services department to get that going.
Don’t have a HK company yet and now feel more confident you can get a HK company and bank account together – then let’s work together. Check out our HKVIP package and let’s do some business together.
This may have just re-opened the doors to doing business in Hong Kong for online business owners. That plus the corporate tax rate has been dropped to 8.25% (from 16.5%) for SMEs with less than 2 million HKD in revenue. Ice age in HK may be past us, let’s hope and we will keep you updated as this progresses.
Ears On The Ground
Here are some messages we have been hearing on the web that we believe is helpful
have you succeeded with HSBC ? [Surprise] A lot of variables will come into play, especially fiscal residency and company’s “establishment” location. Generally speaking, will be harder for countries like me France to apply in today’s banking conditions. Anyways, NEAT business is good although they are launching and still developping. However pay attention -> they have merchant limits as they are NOT a bank, they can only hold funds under a 2million HKD limit. This means, if you generate large amounts of revenue, you won’t be able to store all of your funds with NEAT, you will need like a traditional bank account for savings for example. I currently work it out this way : 1/ I use sendwyre to do as much as I can with supplier payments and other online payments then send the remaining to NEAT 2/ I use NEAT for other purposes like the mastercard to purchase stuff online, also will do HK based transactions or other operational stuff I may need on a week to week basis. 3/ I have a traditional bank account I was able to open after almost a year of issues and 3 banks denied. This one is not being used right now and I unfortunately pay fees to keep it opened. However the aim is to keep this bank account in order to have a back up plan in case NEAT goes bad + it allows me to grow my business where when I will cross the 2million HKD in balance on NEAT, I start sending over to my bank. Remember -> you may have sometimes over 2million HKD for just couple weeks , in that case NEAT won’t accept your funds. So long term wise, you need a traditional bank too and play around those limits.mobile online forum
Input from Neat, March 2018
Here’s an update from Andre in our GFA Community Wechat group who has this update on the Neat bank situation for HK:
“Ok guys so answers from neat: still no multi currency accounts, cannot currently deposit cash, to withdraw cash standard neat charge of 2.5% is charged, the main partner bank is standard chartered. So currently it’s best just for users purely doing online business.”Andre
Can I wire in USD or other foreign currencies?
Yes, you can wire incoming currencies no problem.
Can we transfer money to EU banks?
For wiring out, you can only send money within HK. But you can use a cross border payment company such as Aurelia Pay.
2,000,000 HKD (a bit over $250,000 US dollar) as of March 2018.
A question from a Client
“I have a question, we set up the neat account and everything went smoothly and the account is open and active now.however, it shows the account only accepts incoming wire.
Is there anyway you can help us with that? I tried looking for information on how to contact the bank directly but they only have a q & a with 15 questions.
the main reason we wanted an account was to pay our supplier in China to expedite the process of importing our product to USA. Can you please give me some information and also if you can let me know how we can open account with a better bank.”
Here is a copy/paste of their latest application form
This form collects information about your company so that we can complete the application without the need to travel and visit our office.
We will gather information about:
Your company
Directors
Shareholders
Ultimate Beneficial Owners (natural persons who ultimately own or control the company)
In order to complete the application you will need the following documents:
Valid Business Registration Certificate – example – (or equivalent for companies not incorporated in Hong Kong)” – example
Photo ID of Directors and Ultimate Beneficial Owners
Neat HK will also help you to generate a Board Resolution that authorise you or one of the directors to open an account with us on behalf of your company. The form is pre-filled and requires just a signature.
NOTE: Please be as accurate as possible – this will speed up the review process and increase the chances of your application being successful.
P.S. You can save your application work at any time and come back to it later on. Just click on the “Save” button and input your email.
Input from Neat, March 2018
Here’s an update from Andre in our GFA Community Wechat group who has this update on the Neat bank situation for HK:
Ok guys so answers from neat: still no multi currency accounts, cannot currently deposit cash, to withdraw cash standard neat charge of 2.5% is charged, the main partner bank is standard chartered. So currently it’s best just for users purely doing online business.Andre
What is Neat HK?
Neat is a mobile current account that makes everything accessible and at ease. It only takes 10 minutes of your time to have a Neat account. You do not have to worry with your local and international purchase, with over 50 currencies available with Neat, they got you covered!
With Neat, you can manage your money anywhere, receive salary and make payments, and send money to your friends.
There is also an available Neat Card for free. It is a prepaid MasterCard issued by ePaylinks. Browse the following incurring fee before you avail a Neat card.
What are the fees needed to acquire Neat HK?
There are no reflected monthly or annual fees and for acquiring a Neat Prepaid Mastercard. However, a lost or stolen card of Neat HK will cost HK $50 for a card replacement.
Each ATM withdrawal with a minimum fee of HK $25 will have an incurring fee of $25. Transaction refund is for HK$4. Those merchants in Hong Kong who are under an international brand is included with 1.5% fee in HKD Transaction Foreign Merchant. When you inquire for your balance on an ATM, there is a fee of HK $4.
Also, a consecutive six months of inactivity will be charged HK$12.5 a month. Unless, the balance is zero.
How to get the Neat HK application?
Neat application is available for both iOS and Android devices. You can just download the app at their respective app stores.
How to get a Neat HK Card?
To have a Neat HK Card, complete the registration process on the Neat Application. The only requirement you need is a passport or a Hong Kong Identity Card.
Is there a Business Account offered by Neat HK?
Yes, there is a current business account offered. There are number of benefits for your business when you use Neat HK for your business!
An increase in productivity will be achieved with Neat Business HK. They offer you tools that can help you operate your business efficiently. The dashboard can give you the insight and control of the progress of your business finances.
Just like the personal subscription, business account is a quick setup. You have the access of your bank account anywhere and anytime.
The offered business account is timely. There are integrated features that automatically organize admin tasks. This feature will help you focus more on your business.
You will be assigned with a dedicated Hong Kong bank account number. Neat supports many e-commerce platforms. This allows you to receive payments and manage disbursements.
More so, business accounts offers a feature that can easily pay invoices and employees.
There is an expense card available to enable your employees make purchase online and offline, and withdraw cash at ATMs.
Now, lost receipts are not a problem anymore. Its feature has an ability to add pictures of receipt.
This business account is still developing. There are two features to be added on its update: powerful reporting and automated accounting.
How to apply for Business Account?
Neat Business Application
You have to fill out the Neat Business Application, information about your company are collected. The catch is, you do not have to travel to Hong Kong to apply for a business account. Filling out this application will only take you 10 to 15 minutes. If you have some things to do, you can save the application any time and finish it later.
Informations regarding the company, the ultimate beneficial owners, shareholders, and directors. The said ultimate beneficial owners are those who naturally owns or controls the company.
The following documents are needed to complete the business application:
Valid Business Registration Certificate (see example)
Passport of Directors and Ultimate Beneficial Owners
Neat also helps you produce a Board Resolution that will authorize you or one of the company directors to open a business account in behalf of the company. The form will be pre-filled and it will only require a signature.
Before you plan to fill up a business account application with Neat HK, please check whether your company meets the compliance requirements.
List of Restricted Nationalities
Afghanistan
Bosnia and Herzegovina
Central African Republic
Democratic People’s Republic of Korea
Democratic Republic of the Congo
Eritrea
Guyana
Iran
Iraq
Lao People’s Democratic Republic (Laos)
Lebanon
Libya
Somalia
Sudan
Syria
Uganda
Vanuatu
Yemen
List of Restricted Industries
Adult related
Antique Dealers
Arms Dealers
Auctioneers
Cryptocurrency Dealers
Defence System
Foreign Exchange Dealers
Gambling and Casino
Jewel, Gems, and Precious Metals Dealers
Nuclear Power
Pawn Shops
Plane Dealers
Products and Services Illegal under Hong Kong Law
Pyramid Selling Schemes
Stock Securities Companies
If you think you meet the compliance requirements, start filling out the application.
What are the features of Neat Business?
Neat Business is yet only dedicated to Hong Kong dollars current account and a local bank account number. However, the company plans to offer a multi-currency account wherein it will support a multi-currency account.
Payments made from anywhere around the world will be received to the business account. Any outgoing payments from local third-party banks in Hong Kong are also supported. However, the outgoing payments to international banks is still about to be offered.
It is also planned that Neat HK and Xero Cloud accounting should be integrated. This is to enhance online banking through seamless accounting and account reconciliation.
Why choose Neat?
Neat is a highly secured mobile currency account that you can fully trust, either you will use it for your business or for your personal use.
You can manage, operate, and send your money anywhere in the world.
Neat may be developed at Hong Kong, but you do not have to go to their office to acquire an account and a card. More so, there are no requirements needed for personal use. Receive payments and send money to your friends
Neat HK is a revolutionized and patented account opening process. .
Get your mobile app at the Apple Store or Google Play!
We have heard a lot about buying a shelf company in Hong Kong, this is common talk in the blogosphere. But have we heard about buying a Hong Kong company that has a Chinese WFOE (Wholly foreign owned entity) with it?
Today, we will dig into this, why you would consider it, and what you need to do
Getting More and More People Approaching Me To Buy / Sell Their HK/ China Business
As the Global From Asia blog gets out there more and more, we get emails from people for all kinds of things. One has been people who are looking to buy or sell their businesses here in Hong Kong and China. It is a pretty complex process, and there are a few different case studies we can cover in future blogs.
One I received recently is interesting. The client has a couple of Hong Kong company businesses that each own their own Chinese WFOE company, all setup and operating. He would be open to selling and transferring it to a new buyer.
He sees that there is more and more discussions about buying companies here. Getting plugged in fast with the China market for those who still haven’t tapped in yet.
Why Buy a HK / WFOE Combo?
So as part of the sale, it would not include the customers or supplier database. It would be the structures set up with their licenses and banking accounts. So you’re not buying this business for the customer assets or any IP – but instead to:
Save time. Getting banks in HK has become slow and tedious. China is also, and has been like this for quite some time.
Business in a box. All the banking arrangements are setup, and the licenses you need for an import / export company are ready to go.
Aged company. These are older businesses. Having some years already put away for the company history always helps out. Use it when applying for financing or other “intimate” business relationships.
Get all the licenses you need, right away. Many people want to do business in China, but aren’t sure if they are getting all the licenses and paperwork they need. This will make sure you have it all, used for years that way.
How Would a Transfer of a Hong Kong Company with a Chinese WFOE work?
Ok, so you’re interested in this and still with me here – great!
Because the Chinese company is 100% owned by the Hong Kong company – all the activity would happen at the Hong Kong level. You would become the new owner and director of the HK limited company. Then you would automatically own the Chinese subsidiary because it is owned by the HK parent company.
There would be transferring of bank account signers on the Hong Kong side as well as the Chinese side, and that would do in person.
There would also be some updating of the legal representative in the WFOE side, which the seller can help you with.
So, you will then be the owner of an optimized and functional trading company. That is, without the months of headaches and the current issues with banking.
How Much For What You Will Get
You’re now asking yourself, ok, how much? The price won’t be less than if you started one from scratch – but this shouldn’t be the reason you’re doing this. This is to get an operational and functional import and export business without the headaches.
This is for trading and manufacturing WFOES with full import-export rights. This means you can use it for VAT rebate facilities and even domestic sales.
The price is negotiable for how much involvement you need from the seller, and we will take serious inquiries if you contact us.
The price range is starting at $200,000 US dollars to $350,000 USD. The range is dependent on your specific terms and requirements.
Sound Feasible?
I’d love to hear your feedback and comments on buying a full on HK/China trading company operation. This is for serious business owners who are doing serious business in their home countries and want to plug right into the Hong Kong and China market fast and seamlessly.
Will keep people posted on the progress, in the meantime please leave comments or questions about this in the comment section below.
Well, I can’t imagine anyone jumping up and down saying “me, me, I love taxes”. But I do feel quite a few people want to have a deeper understanding of how taxes work. This is especially true when doing international business.
First, it is a dynamic and complex specialty. I am not a tax lawyer and my tips and opinions you should verify with your tax professional before implementing.
Ok, done with the disclosure. Read on to learn more about differences between corporate taxes and personal taxes.
What Is Company (Corporate) Tax?
First, let’s define what is tax for a company. The most easy way to envision this is picture a company as your baby. You gave birth to a new life, and this company has a new identity. Thus you need to report to the government about its “health” and its taxes, just like a baby will as he or she grows older.
You as the parent (shareholder and director) will be responsible for its upbringing. You need to now make sure this baby company is filing its paperwork and paying its taxes.
Following along now?
So, where you choose to give birth to this company (register or incorporate) is where you will be reporting taxes for it.
People like Hong Kong because it has a low corporate tax rate of 16.5%, and if you qualify 0% on offshore status. But let’s keep it simple and say 16.5%.
At the end of the year, your company earns $100,000 US dollars. You will need to pay 16.5% taxes on that, or $16,500 US dollars, and the company keeps the rest.
So that takes care of the company (corporate) tax. You also need to make sure you play salary tax on employees, government fees, keep the bookkeeping in order, and do the tax audit. But we’re focused on taxes today.
Now we need to talk about your taxes, as an individual.
What is Personal Tax?
Now we have finished the taxes for the company. But there is you, the “parent” of this baby company. Are you taking money out from this baby company to pay for your living costs? Or will you keep the money in the baby company’s bank account so that the company can grow faster and use that money to invest.
This is something that is tricky and we need to think about. I always like to re-invest money back into the company, but at the same time, we as the “parents” of a company need to make a living.
So, now its time to take money out of the company. And the money we take we need to pay taxes on, as a human being, as an individual.
We can take the money out as a salary or as a dividend.
If you take it out as a salary, you would hire yourself by the company and issue yourself an employment contract to work for the company. You would then need to pay salary tax on that income.
If you take it out as a dividend, it is easier. The main difference with a dividend is that you need to divide out by the percent shares you own. So if the company is 50% yours and 50% another partner, then you need to split the dividend by the percentage breakdown.
So, for example, let’s look at that $100,000 USD profit we mentioned earlier. Say you decide to issue $50,000 USD as a dividend, and keep $50,000 USD in the company for re-investing in growth. That $50,000 USD dividend would have to be an equal split between the owners at $25,000 and $25,000.
So maybe one of the owners doesn’t want to take the dividend, and the other needs the cash to pay his or her bills. Then it might make more sense to hire one of the owners to run the company and to take a salary.
This gets tricky at the personal tax level, let’s go through some things to consider next.
Where Is Your Citizenship?
What passport are you holding? Are you an American? If an American, your life just got more complicated as an international business owner.
Americans can get exempt from taxes up to a certain point if they qualify. But you will always need to file. So you’ll need to report that you have a Hong Kong company. You will need to report that earned income in the company that you will take out as a salary or dividend. Talk to your USA accountant about how you will treat this. There is different tax rules for salary vs dividend.
And if you’re an American residing somewhere else, you may also be subject to paying taxes in that country as well.
Other passport holders, let’s look now at a second criteria.
What Is Your Country of Residence?
Where you are a resident also comes into account when dealing with personal tax. If you’re a German living in Thailand, just because you live there doesn’t make you a resident. Are you on a tourist visa, which governments consider…being a tourist! Or are you on a work permit, which is the assumption that you are working in Thailand and earning an income and paying taxes.
Most places in the world where you have a passport and citizenship (except USA, see FATCA infographic). If you are a bona fide resident of another country, then you are exempt from paying taxes in your home country.
So the dividend or salary you took from your Hong Kong company, you would need to pay taxes in the country you are a resident.
The main point is, you need to pay taxes somewhere in the world. Either your “place of birth” or where you hold your passport and citizenship, or if you can qualify as a resident somewhere else.
Think About It On a Larger Scale – Multi-National Corporations
You are a bit confused. I like to step back and think about it from a big company perspective to give it the complete picture. Let’s say that a massive company has a company in Hong Kong. They have shareholders and directors and it is thousands of different people involved.
Let’s go point by point:
They would have income in their company. Same as you.
Costs, yup. Same as you – marketing, software, payroll, contractors, etc.
Directors – May have a few more than the typical small to medium sized business. This could be the C level executives or the Hong Kong company General Manager.
Shareholders – Quite a few, could be a publicly traded company. It may be 100% owned by a company in another country.
Like anywhere, this multi-national company has income and expenses. The company can try to adjust that in various countries where they have their different entities setup. This is transfer pricing. It can also transfer price by invoicing other companies in its network.
At the end of the day, they will need to report their yearly books to the Hong Kong Inland Revenue Department. The company will pay taxes based on how much it earned in the Hong Kong company.
How about the directors and shareholders of this large company? Most likely the shareholders don’t expect to live off the dividends of the company. Instead want to keep the earnings in the company to reinvest in growing the company even bigger. These shareholders are most likely hands off. They want to see their investment make a long-term return on investment. The directors, let’s say there is a CEO and a COO, will get a salary and bonus. The shareholder’s board of directors approve the salary for the directors. Lots of times there may be stock options and bonus of cash payments based on performance of this executive team.
But in a large company, the owners do not live and depend on the dividends coming out of the business.
So, just like you – the company is to make money. But it is more clear that in a larger company there is a clear separation of shareholders and directors. Yet, smaller businesses the shareholders are the same as the directors. The directors need to earn a living and also optimize their taxes.
But how does one pay this dividend and/or salary to the director is a **Personal** tax event, not the same as corporate tax event.
Worth Noting – Do All Shareholders & Directors Agree on the Payout Structure?
Since we’re on this topic it’s worth sharing. Many times people get into business partnerships and they didn’t first discuss the money! How much of the money remains in the company versus how much will the company pay out as a dividend (or salary) to the shareholders.
**Discussing this with your business partners before the company is set up is critical**. This is a critical element. When you have this discussion you will find out if all other business owners in this venture are on the same page as you.
Based on my own experience, I have been in business ventures where my partners needed to take the cash out of the business ASAP. They needed this income to pay the bills. Whereas I was more focused on reinvesting this profit back into the business to grow it.
This difference in viewpoint and goals caused a lot of tension, as one may imagine. Each side has a fair argument. My partners in the deal said that if they don’t see the money coming out of the business they’ll lose focus. They want to benefit them in the short term to help focus on building this company. I much prefer the other side of doubling down the profits to quadrupling the investment of profits.
Which do you prefer? This should definitely be a topic you discuss with your partners as soon as possible. You should cover it in your shareholder’s agreement. Or at least noted as a mutual understanding document somewhere – a piece of paper or back of an envelope on the plane ride!
Big Companies – Keeping Their Corporate Profits Overseas
It is always a hot topic in American news. Massive comglomorates who make tons of money “offshore” or in international markets. These companies keep this millions (or billions) of dollars earned in these foreign companies. Then rather than sending the cash back up to the US company, the invest it overseas to delay the American taxs.
Again, we’re separating our personal taxes from company taxes. Remember, it is like a separate person. So Apple is earning tons of money in China on iPhones and other products. The company earns this cash from sales in China, but their headquarters is in California wants the tax money. The US government would love for them to wire transfer those billions to their USA bank account. This would then create a huge bump in revenue in their USA company, which translates to tax liabilities.
How This Applies To A Small Business Owners
Don’t have businesses setup around the globe? So you don’t have the leisure to decide where to report your billions of dollars of earnings, poor you! And poor me! There are things you can learn from this though. If your company makes money, it doesn’t mean you as the shareholder or the director are making money – at least in the short term. If your company is reinvesting the profit and not sending you the cash, you can wait. At least for that tax year – then you will not be liable for those taxes – as an individual.
Make sense? Again, it is critical that you separate your personal tax from your company tax situation. Company may earn a profit this year. But if it doesn’t send the money to the shareholders, or pay out as salary to the directors, then those individuals won’t be paying personal taxes on it that year.
Hope this helps. The laws and the places in the world where you are a resident or citizen may make this a different situation. So please ask a licensed accountant in your country where you file your taxes as an individual.
Focus On Building Your Business – Not Tax Shelters
I want to end today’s guide with a reminder. A lot of tax specialists always stress that the business exists to get customers and earn profit. It is not about spending all your time trying to avoid taxes.
Think of Google or Apple. They started in garages in California with a few people. I can’t imagine Larry Page or Steve Jobs sitting in their garage discussing how to setup offshore corporations. They’re not focused to avoid paying taxes on the small or non-existent revenue they were making.
That was all setup later, but expensive CPAs and corporate lawyers.
So if you’re reading this and at the early stage of your business, please save your brainpower. Put that energy on building your product and getting customers.
If you’re already past the early and middle stages of your business and want to get more advanced, sure, let’s talk!
How was this guide, please let us know by sharing your comments or questions below!
Which Hong Kong Bank Features To Look For When Selecting a Bank Account
As the global banking system has gotten more selective and difficult, more and more people are contacting me when they got rejection letters. A lot of times this is HSBC HK as everyone goes there first.
Are you one of these people getting the rejection letters? Or maybe your account closed?
You have a Hong Kong company setup, but without a bank account, how can someone do business? Crazy right.
So the scramble for bank account alternatives to HSBC comes up.
Today I’m going to go through the various features you want in a bank account, and give some other banks to look at.
Multi-Currency Account
Because we are global business people, we need to handle multiple currencies. The thing people love about Hong Kong is the ability to hold so many currencies. Many countries force clients to convert into their home country currency such as US dollars or Chinese Yuan.
But having a multi-currency bank account in Hong Kong is a feature you need to request when applying.
And there are a few small differences:
Multi-currency savings
Multi-currency checking
The line between savings and checking accounts have blurred over the years. But the main difference is a checking (also called “current”) is that you can access it from an ATM account. Sure, there are some ATMs that let you choose between checking or savings. But when you’re traveling internationally or not at your home bank, you don’t have that choice always.
But multi-currency is a key feature in a bank account, and let’s use this as top criteria in selecting top bank accounts to apply for here.
Online Banking
Yes, I’m typing this in in the year 2015 and still there are many banks with none or limited online banking. I hate to say it, I have to say a decent amount of Hong Kong banks that leave a lot of room for improvement for online banking. HSBC has the best for online banking, and that is still nowhere near as convenient as international and American banks.
But besides HSBC, which banks have good online banking?
First, let’s define good online banking.
Able to view your account balance and activity
Able to send payments and international bank transfers (wires)
Email alerts on various types of account activity (incoming deposit, outgoing wire, bill payment)
Multiple user login, with various account level access to allow your bookkeeper access and not able to send outbound transfers.
Download / Export transactions as a CSV file or Excel.
Think these are the core functions of online banking. Other things I would classify as “nice to have”, but these you need to use online banking.
Visa / Mastercard Debit Card
Custom Headline
Have you seen bank cards that you are not able to use when buying things online or at shops?
Yes, those exist.
They are only valid at the banking ATMs inside Hong Kong, either in their network or other Hong Kong banks. They will not work outside of China, even in Mainland China.
This is a big problem for global business people like us right?
We need a bank account that gives us a Visa or MasterCard “backed” debit card. So we can use them at ATMs around the world. But not just the basic function as getting cash from an ATM, but also the ability to make simple daily business purchases when out and about.
While this may seem like a basic function, we may need to ask for this feature when applying to a bank. And they may not have the option! Or, they will charge a one time, or monthly fee to have this functional debit card.
Reasonable Monthly Fees
No one is a fan of bank fees.
Yet around the world, bank fees have been creeping up more and more. I predict it is due to low interest rates. As higher overhead costs the banks need to follow with international regulations.
So these costs get passed down to the user, us, in the form of monthly fees or all kinds of crazy transaction fees.
So our alternative Hong Kong bank account needs to have reasonable bank fees.
What is reasonable? Well, let’s baseline it to HSBC HK, which is 50 HKD (approximately $6.50 USD) per month. The bank can waive this fee if you maintain a monthly average balance of 50,000 HKD ($6,500 USD) as of writing today’s guide.
I’ve seen monthly fees as high as 300 HKD ($40 USD) from certain HK banks. You can avoid it by having a minimum balance of 200,000 HKD (approximately $25,500 USD).
So we need to be cautious of bank fees when selecting a bank account.
Custom HeadlineLow / No Application Fee
In all my years with Hong Kong business, I have not seen application fees for banks. But lately I have seen them pop up more and more.
The banks require you to pay the fee upfront and non-refundable even if you get rejected. The justification for these fees is that nowadays there is more and more “red tape” or paperwork due to FATCA regulations for all clients. This is a lot more paper that you need to fill out, mailed around, and warehoused for years.
Who is going to pay for that?
Banks seem to want to pass this down to clients.
So let’s be weary of these new application fees for Hong Kong banks. These are popping up all the time, so keep your ears open when going to your bank account opening interview.
Also, I may miss some of these over the years and months, so if you can leave a comment to help me and others out, that would be amazing!
Decent Customer Service
Customer service, that is decent.
I’m not going to get into cultural differences and customer service in today’s article. But I will just say, that we want to have basic and polite service when dealing with our banking needs.
I’ve been in bank account application interviews and the account representative is…not engaged with the client. They say that this is the way things are, and that if they don’t like it they can apply somewhere else. This comes out a bit rougher when typed out today, they say it in a more soft tone.
But because bank accounts have gotten more “exclusive” to get, the bankers feel that we should be happy they are talking to us and considering our applications.
Let’s vet out banks who have poor customer service. I’m hoping today’s guide can keep up to date with other people’s experiences.
What Is Your Hong Kong Banking Plan?
Hope this helped you out. Hong Kong is a great place to do business. Once you get the bank account! While the banking solutions on the market today may have some things left to be desired, it is much better compared to other options in Asia.
What is your next step?
The team at Global From Asia is offering a full service banking application service. We understand your current business and banking requirements and work alongside you. As the banks around the globe get more challenging to apply for and get approved for, it is more of a headache than ever! We have worked with many clients to get the banking application and approval process streamlined and would love to work with you!
Aqua Luna, a Chinese Junk in Victoria Harbour, Hong Kong. (Wikimedia Commons/Mk2010)
This is a guest article by our friends at GlobalFromAsia.com.
Passing over the Hong Kong border is a routine whether you are a foreigner living temporarily or permanently in Shenzhen. Based on the visa that you may have, there might be a need to leave Mainland China every month, or you may come and go as long as you want. Easy to understand instructions and a few reminders will help you how to cross the border to Shenzhen worry-free.
You might be wondering where to cross the Shenzhen border. For those who make their living in Shenzhen, the most convenient way is to navigate one of the many land or sea borders straight to Hong Kong. Majority of the people make an abrupt turnaround and traditionally journey back by way of China customs while some settle for a few days for some leisure breaks or go on a shopping spree.
A great number of foreigners usually have choices when they wish to cross the border to Hong Kong and vice versa. These land borders include Luohu, Huangguang, Futian, Shenzhen Wan, and Shekou. Wherever you live in Shenzhen, most of the border checkpoints can be accessed either by a taxi or metro train. In case you choose to ride a taxi, just say where you want to go followed by the word kou’an which means “border.”
Luohu
Luohu is considered as one of the most active border crossings between Hong Kong and Shenzhen. It is a pedestrian crossing that connects Shenzhen with Hong Kong in the middle of Luohu and Sheng Shu in the New Territories. The simplest approach to travel to this place is to take the metro train to the Luohu stop, and you will arrive at the Shenzhen Railway Station. The railway station has high-speed trains with destinations to Guangzhou and other stops outside the Guangdong Province.
The Shenzhen Railway Station is so busy with different nationalities boarding the train and vigilance is a must because of several pickpockets. From the train station, you just have to pass the HK Immigration where you need to fill out forms before boarding another train that could take you to Kowloon. After being cleared with the immigration, you can purchase an Octopus card for your next destination. The crossing opens from 06:30 to 24:00.
Barely west of Luohu, you will find the Huanggang border crossing which is distinctly structured for transportation. If you don’t want to get caught in the morning and evening commuter flow, this crossing is more hassle-free, and traffic jam is reduced. One advantage of navigating this border is its 24-hour operation where you will find buses bound for various stations in Hong Kong.
Many expats residing in Shenzhen who wants to go to Hong Kong for some nightlife, cross the Huanggang border. Expect that when you enter, you will be inspected by China Immigration with the crossing situated on the Shenzhen side. Once on the bus, never lose your yellow bus ticket because you will need to hop on another bus after traversing from the mainland part to the HK frontier.
You can purchase a minivan ticket if you want to go to the Hong Kong Airport River without the need to leave Shenzhen or Hong Kong if going to immigration. Huanggang does not have metro or train at Hong Kong or Shenzhen side, only buses and private vehicles. It is 24 hours open and can be contacted at +86 755 83395171.
Futian is one of the land borders that can be reached by train. You will find the crossing at the Futian Kou’An Metro Train Station which is the most recent Shenzhen/HK Metro Border Crossing. This pedestrian crossing links Shenzhen with Hong Kong between Futian Kou’An as well as Lok Ma Chau in New Territories.
Futian Border Crossing is somehow comparable to the Luo Hu Border Crossing in terms of how you will go to your next destination. Here, you will also need to purchase an Octopus Card for Hong Kong Metro. But, in this crossing, you can depart the building and directly return to Shenzhen which is favorable for “Visa Runs.”
This bustling border crossing is located in Nanshan District with no available metro station for transportation but with taxis to take you to your destination. Once you’re done with the HK Customs, you can both ride a bus or taxi and go over the one-kilometer long bridge that could take you to several locations.
In the midst of peak hours (8:30 am to 12:30 pm and 5:30 pm to 8:30 pm) the hanging time for authorization is longer. And when comes the holidays, weekends, and travel seasons you need to have a lot of patience while waiting for your turn to be cleared by the immigration. The border is open from 6:30 am to 9:00 pm. Coaches and taxis are the main transportation here.
People who live and work in Shekou can conveniently travel to Hong Kong by ferry. There will be a free shuttle service provided by the old ferry terminal that can take passengers to the new ferry terminal. The free ride runs every 10 minutes starting 6:30 am to 11:00 pm and the ride takes only eight minutes. The old ferry can be reached either by car or metro. Once on the new ferry terminal, you can board ferries on its way to the Hong Kong International Airport, Hong Kong Island, Macau and Zhuhai.
This electronic card is essential because it is generally used as payment upon riding a bus or metro when border crossing HK/SZ. Purchasing one will save you the hassle of waiting in line with other people buying their tickets at the station. Another advantage of getting this card is the discount you are entitled to every travel. You can buy the Shenzhentong card directly from the station itself or any 7/11 stores and pay 100 renminbi.
If you bought a Metro or Shenzhentong Travelcard, do not lose the receipt that contains the card ID number. You will use this if the card becomes lost or stolen. You need to keep in touch with the station where the ticket was bought and cancel the card. It would be better if you have the receipt available because you get the balance reimbursed excluding the deposit.
We hit a breaking point in our business endeavors. As a business owner, many don’t see the downs in the roller coaster ride. And often it is our emotions more than anything else.
What do we do when we hit a bit downturn in our global business?
This is a big challenge, and there are tons of answers depending on your specific situation. Today I hope to give you some tips and inspiration that have helped me in the down times.
Downtimes Can Happen in your Business Endeavors & Don’t Blame Yourself
Businesses go up and down. There are bad days where the stars weren’t aligned, potential customers were angry at the rain or snow, things happen. Try your best to remember that with good times, there will also be bad times.
Here is one of my favorite quotes for dealing with a bad day:
999 Dolly Parton Quote – to get the sunshine we need to deal with the rain.
So when you’re in a bad state of mind and business is down, remember that the bad times you get through will only make you stronger. And if every day is a good day, then by definition they would be an average day! We need to get through the bad to appreciate the good.
So, don’t be too hard on yourself. The trick is to get through the tough times, as most people fail – or choose to fail – at those times.
Don’t Freeze Up – Keep on Truckin’
There have been some days where business systems were down. In a previous SEO tool company I was a partner in, the system was down for a day! The customer service was blowing up!
Those times, especially in a small business where a lot of work is already overloading the few people in the organization, you want to just freeze up and take a walk.
But this is what separates the good from the bad. The winners from the losers. Face the problem head on. Be honest with your clients, your team, and yourself.
When I lose money in a business decision, I try to remember – this is a one time expense. You can’t predict the one time bad expenses that come up. That is part of business. But you can control that you deal with them, and that you learn from them. And you improve your business systems for the long term.
On the other hand, if this business issue keeps coming up, it is NOT a one time expense and you need to address it immediately. That is your job as a business owner – to look at the big picture, step back and see the workflow of the company, and plug holes.
Look At Your Costs, Budget For The Tough Times
We should all be budgeting. Planning our recurring costs, and looking to growth.
It is our job to leave room for errors. For unexpected mistakes. If we don’t have some kind of safety net in the form of cash, then we’re in trouble.
Bill Gates saved a ton of cash on the books. 999 He did this so that he had enough money to pay for the staff for a full year without any income. That is extremely safe. But by having this safety, it allows us to think more long term, and handle the hiccups that come in our business.
Maybe you can’t afford to have a year’s savings to cover your costs without sales, but try to give yourself a few months. That way when you have these bad days, or probably longer… you can rest a bit more at ease.
Believe me, I have been at times where I was close to running out of money every week. It is so hard to focus when that is the case. Try your best to give yourself some runway.
Be Zen – Step Back While It’s Happening & Reflect
Controlling my emotions is something I learned while doing business in China. Heck, maybe I would have learned it if I had stayed in America. But in China when I got frustrated at business, most of my Chinese associates would tell me to work on controlling my emotions.
This has been a key difference in business practice I have noticed between East and West.
Westerners, we are much more open and straightforward about our emotions.
In the East, it is about not showing your emotions. Being calm and cool on the inside.
While which one is better is up for debate, I do like the idea of reflecting on how you are feeling. Look at yourself in the third person. Be a fly on the wall in the room, looking down at yourself. Why are you feeling the way you’re feeling?
I love to take walks when I’m stressed and overwhelmed. It kind of resets my mind. While walking, I try to analyze the situation and what I am thinking. Why am I upset. If the worst outcome happens, what is the worst result?
Normally when you think in this way, you can be more confident and cool when “getting back in the action”.
Cut Back On Things – Simplify
Here is where I have been weak most of my life. I love to do so many things. I love to learn. To be involved.
But this is like being a pack rat.
And your mind gets cluttered.
You need to write down all the things you’re doing and cross some of them out. Whether this is your personal life, your education, or your professional careers.
I always think of a story back in my college days.
I was in a fraternity, well I was rushing at the time. I was the stressed out “Mikey” with my backpack full to its seams and rushing from class to meeting to class. Josh, one of the older brothers, called me into his room at the fraternity. He saw I was so overwhelmed so he asked me:
“Write down all the things you’re currently involved in”.
I wrote down tons of things, like student government, investing club, and yacht club. He looked at Yacht club and asked me “do you know how to yacht”. I said no, but I was on the boat a couple times, I was the secretary so my role was not to run the boat, but to take notes and keep the meetings in order. He laughed that I was secretary of the Yacht club and had never sailed a boat.
So after looking at the rather long list, he took a thick black magic marker and ran lines through over half of the list. I cringed when he crossed off some of them.
After he finished crossing off a lot of them, he gave me the sheet back and said.
“I want you to come back next week and report back that you have quit all the groups I have crossed off on the list. Ok?”
I was so afraid to quit something I had joined. But I followed the instructions. I went into the groups and clubs he crossed off and told them I was too busy to help anymore and had to cut back on extracurricular activities. They accepted.
Within just a couple weeks, I noticed I had more free time! I was able to de-stress a bit. And the funny thing is, I didn’t feel like I was missing out on anything.
Thanks Josh!
Hopefully you reading this can list out all the things you are doing. Ask someone like Josh to review it and cross out for ya. Or if you are mentally strong enough, cross them off yourself.
Simplify Your Multiple Corporate Structures Around the World.
Now we’re getting a bit more relevant for this Global From Asia blog! We all are so excited to have an international business. The sexiness of having companies and operations in China, America, Brazil, London.
Yes, having global corporate structures and teams around the world is sexy! So exotic. James Bond style.
But when times get tough, upping all these company structures is exhausting. Both on your time, your brain, and your wallet.
I have had to bite the bullet a few times and close some companies within a year or two of setting them up. A UK company was one of them. It took us about four months to get it setup, between the company and the bank account. Mailing documents over the Atlantic Ocean a few times.
But we weren’t really leveraging it enough. A eBay account and warehouse weren’t enough reasons to justify the costs to maintain it all.
We went through the process of closing the operation down. Think some of the stock is still in a buddy’s garage in Ireland (this event happened back in 2008!). Or maybe I told him to give away some of those home bar goods as Christmas grab bags at his company.
It was a tough thing to go through. But once things happened and it was “back to being simple” the business went a lot smoother.
Like many things in life, simple is usually better.
Therefore, when business gets overwhelming – write down – or re-write from scratch – your business processes.
Keep Your Eye On The Ball
So many distractions in our life and our business. Ironically, just as I was writing the last paragraph my wife came in making a lot of noise and totally got me off point.
The trick is to keep your “eye on the ball”, or think about the goal. I have been writing more and more, and now I am documenting how many words I write, at which time, and what makes me more effective. I have found that writing blog posts like today’s helps reach people, help many people out, and also get new clients.
What is helping you get things done? I am quite sure there are a lot of things that get in the way.
Normally it should be about getting sales and additional revenue to your business. Making more money is always a good goal for any capitalist. So write down those activities that get to that goal.
Too many ways to make money, that means too many channels. Pick the ones that have the most ROI – return on investment – meaning either in your time or your money put in, the most benefit comes back.
Focus On The Business – Not Complete Business Structures
So many people talk to me about having an offshore company here, and a operating company there. All too often, they are talking to me about this when they are pre-revenue.
So, they are making things complicated before they even have any money coming in!
Did Google and Apple worry about their offshore structures when starting out? They never worried about it, as once they got big enough they hired smart MBAs and CPAs to take care of all that.
Stick to your core business – making sales of the product or service you are offering. And get to the point where you can hire an expert to take care of all the global corporate structure formations later on, when you’re on your yacht in Tahiti.
Think Long Term Over Short Term
You’re a business owner, and most likely, you’re a major shareholder as well as a major director of the company at the same time. That means you will get the biggest payoff later on.
The beginning is always the hardest. You need to outlast all the competition. You need to fight when everyone else is crying mercy.
Losing money in the short term may be hard, and sleeping on a folding cot in your office is not comfortable, but you’re a warrior. These sacrifices now will pile up and become an unstoppable machine in the market to take over your industry.
You may get in situations with staff where you need to pay out some damages due to cost cutting. You may have a bad client that doesn’t pay a big bill. You may get a lawsuit from a competitor.
These times suck for an entrepreneur and business owner. The world feels like it is upside down. I’ve been there, and you’ve probably been there too.
For me, the best way to get through it is to think long term. That these are one time events, that I can get past, learn from, and prevent in the future. It toughens you up, and you just got to get through them to enjoy the long term benefits of business ownership.
If you’re always stuck in the day to day of your operations, it will be hard to think long term and some of these events feel like the end of the world. Its tough, but we need to step back, look at our business as a whole, and make it happen. If it was easy everyone would do it. Its these tough times that define the winners from the losers. And if you can stick to your guns and get through this, you’ll be better in the long term.
How About You, What Are Your Tips?
I’d love to hear your tips for getting through those tough business days. Especially for those running a global business, trying to keep things in order can feel like plugging holes. A lot of these things haven’t been put in the text books, and that is what gives us the opportunity to get ahead in business and in life.
So I hope you enjoyed this guide. I’d appreciate you leaving a comment below with your feedback and ideas. Let’s make this a source where people can come to when they are overwhelmed in their international business endeavors!
Tired of sourcing from factories and want to setup your own manufacturing operation? Searching for the best corporate structure for a new Chinese factory?
Look no further, today we will dig into Hong Kong being a great place to open your factory under.
How To Open A Factory?
I remember when I first visited a factory in China. I became shocked to think it isn’t as complicated as I had thought. There are three main factors:
Big Open Space
Need a big building with lots of open space to set up the operations.
Machines
You’ll need the equipment to prepare the materials. This can be all sorts of machines but let’s stick to the most common: plastic injection machine. These are the most common in a Chinese factory. They will take the manufacturing mould, and then inject the plastic inside and pop out a bunch of the plastic parts. Significant size and definitely a big upfront investment.
Labor
You’ll need people to put together the plastic parts once they came out of the machines. Debur, check for any defects, assemble. Check the quality. Package. You get the idea.
Of course there is a lot more skill and magic to the process, but these are the main pieces of the puzzle you’ll be dealing with.
Is Hong Kong A Good Place For Your Factory Business?
A lot of people ask me when they’re searching on Alibaba should they pick companies that are in Mainland China or Hong Kong. Yet I don’t know any factories still located in Hong Kong – they are all in China. What is in Hong Kong is the sales office, or even just a virtual office for the parent company.
That’s not to say having your factory established in Hong Kong as a business entity isn’t viable. It is something common. It can be with anyone, Americans, Europeans, Local Hong Kong people, or Mainland Chinese who open the HK limited company. It will not be too easy for the general public to know the nationality of the owners (though there are ways to do company research in Hong Kong). Once you’re a Hong Kong company, you can then open a Mainland Chinese WFOE (Wholly Foreign Owned Entity) that will be where the factory operates from.
You can have a local Chinese partner in the factory with you, and you can both own the shares in Hong Kong. Once that is setup, you will then be “foreign” to the Chinese government even if half the company is Mainland Chinese owned. So you’ll open a Chinese subsidiary that is the fully owned by Hong Kong company. Have the IP owned by the HK parent company, and now you have the benefits of HK’s English legal system while able to operate inside China.
While any company could be the foreign owner of a WFOE in China, Hong Kong is a good choice as it is so close and so common. Hong Kong banks, and other banks and legal entities will be familiar with how to file the documentation. Thus the WFOE won’t have as much of a headache as having it owned by a company elsewhere.
Make sense?
What Things You’ll Need For a Hong Kong Parent of a Chinese Factory
So what are you going to need for this Chinese factory owned by an HK limited company?
It depends, will you have a physical office in Hong Kong? To do sales, meeting clients, trade shows, etc? Or will you work close with a serviced office in HK that will help with the mail from the governments and banks.
I’m going to assume you’ll be living and working in the Chinese factory, and that will be your base. You won’t need the overhead of a Hong Kong office and will instead invest in Mainland China operations.
Thus, you won’t need many things in the Hong Kong company, most operations will happen in Mainland China.
But you’ll definitely need:
Hong Kong Bank – Goes without saying. Any company operating needs to have a bank account. You’ll use this to receive money from customers, and send in money to Mainland China for the production and the rent and staff costs.
Hong Kong Credit Card – To keep your life a bit more simple, you’ll need a credit card to put the expenses on. You’ll be traveling to trade shows, clients, and having certain online software packages.
Paypal. If you’re selling B2B (manufacturing orders) then I don’t recommend having clients paying you by Paypal. But you may like to have this to buy things online and for small sales. This could also come in handy buying things online if you don’t get a credit card.
RMB (Chinese Yuan) Currency Option – Make sure you tell the bank you’ll need a RMB currency account. This will come in handy for managing the risk in currency fluctuations. Plus you can save time at the Chinese bank when you send over Chinese Yuan instead of USD or other foreign currency. It’s much easier to convert to RMB in Hong Kong than it is in Mainland Chinese banks. You can test for yourself, and you can thank me later 🙂
So Here’s How Operations Will Go
So now you did it, you setup a Hong Kong company and then a Chinese WFOE subsidiary. Good job! That took at least 4 months, but more likely 6 months. You may have done some operations already, but now you’re fully legal to do it.
You’ll rent a big space in the outskirts of Shenzhen or in Dongguan. You have your sales team there – and the internet speeds are reasonable for dealing with foreign clients. You have orders coming in. Once the money is in Hong Kong, you can either wire the money on demand to China. A lot of companies work out a monthly invoice for costs of operations and production.
Once you send the money to your Chinese bank from your Hong Kong bank, you order the raw materials and get the factory workers trained up to handle the production. You may need to hire more staff or scale down when production is low. I hope you have a core manufacturing team in place with good experienced factory management.
You process the order. You finish mass production and then send remaining funds to your Hong Kong parent company’s bank from the client. You need to get more cash over to China to finish the deal and get it to the port, FOB Shenzhen.
You will keep some money in China, but you hold your money and IP in the parent company in Hong Kong.
This is the basic idea. Sure the factory can be over in Shanghai, or deeper into Mainland China as well. Where you choose the factory location should base on the type of product and industry you’re in. There are cities who specialize in certain areas.
So What Do You Think? Hong Kong Perfect For Your Factory?
Hope this guide was helpful for you! Where are you opening up your own factory. Often the order of events is a USA import and export company grows bigger and bigger. Getting more clients and specializing more, they want to go even more direct. Since they know their product so well and their customers too, they can invest in a factory themselves.
Sure, this will have more fixed costs and more risky, but you’ll have full control. The trickiest part is to managing the staff and the quality control. All that complaining you did to those factories you bought from before will now be your headache! Its not always the factory owner who does the bad quality on purpose. It takes good management skills to keep things in order and deliver top quality.
So I’d love to hear your experiences and tips about Chinese factories from a Hong Kong company. Please leave comments and questions below!
Are you an e-commerce expert, or maybe just getting started out? You should get serious and check into leveraging the power of Hong Kong. For your global business, and Amazon USA sales and supplier center’s headquarters.
Today we’ll dig into why Hong Kong is such a great place to base your Amazon business.
Notice – This Is for Everyone Except US Citizens
This article is only applicable for those who are non US citizens. If you’re a USA citizen, Amazon will enforce that you use your US personal tax ID or a US company.
The rest of the world, you can choose where to establish your company and have your Amazon sales go. Just keep that in mind. When you are setting up your Amazon seller central account, it will ask if you, or anyone in the organization is American. If it is 10% or more owned by a US citizen, Amazon will tell you that you must have misunderstood the form. You’ll get sent back to the beginning of the setup process and open a US-based Amazon account.
Benefit 1 – Corporate Tax is 16.5%, And Can Also Apply For Offshore Status
So, as a global business owner, you can choose where you setup your business. In Hong Kong, even the “normal” corporate tax is at a global-low of 16.5%. There is an offshore elect option that you can file. (Plug- we can help you with offshore status) If you qualify you can get a 0% exemption.
So ya, Amazon sellers can enjoy this lower tax.
Benefit 2 – Still The Same as a USA Based Amazon Seller
If you’re selling on Amazon USA marketplace, they don’t make the sellers look any different, based in America or not. So you don’t have to worry at all about your sales and marketing being at a disadvantage because you’re not registered in US.
Many people don’t understand this and think they need to be American or they need a USA based company to sell on Amazon USA. Nope.
If you’re interested in digging in more, we have a good podcast with Wilson Blues on selling in Amazon USA from Mainland China. This applies to not just Mainland China, but Hong Kong and other places as well.
So if you’re European, you could just sell from your European company in Amazon USA. But the trend I see is a lot of European entrepreneurs re-structuring their businesses over to Hong Kong. For their Amazon businesses, as well as many business types in general. So why not just start fresh with your new Amazon business? 🙂
Amazon handles the payments to Hong Kong by Payoneer and will deposit it to your Hong Kong bank account.
Enjoy USD Accounts and Multi Currency Accounts
Here’s another big benefit- multi currency bank accounts. A ton of people. The Australian dollar currency volatility is crushing Australia business owners. They don’t have a choice to get a multi-currency account. (Not sure if that is true for all Australians, there must be some multi-currency banking somewhere in the country, no?) So they are getting destroyed when Amazon USA sends them their sales proceeds.
When they register in Hong Kong and get the bank account all setup, they can then get the payouts in USD. This means no more currency risk, and they can convert to any currency they so desire, when they are good and ready. Maybe you can pay in Chinese Yuan to your Chinese factory, or keep that in USD too.
Tons of entrepreneurs I work with are so happy they don’t need to deal with the currency of their home country. They are international business people, traveling the world. They don’t want to worry about the risks in the country they were born in having currency fluctuations.
In today’s world, we are free to do business anywhere we like, and Hong Kong allows us to choose the currencies we hold our cash in. Should be like that everywhere, by default. But until that day, Hong Kong is a good place for you to set up!
Easy to Buy from Chinese Factories
For decades business owners from around the world have benefited from Hong Kong when doing business in Mainland China. Counterintuitive I know, many of us think we should just go direct to Mainland China. But Hong Kong is where it’s at, and even Chinese factories have HK businesses with bank accounts.
So rather than wiring the money from your home country of Europe, Australia, etc, you can save money! Just doing a HSBC Hong Kong bank transfer to your supplier’s HSBC HK account. Free transfer, settles there in an instant.
Easier Legal Contracts
Like buying from Chinese factories, it is also easier to make business deals with them. Because they may have a HK company, a contract such as a sales contract, NDA, or even an invoice is easier to arbitrate if both companies are in the same country!
And even if the factory is only set up in Mainland China, there is a special relationship and understanding between HK and CN. It’s just closer, and the factory will respect you more. Plus they will see you are more serious and long term committed to Asia, China, and business on this side of the world.
As most buyers are still just using their home country’s business structure, you will stand out from the rest! Take this extra time and do it right – factory owners will take your business more serious!
Banks Are Fine With E-Commerce Business Models
We all worry these days about banks approving our accounts and keeping them in good standing. Don’t worry about the banks flagging you as a high risk business if you’re selling on Amazon USA. Banks in Hong Kong know this is a gold mine, because it is!
Come to your bank account interview and application day with your Amazon sales records. Show them the volume you have been generating and the revenue you have. Show the screenshots of the product listings and that you have your own brand.
I’ve helped a lot of Amazon seller clients who have set up their bank account with HSBC and not had a problem. Just be confident and transparent about your business model, Hong Kong is the right place for you to set up your global Amazon business.
It makes sense to do it here – buying from China, selling in USA. This is the trading business of the past, just now re-built for the new technology age.
What Do You Think? Will You Establish Your Amazon Empire in Hong Kong?
There you have it, brain dump of why Hong Kong is the right place for your Amazon USA sales business. As I meet these sellers on at least a weekly basis. I am confident to say that this is the right destination for your long term e-commerce business.
What are you thinking, do you have a company setup yet? A lot of clients started selling on Amazon through their personal accounts and it is getting bigger and bigger. Take that big step and make it formal. It will feel a lot better and REAL.
Or you already have a company setup in your home country for this Amazon business? Restructuring is a bit of a hassle, but you can get through it. Start the HK company and re-work everything around Hong Kong, step by step. The Amazon sales, the supplier orders, a new Paypal HK account.
Group hiking in Hong Kong a way to relax and mingle
When you have exhausted your list of things to do in Shenzhen and finally get to take off time from work for a long-overdue weekend getaway, you’ll want to savor every last minute of it by hiking. For nature lovers living in Shenzhen, there is always a choice for a bit of travel — Hong Kong, and you can do it with a group of people who share the same interest. Hiking in Hong Kong is is the best way to get outdoors and socialize with people of all nationalities.
Hong Kong, located right next to Shenzhen, is endowed with bright sunshine, soft beaches, limpid seawater and hot weather all the year round. It enjoys a long and winding coastline, which gives birth to dozens of bays and beaches. Sheltered by mountains with hiking trails, many of them are unruffled and free from strong wind.
Oswaldo Loor from Ecuador got an invitation of hiking in Hong Kong from Ye Wenhao last May, who was organizing hiking trips at that time. Interested in the trip though, Loor at the end still wanted to go to a beach in Hong Kong with his Latin friends.
Ye told Loor that he could organize a trip to the beach if more than 28 people joined, which was enough for renting a whole bus. That said, Loor started to promote the beach trip and successfully got 56 people to join it.
The beach they went to is Sai Wan Beach, which has been described as one of the best scenic spots in Sai Kung East or even Hong Kong. The beach features white sand and clear blue waters, which is attributable to its relative inaccessibility.
“The first time we went to Sai Wan Beach was so much fun. We jumped the cliff, bathed in the ocean and all. The people were really happy. We were a mixed crowd of Chinese and expats. They really enjoyed it and thanked us for organizing the trip” said Loor, who was so happy and decided to organize more trips with Ye.
Up to now, they have organized about ten trips, including trips to Sai Wan Beach in Sai Kung Peninsula, MacLehose Trail Section 1 & 2, Suicide Cliff at the south of Kowloon Peak, and Sunset Peak. Loor said they organize at least two trips every month, mostly on the weekend. Every time, around 28 people join the trip.
During the trip, you can not only enjoy the stunning natural scenery and burn some calories sweating out, but also meet new friends from different countries, talking, dancing, swimming, jumping and camping out.
All people are welcome to join their Hong Kong trips, which cost only a bit of money but return tons of fun, a great recharge of energy and an ignition of passion for life.
Take a step forward to hike
If you are interested to know more about their hiking trips add Oswaldo on WeChat, his user is: osloor and join also their hiking WeChat group with around 400 members.
Scan QR Code in Mage To Add Oswaldo
Long-press the QR Code, tap “Extract QR Code” to Follow “Discovery” on Wechat for more information.
On July 16th 2018, you will be limited to bringing 120,000HKD to Hong Kong without declaring it when crossing the border from Shenzhen by ferry, train, airport etc. Previously there was no limit of the amount of cold hard cash you could bring into the Hong Kong Special Administrative region.
If you do not declare your currency you could end up with a penalty for up to two years in prison or a maximum fine of 500,000HKD.
China Customs Cash Limit
When crossing back into Shenzhen you still need to remember that you are limited to 20,000RMB or 5,000USD equivalent before you have to declare at the Chinese customs.
Welcome to Hong Kong! The first thing a new client asks us is – what is a good hotel to stay at in Hong Kong? With so many choices and price ranges, it is a difficult answer to say in 1 email! So we have taken parts from various posts and made today’s guide list a full range of options for different locations and price ranges.
Hong Kong isn’t the biggest place – so even if you pick a hotel far from the center it is possible to get there and back for meetings and conferences.
Going to Global Sources Trade Show
Many come to Hong Kong for the Global Sources Trade Show. This is a bit far from downtown, so you need to decide if you want to visit popular bars and restaurants at night or not.
While there are some nice hotels at the airport and near the Asia World Expo (where the Global Sources Show is) – most people stay at a hotel in Kowloon or Hong Kong island.
Why? Two reasons
There is a free bus or Airport Express for Global Sources Attendees. During the trade show season, they worked a deal to give you a free pass to the Asia World Expo from Kowloon or Hong Kong station. Just show your badge or registration papers and you’ll get a pass.
There are more things to do at night – Just like any city, the airport is not downtown! Hong Kong is the same. So if you want to get some nightlife in and nice restaurants, it’s best to find a place in Central, Wan Chai, or TST districts (as well as quite a few other central hubs).
Going to the HKTDC Trade Show
There is another trade show happening in Hong Kong as well – the Hong Kong TDC show, or HKTDC for short. This is on the main island of Hong Kong, aka Hong Kong island, so you can just take a MTR to Wan Chai station and it’s about a 7 minute walk to the HK Exhibition Centre.
Many people go to both the Global Sources Show as well as the HKTDC show. Each are a few days long, and have just a little overlap.
So if you’re looking to do both, and want to reduce the commuting and have a hotel in the downtown area – look for places in Wanchai, Causeway Bay, Admiralty, or Central. Sheung Wan is another good one.
Always Check The Address On MTR Map
So a good rule of thumb is to ask the hotel what the nearest MTR station is. Then, find the MTR map and look at it.
Downtown is the blue line on the bottom of the map. That is where the “action” is. The bottom left is the main spot, with Central as the hub. If you’re near Central, you can also take the Airport Express right up to the Global Sources show, so it is easy to get there and to the HKTDC.
A newer MTR map will show you more stops on the blue line to the left (West) of Sheung Wan (and left of Central). These are “up and coming” districts with this new metro line expansion, so you may be able to get cheaper hotels and better value for money there.
Also, if it is far up north or far to the east – that is about a 45 minute to 1 hour MTR ride from downtown. I learned the hard way “back in the day”. Plus I have had clients in town who book a nice hotel there but it is just so far from everything. You’ll save money, but spend more time in taxis or more time in the subway.
What’s Your Budget?
Hong Kong is one of the most expensive places in the world! And no matter how much you spend, you will probably have a much more compact room than anywhere else in the world! Space is such a valuable asset here it is unbelievable.
So when someone asks me for a hotel recommendation, I would ask:
What is your budget?
What are your expectations?
What location do you want? Central? Or Willing to Travel more?
If you want a 5 star hotel in downtown, you’re talking around 500 US dollars per night. If you can deal with a 3 star in a downtown area, you can get by at $200 USD a night. Then there are the 1 – 2 star that you can find around 100 to 200 USD a night. If you’re willing to go to Kowloon side or even further into New Territories you can get better quality at a better rate.
Hong Kong is really all about location. And size of the room.
AirBnB + Hong Kong
AirBnB. An obvious one, but less choices here as the Hong Kong government is strict about businesses listing here – https://www.airbnb.com/s/Hong-Kong. Over and over again this topic comes up – Airbnb is technically not allowed in Hong Kong and the government has forbid people to use it. You can list there, but to list, you need to be a business with a license to sell a short term stay.
To legally list on Airbnb in Hong Kong as a person / individual, the listing has to be for at least a 1 month stay. That is what the government allows for personal to personal renting.
Yet I have friends from NY and other places who have still found amazing places to stay through it, as recent as a couple months ago right in Mid-Levels in Central. Check it out, and see if you find any apartments you can rent. The risk if there is a government crackdown at your apartment is that you would get your money back and have to find a new hotel. I haven’t heard reports about it – and so I wouldn’t worry too much renting on Airbnb for a short term stay, but listing is another matter.
Yes Inn
Backpacker Looking For Value For Money?
One I am safe to recommend is called Yes Inn. This is a hostel, pretty clean, and a bunch of my friends have stayed here. They have two locations on the Hong Kong Island side – Causeway Bay and Fortress Hill. There is also one on the Kowloon side in Mong Kok (check an MTR map to learn about specific districts). You can share a room with other travelers, or get your own private room. Below is a pricing table:
Standard mixed dorm suite HKD $179-419 (USD $22-56)
Private room suite HKD $199-459 (USD $25-59)
This seems to be the best value for a bootstrapping entrepreneur. They have a few locations in Hong Kong; the better location is in Causeway Bay, but there are also locations in Fortress Hill and Kowloon. Rates start at about 200 HKD a night (28 USD). Obviously check their website for the latest prices, but in my opinion the lowest cost for the value and location you can find! http://www.yesinn.com
Butterfly Hotel
Butterfly hotel is a bit more expensive. But again, you get what you pay for. Rates from 1,000 HKD to 2,000 HKD a night (140 to 280 USD), but you have your own room, there is wifi everywhere, and they have locations throughout Hong Kong. Check out the Butterfly hotel in Central here. http://butterflyhk.com/eng/our-hotels/on-hollywood/index.php
King’s Inn
I think this is a mix between the two choices above, both in price and in service. The rate when I have stayed here is about 300 to 400 HKD (40 to 50 USD), and you’ll have your own room. But there is only one location right in Wan Chai. The website is a bit hard to use, but then again this is why the price is more reasonable. http://www.kingshotelhk.com/hotel/location
Next I am nervous to even mention it here – but I think a guide about Hong Kong hotels wouldn’t be complete without at least mentioning it:
Chungking Mansions is the building having about 80 low cost accommodations (guest houses) located on Tsim Sha Tsui (Kowloon district). I have stayed here at least 5 or 6 times, as well as countless numbers of my friends. You can get a room for as low as 100 HKD a night, though more realistically 200HKD. A lot of Indian restaurants that second as a hostel overnight – I have slept to the strong smell of curry at least a couple times there. An adventure to say the least. If you are looking for the lowest cost choice, take a trip over: 33-44 Nathan Road, Tsim Sha Tsui, Kowloon, Hong Kong… but don’t say I didn’t warn you first!
The funny thing is – our office is across the street! Yet none of our clients have opted in to staying there!
Want To Stay Near The Global From Asia Office?
Coming to Hong Kong just for us! Wow, we are honored. So many clients ask us what are some good hotels nearby the office. Let’s list out a few. We also link them to booking.com search results, as you can put our company address (found at globalfromasia.com/contact/) and get search results by distance.
Holiday Inn TST District
A big brand and one many Americans know well, Holiday Inn. They have one Holiday Inn that is 1 block from my office: http://www.booking.com/hotel/hk/holidayinn.html and have had people stay there plenty of times.
How much is it? Of course it varies by season and supply demand, but I would tell you about the $200usd per night range.
Prices here start at about $3,100 HKD a night (about $400 USD), and are high class.
Peninsula Hong Kong
Another 5 star hotel right around the corner from our office. Also has a great view of Victoria Harbour (for an extra 100usd/night fee on average). The rates here start at 4,000 HKD/night ($500usd) but it is an amazing experience.
Also, if you’re up to see Hong Kong from the sky, they have a helipad on the rooftop!
Intercontinental
This is a hotel I stayed in for about a week when doing a business deal with a European investor back in 2009 – 2010! It is a good hotel and also a bit more reasonable price than some of the other hotels with a room rate starting at $250 USD / night.
Still not for the backpacker’s budget, but for a business person who wants a good mix of class and value, this is an option. It is just a few more blocks away from MTRs, but still right on Victoria Harbour on the Kowloon side with some amazing views. I enjoyed working in the lobby with a massive 2 – 3 story tall window overlooking the harbor.
What Is Your Experience With Various Hong Kong Hotels?
Hope today’s guide on accommodation in Hong Kong is helpful! This could be a book – there are so many hotels and places to stay, this is only a brief overview to give you some ideas of price ranges, locations, and levels of service.
It is probably going to cost you around $150usd a night for a “normal” hotel room, can go as low as $50usd, and as high as $500 – or even more. As everything in Hong Kong, the sky is the limit!
Now it is your turn! Please share your experiences and recommendations in the comment section below. Let’s help each other out!
Today we sit down with Stephen Barnes from Hong Kong Visa Centre and discuss how business owners should consider the visa and immigration process in Hong Kong. Is it right for them? Will they be registering a HK Limited and planning to remain in Hong Kong, or working “offshore”?
Its a rather complex topic, and we’re lucky to have the “Hong Kong Visa Geezer” break it down piece by piece to help get our heads around it and deal with it properly!
Topics Covered in this Episode
Brief introduction of Stephen Barnes and his Hong Kong Visa Service company
Entrepreneurs in Hong Kong and out of Hong Kong, thought process of considering a Hong Kong visa
Investment Visa, what it is and who its for.
Comparing an Investment visa to an Employment visa to a Student visa, and a Tourist visa. Putting it all together, which one is for who, and why.
Those Hong Kong companies in Mainland China (Like me) or in Southeast Asia or other countries, how they are treated
Diving Deeper into the Investment visa for entrepreneurs and small to medium sized businesses
Newbie tip for a Foreigner in USA or Europe looking to make the move to Hong Kong to startup.
Below we had this podcast converted to text, as it is a top listened episode, enjoy!
Introduction: Welcome to the Global From Asia podcast, where the daunting process of running an international business from Hong Kong is broken down into straight up actionable advice and now your host, Michael Michelini.
Mike: Okay. Thank you everyone for tuning in to Global from Asia episode 4. I’m here with Steve Barnes from Hong Kong visa center. Thank you for coming, Steve.
Steve: Mike, it’s my pleasure entirely.
Mike: Okay. Great! So let’s just jump right in. Maybe you could introduce yourself and your company to our listeners today.
Steve: Steve Barnes, been in Hong Kong for 27 years, started immigration practice in Hong Kong 20 yrs ago. I’ve been practicing ever since.
Mike: Okay, great! Yeah, I met you actually at a seminar where you were sharing your knowledge and appreciate you being on podcast for everybody today. It’s a hot topic, visa and immigration…
Steve: Yeah.
Mike: For expats here in Hong Kong. So I think a lot of our listeners are sometimes in Asia where they are coming through Hong Kong, doing their either startup or their entrepreneurial endeavors as a small business or medium sized business. What do you kinda advice them for immigration or visas in Asia or in Hong Kong specifically?
Steve: Well, I’m just telling that my expertise is Hong Kong. I’m gonna limit my comments to Honey Kong, it is an immigration opportunity for anybody who want to established a joint business here but effectively, if you’re a foreign national and you want to reside in Hong Kong to promote, pursue your business activity, you need to make an application for an investment visa, which is an employment visa a credit cases on you undertaking an active investment in Hong Kong and probability test. Together this institution show that you are in a position to make a substantial contribution to the economy of Hong Kong. Now, in many ways, everyone asking how long is visa strings, right? But there are certain things that run a bit advice around every investment visa application that goes on to get approved. The things that you need to show through your planning and through your, through early months of your operation that you are in a position to create local employment opportunities. Don’t get any local jobs on day 1. If you have a business plan that you put into immigration department for investment visa application and there is no opportunity to locally create a local employment, then you’re going to travel together and the second thing that the immigration department are looking for, a suitable business premises and there is a premises that kind of vibe for who you are and implementation direct going to time of your plan. You can kick off with a mere virtual office, which you borrow to cheap place, but the expectation is, then your course, sooner or later, once your business plan arrived at point where you’re hiring your first employee. That first employee will have some more sensible to report, to work to each day, because you can’t expect this person to going that, fulfill their employment duties where employee from your kitchen table or a spare bedroom so no matter how economically to have any kind of bring some quality time, place for your employees to work, you need time to spare and prepare the pre-requisite for a proper engine course. The 3rd leg of approvability still is actually divided into two parts, the first is cash and the second is resources. Cash million dollar question everybody asked me is literally how much cash you need. It all depends on the circumstances. in my experience, if you have less, less than 500,000 Hong Kong dollars, you may find that your application could be compromised, so deem to be weak especially with the other aspect than your plan is a little bit marginal but if you got a half a million or more, it’s reasonable to achieve that you can go on, to expect the consideration of the immigration positively approved rather than negatively think if you haven’t enough cash. So half a million can do it but I’ve seen in application they approved less cash as well but it’s not hard and fast. The trick is to understand that you shouldn’t be really thinking that the immigration department gonna buy into your startup laying type activity which is fine without at least having some cash because you know, laying doesn’t mean cashless, laying means having a money and spending the right kind of money so that’s an important consideration. The max and the more have the issue, it is swiping very smartly got to eye level funding so that’s always good. So that deals with cash and the other element is resources, Now resources are usually all the kind of things that are driving you to make a decision to pursue investment will come in the first place. So if you got a bit of code and you already developed, you wanna use new investment in Hong Kong to be able to build on that. The fact you’ve got a basic version of your product written already. It’s a resource for first of your application if you’re coming to Hong Kong and youre general trading, and you’ve got some kind of clientele that are already in place, that’s all good. Any other resource will allow the immigration department to objectively conclude that your business, if you use those resources together with the cash that you’ve got will eventually go on to results in a solidly and commercial enterprise, that’s the challenge.
Mike: Okay, got it. Thank you so much, Steve. So I just like to recap. He mentioned 3 points. That you’re going to employ local Hong Kong residence or Hong Kong people in the business.
Steve: Anybody in Hong Kong includes lawful employable but without further promiscuous of the immigration department
Mike: Lawfully employable.
Steve: Those people are account as well for persons for the purposes of local employment
Mike: Okay, got it. And that was not to be immediate but yeah to have convincible, clear playing that you will do that. I mean what time of year, 1 year?
Steve: That’s what your plans is, right? I always say to clients, “dont think about structuring your business around immigration, think about structuring your business and ask yourself actually what does this business works for immigration purposes and you will find that there is a quite close-call relation doing business that you will expect to be successful`and those businesses which immigration department approved.”
Mike: Got it. Okay. And then second point is the office, for when you’re employing the workers that is suitable location.
Steve: Suitable environment for them to work. That’s correct, yes.
Mike: And the 3rd is the cash and the resources. I think I just like to kinda some like convert to dollars when we talk, so he’s saying, of course it is always hard, I knew everyone asking how much money.
Steve: Let’s say $75000 – $80000 US dollars into Hong Kong business bank account. Interesting there is you don’t actually need to have all the money in the business bank account. You can have enough money in the Hong Kong business bank account to finance first 6 months of cash flow, and the rest of the funds is you can attest in your personal account anywhere in the world. So you can show you’ve got the money ready to deployment into the business. You need loan those funds by the way then efficiently through at least 2 years it means before you make out a purchase so the best part would good confident proof that you are not just borrowed money and shot fine it back which is always just the perks of visa application. They all know the tricks. They’ve done it.
Mike: Yeah, I can imagine. Okay. So those are the 3 main points. I kinda a lil bit follow up the resources, so code, I mean your degree, or like education…
Steve: Yeah, your service, yourself is also a resource, your background, what you bring into, you got to have a good track record and business in the past, if it becomes successful, they come through all those types of businesses. All that stuff.
Mike: Okay. So then I think some people used a trick of employment visa even though maybe they are not familiar or for a small business. I know you don’t that more greyer.
Steve: This is an old guess not. People think that you can somehow separate ownership from your business vehicle and become a third party and also an employee, You can’t. So during the currency of the application if its a new business situation, you’ve come to this interaction, that the existing composed interaction they’ll going to look to say who the owners and director of the channel is are. i would say that you putting yourself as an employee but you’re actually own the company and director of the company. You expected on how you dresses up. They are going to comply the investment visa probability test here. that’s the hard to test of substantial contribution to the economy rather than the lesser test which is do you personally possess special skills and and expected knowledge that are not already available in hong kong . So your personal skills in the contacts of business that your shares it will be seeing merely as a resource and they will apply an investment visa approval test on you but if you’re making the application for an employment visa, and you don’t have an interest in the business and then address you will just apply special skills and obviously, experience to anyone move so much to the ability of the business to substantial contributions to the economy of Hong Kong.
Mike: Got it. So there’s a 3rd option I heard of, student visa?
Steve: Well, student visa will get you on ground of Hong Kong but you not lawfully employable, you can’t join a business of your own based on Hong Kong, you can only study and thats it.
Mike: Okay, okay. Thank you for that. Lets, so we talked about, this is kinda recap, I think there’s a three even four I mean, technically there’s a tourist visa, to make on your passport. I am on my US passport holder. I have 90 days stay.
Steve: Yeah.
Mike: So I actually never legally work in Hong Kong. I’m an offshore Hong Kong company.
Steve: RIght.
Mike: So, I sometimes visit Hong Kong, sometimes working up a coworking space, gather some meetings. I’m okay, right?
Steve: Well, they say, it’s all about residing. So if you, as I know you are living in China but you spent most of your time in Hong Kong and pursue some business you establish here and your status is visitor, if your intentions to reside, it’s crystallize, then visiting days are just actually suitable in various before, because you’re effectively directing, controlling, employees of your company and visiting is not what it intend to do. the visitation is supposedly to come, interaction with Hong kong as a regular visitor and you gonna depart again. So, when you end up spending a great deal of time in your visiting days status instead in reality your intention is to reside is crystallized then you need to change your status from visitor to investment that you’re running in Hong Kong.
Mike: I understand. So, yeah. I mean, it’s actually complicated for me, so we talked about it, i think the correct way is, I, as entrepreneur and I wanna reside in Hong Kong as an investment visa.
Steve: Absolutely. You need to incorporate a company, get a business registration, you need to have a really good business plan which doesn’t actually need to be reflective in form of document cause in many ways immigration department normal one want to register their business plan that you might have write to an ipad. So if you’re self funding your business, there’s no formal need of business plan that might be a good practice to crystallize your thoughts and the immigration department will look at your stories as whole. They need to see that you got all the resources that you just discussed. They need to be satisfied that there is no security objection to you being granted decision to reside in Hong Kong to employ your business plan. When you have a good story, you carry can the arguments, you can tickle the bosses and you got the right level of money and there’s no security reason for you not being granted a permission you’re looking for, there’s no reason to expect, the immigration department will give you what you need.
Mike: Okay ,time frame normally?
Steve: 6 – 8 months.
Mike: 6 – 8.
Steve: 4 – 6 months, I’m sorry.
Mike: 4 -6 months.
Steve: If you’re not a resident in Hong Kong, you live somewhere else like, you do, when you want to make an application it’s going to take 4 – 6 months. If you presently reside in Hong Kong and you’re actually working for another employer and you want to stop working for another employer and start up for yourself, you still need to pass in investment visa probability test. Thus an existing residents that application dealt with different section of immigration department. It applies the same criteria but it’s a different team that handles the work. And because you’re an existing residents, that thing will finalize your application 6-8 weeks not 4 -6 months.
Mike: Okay, got it.
Steve: Make sense?
Mike: Yes. Thank you so much. So yeah, to kinda recap. Even if, so if you are working for a company in Hong Kong and you’re a resident of Hong Kong, when you wanna start your own business, apply for an investment visa, it’s a little bit shorter a month, two month and a half, still have to the money in your control.
Steve: Yep.
Mike: Either a company account or personal accounts.
Steve: Yep.
Mike: But if you’re doing it offshore or like me on China or others in Southeast Asia or West or as a visitor, so then if I came on 90 days stay and i’m staying in a hotel.
Steve: You can apply for guest status while you’re here but the immigration department dont allow the fact that you have a pending investment visa application to somehow advantages you in relation to 90 days of your stay. You have to leave before the 90 days are up and make a re-entrance some station if you want to comeback as a visitor before the immigration department approve your investment visa application.
Mike: Got it and really, really viable information, Steve. So again, I like to always ask on this talks. One kind of tip for newbie listener. I think a lot maybe don’t have the 500,000 Hong Kong Dollar but they are educated hustler entrepreneur. What kind of information would you give them?
Steve: Well, bear in mind that the visa class by definition called for active investment. So the fact that you may be a viable entrepreneur and you can you know, duck, dive and wave above by the best of it, that’s all well and good but you gotta understand that immigration department applies to the security of you that are mandate to make sure that they don’t approve foreigners who set up business here that have access to red label broker credit terms that you can find in Hong Kong and basically you know spend your way to disaster, trail of Hong Kong creditors on your way so even though you may have,maybe you made a license peripheral stuff to crack on with it, with very little capital using all year, argument and natural skills the immigration department don’t actually do not place a great deal creations on that. You still have to have a body of cash behind you to support yourself while doing this.
Mike: Got it. It kinda gives me a followup question. So if I answer investment visa issued, do I have more advantages on business?
Steve: Well, once you get investment visa, the immigration will approve you initially for 12 months to undertake the work you’re planning to do to promote that business as reflected in your business planning that you’ve told the immigration department is going to do on how you gonna spending your time in the context of that company and that company so you can get approval but just to do that business nothing else. Now, if opportunity put the things developed that perhaps you need to private half way through you often do something else because 1st activity is not working, that’s okay. Bear in mind that some point you even have to report that to the immigration but you won’t have to report that, the point where you privative but if, as they usually do this type of start up scenario, they grant you an approval subject to business reviews at the end of the first 12 months, so then the first 12 months immigration department will going to lift up the full and everything you’re doing in the business so if you privative in the meantime you have to explain to them. The more importantly they’re looking to see that through the lackluster performance that you have in fact been engaged in the activities that they can objectively conclude, willing to you to make a substantial contribution to the economy of Hong Kong. So you get the approval to performance, saying ok, we like your story, we believe you, see to it at 12 months mark, 80% of new business situations do not very well capitalized, tend to get approve subject to business reviews 12 months will lift up. If they do not subject to business reviews, if they really like your story from get go, then you will get what I call a freeing clear approval which means that the 12 months mark, the process to get your first extension is really just manage to get bags and you can expect that you’ll can go on to get 3 limits of stays and then you go and get numbers 1- 2, 2 -3 years pass which gives you a potential full 8 years in Hong Kong, to managing, directing, control that business. At the seventh or most people do taking constant history in temporary residents here, they want to application for permanent residency and up there absorbs same responsibility to have keep working in that business because this is a permanent residency and actually you can employ or engage your own business without further reference in the immigration department.
Mike: Got it. Wow! That’s a lot of information. So just to recap, after you get an investment visa, even if you passed, another 12 months later you’re gonna have to fly, go back,
Steve: There’s an 80% chance that they will subject your initial approval to business review.
Mike: Okay and then if you passed that usually, you have 2 years.
Steve: And if marginally, strike through that 12 months then you’d expect to business review, if you have created local jobs if you don’t have much cash in the tank. If you have been able to meet your revenue projection whatever it is, you know, just be in reasonable milestone in the first 12 months. If you have achieved that, you may find immigration department really extends you up to 2 years but then they can give you 12 months and that is subject to business approval again at the end first 12 months. But if you have a good story and slippy on the text phase and halfway supply of cash there’s no reason to expect that they respond and they will say no based in my experience.
Mike: Great! Okay. Lastly, there’s a lot of listeners that wanted to contact you. We’ll put your website upon the website too but what’s your…
Steve: Oh! We have a number of websites. We have a website which is called the HongKongVisahandbook.com and that’s basically our foundation content. It’s a DIY definitive guide to Hong Kong process. No singing, No Dancing completely free of charge, no registration required and textbook if you will, although it got videos, screencast, podcast, templates, the whole shooting match, all completely free of charge, hongkongvisahandbook.com. Tthen I do daily immigration content of the site blog called hongkongvisageeza.com and I post on that 4, 5 actually on my mind 7 times a week i don’t usually plan this so that feeds you sorts of updates of information, all completely free charge.
Mike: Great! Yes, it’s really great and we will linked that on golbalfromasia.com/episode4.
Steve: I have a, I’m gonna be Shenzhen, a week on Friday, you might put on your show notes at the boathouse. I think.
Mike: Oh, yeah.
Steve: I’m giving a talk. Oh! Not Friday, Thursday it is.
Mike: Okay.
Steve:At the boathouse, yeah.
Mike: Yeah.
Steve: So perhaps if you put the link in your show, the people listening to me, I’ll talk about my favorite subject live.
Mike: Okay. You’re very passionate and you’re also good Internet Marketer. Your blog and your content and your handbooks, you also know a lot of listeners are Internet Marketers too. So we like the, you are also up in the game.
Steve: Our marketing was built in by design and our product is driven from marketing of inspector.
Mike: Great! That’s definitely the right way to do it. So alright. I guess if there is any last points right before we end here.
Steve: Right. I wanna, just so basically, carries anyone that is thinking about Hong Kong to understand that Hong Kong is very open. W are set and very welcoming and what might have been your early experience from the immigration agency if been to either Thailand or China, don’t expect that you’ll have that kind of experience in Hong Kong. We have very rule of law, incorruptible public service at the immigration department. We have a customer service mandate, very open, accessible and friendly but there’s a lot of stuffs that you can have access to because the immigration department play the role of gamekeeper and coucher at the same time at their website is designed to inform and not give you advice and the immigration department shows to inform and decide not to advice. So a lot of people look at Hong Kong immigration department website, they look at investment visa category and they say “Oh just get to put these document, fill this forms and i’m home and hopes.” It doesn’t work like that. There’s a 4 -6 months interrogative process where you have to show that you can make that substantial contribution to the economy of Hong Kong and if you can do it, clean and honest enough, you got the money, you got the will, you made a right entrepreneurial stuff, you have 95% chance of getting what you’re looking for and that’s how it works.
Mike: Great! Okay. Thank you so much. I’m sure we, I enjoyed you talk a lot. Thanks, thanks a lot.
To get more info about running a business via Hong Kong please visit our website at www.globalfromasia.com that’s www.globalfromasia.com. Also be sure to subscribe to our iTunes feed. Thanks for tuning in.
Want to open up your bank account remotely for your Hong Kong company?
Today, let’s go through this. It’s such a hot debate going on, let’s use this post to make a difference!
You Can’t Open Your Bank Account Without Being in Hong Kong
The quick answer is, you need to be in Hong Kong to open your bank account. They want to meet all the directors and significant shareholders of the company to know who the client is.
I’ve talked to almost every bank in Hong Kong over a 2 day full time effort, and all needed the directors to come in person.
But there are some ways around it, I’ll dig in a bit today.
HSBC in Mainland China Works
So for those entrepreneurs in Mainland China with Hong Kong companies, you’re in luck. They will allow you to apply for a Hong Kong business account from a HSBC in Mainland China.
There are fees, and in 2016 these fees are going up. From what people have told me who did it, it’s about 2,000 Chinese Yuan range. They choose to come to Hong Kong instead, as that is about the same fee as an airline ticket.
So maybe you need to come to Hong Kong anyway. Let’s say your passport visa is running low on time. So make a visa run and then also apply for the bank account.
Don’t have a reason to come to Hong Kong and you’re in North China? It may make sense to pay this extra fee to do a remote bank account opening. I’d love to hear people’s experiences in the comments of today’s post (thanks in advance!)
HSBC Premier Customers
So, I’m putting this in here because this is one I hear over and over. As far as my research and network of people tell me, it is not possible in today’s environment, (yes, we’re in 2016 now), to open a Hong Kong business bank account from non-HK or non-Mainland China HSBC branches.
In the past years, people told me that premiere level (minimum deposit of 1,000,000 USD) could open bank accounts in other countries. Maybe that was for personal and not business, and maybe that is still active up into today. But I have asked bankers, who have become somewhat of my friends, and they assure me you cannot open a business bank account for HSBC HK outside of Hong Kong or China.
Again, please prove me wrong! You can leave a comment below or send us an email.
DBS Hong Kong Has a 20% “Application”
Few have mentioned that you can apply for DBS bank online. So I was like, heck let me try this. They call it an application, but in my opinion it’s more like a lead capture form.
They asked me a few questions about me and my business, and once I did that, the site said they would email me later for more details about applying.
Not sure if my case was that horrible, but I never got a response back! Still seems to me I need to go there in person. And now their new SME bank application fee (upfront, no refunds) is 10,000 HKD! Insane right?
Anyway, so that is what DBS calls applying online.
Why Is It Not Possible To Open An Account Online or Remote?
So you may be wondering why it’s not possible to apply online.
There are 2 possible reasons:
They are afraid of fraud
The financial industry has been getting tougher and tighter lately. Government regulators are slamming banks with fines. If they feel the bank didn’t do a good enough job in verifying the banking client (KYC – Know your Customer). It’s the job of the bank to ensure the client isn’t a terrorist or a money launderer.
The banks need to make sure they don’t “slip up”. If they let a “bad egg” who says they’re a trading company for t-shirts get by but in reality is doing drug trades, slip through the cracks. Uh-oh, bank is in a big problem.
So what’s happening is the government regulators are pushing the job of being a policeman to the banks. Seems kind of smart for the government. They don’t need to hire more people to dig into the banks and can instead put the responsibility and overhead onto the banks.
They don’t want to invest / embrace technology
Another reason is, I’m interested in opening a bank in Hong Kong. I talk to tons of people frustrated with the current banking options there and lack of customer service.
In a normal business industry, a new tech company could come along and disrupt the old players. But banking, in Hong Kong at least, is so sealed – when has a new bank opened here? I’ve heard it was in the 1970s!
So what is the incentive for the banks to innovate? They’d need to spend a lot of time and money. Plus they’re not good at the internet, they’re better at crunching excel formulas and clearing cash trades.
As far as I understand, the Hong Kong banking association allows digital signatures for online banking. That means that at the least, for account maintenance items such as updating details on your bank, you are legally able to do online. But most banks still want you to come in person or mail a hand signed document to do that.
Some Have Opened Banks Outside of HK (Offshore)
So one thing I have been learning is that some who don’t get a HK bank end up using their HK company to open a bank account in Europe or in an offshore island. Seems a bit strange to me, but it is a business account and not a personal account, so the owners limit their liability in the business. Would need to dig more into this, some use it to receive money from customers in those regions / countries.
A Tip – Add New Owners / Directors Later On
So what some do, to avoid having to have all the owners come to Hong Kong to open the bank account, is keep it simple to start. Maybe one or two directors when filing the new company and applying the bank account.
Later on, once things are operating and stable, then you can update your company documents and add the new shareholders and directors.
This is one tip that has saved a lot of travel time and headaches for many clients.
Sure, those owners not on the original company documents are taking a risk. But they also need to be aware if they can’t all fly to Hong Kong together, this is the most reasonable option. You can have a personal contract between the owners that can help ensure you will get your shares in a future date. You should trust your business partners that much anyway.
This Is What We’re Working On – To Make It Easier
As Global From Asia has converted from a podcast and blog into a full service agency, we have picked up more and more cases like this. We are building one big strong case and talking to the Hong Kong government about it.
In order for Hong Kong to stay ahead of the game in the global business space, they need to work on being more online friendly.
If you want to get involved, please let us know! Hopefully this blog post can spawn some new ideas and get some change to happen!
Why Do you Think It’s So Hard To Apply For Banks in HK Online?
So I’d love to hear from you! Please leave your comments and thoughts in the comments section below. Let’s help each other to figure this puzzle out.
I’m curious if you have had any problems applying for a new HK bank account. What happened, why did you get declined? Let’s help each other and see if we can fix this for the long term.
Best of luck on your global business domination! Original: here
Many entrepreneurs cringe when they hear the word bookkeeping and accounting in Hong Kong. To be frank, I used to, and in some ways still do. But rather than running away from it and hoping it will go away – it’s best to suck it up and take charge.
Today we’ll go through the thought process of organizing your bookkeeping for your HK Limited company.
Get a cup of coffee, jot down some notes, and get inspired. Now let’s go!
What Your Business Type Matters For Bookkeeping
Not all bookkeeping is the same. There are a few different criteria to consider:
Products Business, Service Business, or Mix of Both? Are you a business that earns money by selling products (hard goods), or are you making money by providing a service. You can sell online or offline, as in bookkeeping terms it doesn’t matter (of course the technical method for online and offline is a bit different).
B2B or B2C? Buzz words you probably hear quite a bit. B2B means you are selling from your business to another business (business to business). This means that your customers (oftentimes I call them clients when they are a business account) are companies, not an individual. B2C is the opposite, you’re selling to end consumers, often called retail customers. These people are individuals making decisions for their own benefit and use, or as a gift for a special someone. You might say “well, I do both B2B and B2C”, so don’t get stressed out, but be aware that you are doing both.
What Is Your Industry? Various industries have a lot of different ways to have their businesses operate. Normally when you do accounting, it will only really let you put in 1 or 2 different industries in the system.
Create a Chart of Accounts
Cringe. Yes, this is overwhelming for newbies. But this is the center of your business. Here is how your accounting and business will flow. Many accounting software packages will help auto-generate them based on your industry and other questions you answered above. Yet I would still recommend working with your bookkeeper to ensure nothing is missing.
Here are typical accounts that you would list on a chart of accounts:
Income
Services
Parts / products sold
Sales write offs
Cost of Goods Sold
Materials
Labor
Outside services/Subcontractors
Supplies
Small tools
Expenses
Advertising
Marketing costs
Inventory used for promotion
Automobile Expense
Bank Service Charges
Cleaning
Contributions
Depreciation Expense
Discounts Taken
Dues and Subscriptions
Insurance
Subaccounts:
Auto Insurance
Business Liab & Contents
Disability Insurance
Life
Medical
Interest Expense
Licenses and Permits
Maintenance & repairs
Meals & Entertainment
Merchant credit card fees
Office Expenses
Subaccounts
Computer expenses
Postage and Delivery
Office Supplies
Other Office Expenses
Payroll Taxes
Professional Fees
Rent
Salaries -Office
Salaries – Officers
Telephone
Travel
Utilities
Other Income
Interest Income
Other Expenses
Don’t stress too much if you miss something or want to remove something later. Of course it’s ideal to have it all set from the get-go, but you can go back to this as your business develops.
Add Your Products & Services
Once you have the chart of accounts setup, now it is time to add in the data you’ll be working with to buy and sell. This is a strategic event and you should do it before you start to enter all your transactions.
You can use the template spreadsheet in Quickbooks and download it to your desktop. There you can match up the products in your shopping cart or your service offering page. The more details you put in here the better, as it will save you time from entering it one by one each time you put in a new transaction.
List Out Client and Supplier Accounts
Next you will want to write out your customer accounts and supplier accounts.
Now this is when B2B or B2C comes into play. If you’re doing B2C, yes it’s a lot of transactions! You will not manually type in each individual’s name, address, and contact details in your accounting system. That is insane! So you can call them “Retail customer” as a general journal entry. Another way is you will integrate your ecommerce or POS system to your accounting software.
If you’re doing B2B, you may want to spend time putting in your bigger clients company name, contact person, address, email, and phone number. This way when you create an invoice to charge them for a product or large product order, it will auto-fill. And you can also run reports to see who your top clients are, as well as those who are late on paying you.
Do the same thing for supplier side. This is again up to you how detailed you want to get and how many suppliers you want to input. If you are buying from a supplier on a regular business and the monthly or yearly amount is significant, take care. I would recommend to invest the time to put their full company contact details there.
You can also use an Excel spreadsheet and then if you have software bulk import it to save time.
Start Entering Transactions
Now that you have the charts setup and the client/supplier information prepared, next you should start to put in some transactions.
This is where the magic happens! There are a few ways to get you transactions into the system:
Manually Create Invoices and Purchase Orders
This is the traditional way, and if you’re a B2B business, might be the main way you will enter your business transaction flow.
When you want to receive money, you will create an invoice. You can then export it as a PDF and email it to the client. Many times accounting software has the ability to send the email right inside the system. As you have the customer information already entered in it’s easy! The invoice will auto-complete their contact details in the invoice.
If you have products or services already created, you can then choose them from the dropdown menu. Either it will auto-fill the price and description, or you can manually type in what you need.
On the supplier side, for the most part it’s the same thing, except you make a PO (purchase order). If you have their contact details and what you’re buying pre-defined this is fast as well.
Once you make the payment, or the client pays the invoice, you can mark it as paid, and it will balance in the accounting system.
Import via CSV (Excel Spreadsheets)
Most online banks now allow you to export your transactions. Normally they let you do as a PDF, as a Excel, or as a CSV (comma separated values) file.
Most accounting software systems work with CSV format. Let’s hope your online banking system supports it.
You’ll then download the file from the online account and the import it to your accounting system.
You may need to make sure the “mapping” is correct. This is where the “First Name” field in the excel spreadsheet connects to Fname in the other system (it’s what the database calls first name, for example).
It is nerve-racking at first, and normally it will ask you for your confirmation before doing the import. I’ve had some messy times trying to undo imports when the mapping was wrong – so be a bit alert, especially the first couple times you do this.
Automatically Pull From Online Banking & Merchant Accounts
Are you a B2C business, selling on Amazon, eBay, or other e-commerce shopping carts? There is no way you can have the time to have a team member entering in all these transactions. That’s because you’re doing high volume (you and I both hope!) and making tons of money selling lower priced items.
This is where the magic of technology comes into play!
You’ll look into integrating your business with an accounting software solution. Check if it works with Paypal, eBay, and whatever e-commerce provider you have. The more the better, so that you can avoid having to deal with
Make Sure It’s In Sync
Once you do link up the various third party integrations, you’ll need to check on a regular basis to make sure they stay connected.
Why do they disconnect? This is for your security, and different systems have different lengths of times. The better ones will let you set the length depending on which service you integrate with – for example 30 days, 90 days, 1 year, or indefinitely.
But alas, all these systems integrating together each one has their own preference. Just be ready to get an alert that you need to re-authorize the connection. Your bookkeeper may help check it for you, but it is still best you as the owner and director check it on a monthly basis, or even more often.
Pick Reports You Want To Read
Now, time to reap the rewards of keeping your books in order – reports! Quickbooks and any accounting software loves to take the data you’ve been entering it and give you a bunch of summary reports to see.
Some of the more popular reports you may access:
P&L (Profit and Loss)
This is the most important one in my opinion. This will take the total amount of each transaction classification and then take a total for the time period you are running the report for. Looking at this report will see if you have made or lost money during that period.
It’s hard to hide a loss here, if you’re sales are less than your expenses, it will be an ugly and scary red loss or a negative number.
But this is why having books will help! Double click on one of the numbers and it will run a report of all the transactions there. See where you’re spending your hard earned dollars. Knowing where your inflow and outflows go is essential in the success of your business. Don’t delegate this to anyone, this is the key role of a business owner.
Tip – I like to run this report for the past 12 months, and to have it divided up by month. That way I can quickly see which months the business is making money, losing money, or has high / low margin times.
Balance Sheet
Another critical report, this shows you how much cash you have in the bank. How much debt do you owe? Who owes you money. This report will show you how much money you would walk away with if you closed up shop today. That is, paid off your debt holders and took out all the money from your bank. There is also Shareholder’s Equity, which you consider as intrinsic value of the business. It is taking A-L (assets minus liabilities) and becomes the third part of the balance sheet.
This report will show you how “strong” your business is if things start to get difficult going forward.
Aged Receivables
Do you let your clients pay you later? Such as Net 30 terms, which means they pay you a month after they receive the goods. Then you should keep a report like this bookmarked. Here it will show you which of your customers are late paying you and maybe get you off your butt and making calls to remind them to send the money in! The longer it waits, normally the lower the chances are of you getting it. Business moves fast, and maybe they will shut down – the more old receivables on this report, the more nervous you should be!
Expense Reports
Here is where you should look at the monthly breakdown. Check which vendors are getting a lot of your money. Also look at the report by type of transaction, such as office expenses. Maybe don’t be such a detail freak that you count how many reams of paper you bought, but at least be aware what your average cost is on those accounts. And question some people sometimes, keep them in check. Make sure your team knows you are running these reports and analyzing the numbers. Also shows them you are being responsible and care!
Budget vs Actual
A cool feature of accounting software is you can put in your monthly budgets. If you have an expected amount of money you’ll be spending each month, or a target for your sales team, put it in here. In this report, you can get a better idea if your company is staying on track of what it said at the beginning of the year. Way off track? Schedule an executive meeting scheduled ASAP! Decide do you lower your forecasts going forward or is the team able to bring things back up to where they predicted?
I’m sure you’ll have more reports you’ll want to run. Each business is different. The main idea is you should have a good grasp of what money is coming in, what’s going out, who owes you money. Check on a regular basis and ensure you are on track from what you predicted at the beginning of the fiscal year.
Keeping Things In Order For a Smooth Auditor’s Report
Another benefit of keeping on top of your books throughout the year is when you get your Profit Tax Return from the HK IRD, you’ll be ready. Just run the latest reports from the software and submit to your HK CPA auditor.
Not many people enjoy digging into the numbers, but we need to take responsibility as business owners. Hope today motivated you.
Any Questions or Need Help?
So that’s all we have for today. Get to it, and start entering those transactions into your favorite accounting software. Need help? We offer full bookkeeping services and you can check out our plans and pricing.
If you enjoyed this article, feel free to leave a comment below. Let us know how you are keeping on top of your books.
Looking to make your first order from a Chinese factory?
Or maybe you’re currently doing it and still crossing your fingers that it is going along well.
We know how nerve racking it is, and hope to help you today.
Here are some 10 tips we have learned over the years from our own experiences and talking to experts in the field.
Make Clear Specifications
If you want to avoid problems with a Chinese factory, then look professional from the beginning. If you come to them looking like an amateur, then they will underestimate you.
What can you do?
Be prepared!
So do as much upfront research and work on your product as possible before approaching a factory. Is it a pre-existing product, an enhancement, or a brand new innovative product? Each one of them requires different level of specifications, but the more homework you do the better. And the ideal is to have a sample of the product in your hands and sending it to the factory, they can look at it and give a full and complete estimate.
But please be careful and make sure this factory is trustworthy before sending over your hard work.
Don’t Focus on Price Alone
If a factory can tell you are looking at price and price alone, then in my experience the good factories will step away and the lower quality, more desperate factories will step forward. I’m sure you want the best quality product with a top supplier, so don’t show them that you are a cheap buyer.
If you want a cheaper price, they can go as low as you want to go.
But don’t expect a nice and shiny new toy…
I can speak from firsthand experience, in my early days in China I kept pushing down the price of a wine corkscrew, and the factory finally “broke” and agreed to my price. Unfortunately for me, the metal was a cheaper one that would rust quicker and I had many returns on my e-commerce website for the next year or so.
Be Patient
If it’s your first time to buy from China, don’t rush it. And this article isn’t going to make you an expert, sorry to say. Give it at least six months I’d say to do your first order.
Think about it.
Between:
* Finding the supplier
* Shipping samples back and forth
* Negotiations
* Making a sales contract
* Sending a deposit payment
* Quality inspection
* Shipment to your facility
Just listing these out I’m thinking this is longer than six months!
Always Get a Sample – Production Sample!
This is where people get impatient and rush. They get one sample that is “kind of close” to what they want. They are based in USA and Europe and tired of spending the 80 US dollars for UPS to ship the samples back and forth each time, so the factory convinces them this is a “basic idea and they will change X, Y, and Z” to make it the way you want.
So then get them to make that sample and send it back!
Yes, it is exhausting but if you cut corners at the beginning, it will cause bigger headaches later on.
Do a Test Order
Buy from a couple factories a lower quantity.
The best time to get to know a factory (or anyone in life or in business) is to do a practice run with them. This is when their true colors come out, as often during the sales process all the promises in the world are made, now is the time to see if they can execute.
It’s Sometimes OK to Use a Trading Company
Many people always talk about going “factory direct” and “cutting out the middleman”, and yes, while you may keep more of the money yourself, there are sometimes extra value add services they can do.
Another reason to use a trading company, they have a network of factories, so you can do a lower quantity across multiple product categories, while a factory has higher minimum order requirements and then you’d need to coordinate with all of the factories yourself.
Use Third Party Services
Similar to potentially using trading company, there are a wide range of third party service providers out there. From quality control, CAD design, sourcing, to logistics, the more of these you use yourself the better control of the entire process you will have. Normally the factory will tell you not to worry about these things – as they have their own partners they work with or they don’t do these services at all! But of course if you pick your own third party vendors you can rest assured they will help you more ensure the factory is doing things in your best interest.
Location Matters
I remember when I was first searching for a factory while home in USA. I had no idea where these factories were located and I thought they were all in the same vicinity. Yup, I didn’t comprehend at the time China is a massive place, and various “clusters” of factories form in certain cities – for example Ningbo is where a lot of gifts and home decor is made, Shantou for toys, Shenzhen for electronics. Learn where these clusters are, and then determine if you can source all your various products and components in that area. Why? This will reduce headaches long term when consolidating shipments and doing just in time (JIT) scrambles for unexpected situations.
It’s Better To Lose / Waste Money At The Beginning Than At The End
Many people look at R&D and they think, yes, this is a worthwhile cost to design a new product. But I think they don’t classify things correctly – I put a ton of various costs as R&D – flying to the factory, sample shipments, buying samples from various potential factories. We can’t cut corners on these upfront investments, and we need to look at them like this – investments – not expenses. As like any investment, the value increases over time, and the knowledge, awareness, and correct suppliers you find at the beginning will save you countless hours and dollars in the long term.
Sadly, when we make the right decisions it isn’t as easy to see as when we make the wrong ones. But if you’re not having headaches in the years ahead, count your blessing and thank yourself for making the right investments and decisions at the early stages
Make a Contract in English and Chinese
This one I wish I knew when I first started buying from Chinese factories. And you can’t just find one on a Google search and tweak it, this is something that will be with you for years to come. Find a qualified lawyer, on my podcast we have Mike Bellamy sharing some of his legal contacts there to use. Or go through recommendations in your own network. While if you’re a smaller buyer, a contract may be hard to enforce, at the minimum it sets the rules of engagement from the beginning and reduces miscommunication later.
Conclusion
So I hope today’s rather brief article helped and got your brain flowing here. It’s a daunting task, sourcing from China, but we need to stay motivated and do it step by step. If you’re currently buying from wholesalers in your home country (like I was) take it one product at a time until you’re confident and comfortable to expand.
This was a guest post I wrote originally on JumpStart Magazine.
I’m getting a lot of heated debates lately about should an entrepreneur choose Belize or Hong Kong for their global business.
Today we’ll break this up a bit and see what is best for your situation. Again, please ask an expert for your specific case and situation.
What’s Your Nationality?
The first is what passport do you hold? It’s easy to incorporate a new company almost anywhere in the world, the challenge always comes up at the bank account opening process.
If you’re a USA passport holder, you can apply for a bank account in America without a problem. So what people are doing is opening offshore companies and then via this offshore company opening a US bank account. Seems pretty wild right? Open a company overseas as an American, and then go back to America to open the bank account.
I’m not a tax specialist, but I have heard that this is a great tax shelter setup. And Belize is the most common company structure to have when applying for a USA bank account.
So the reason this section of the guide is asking you which passport you have, if you open a Belize company as a European, for example, it won’t be that easy for you to get a USA bank via this Belize structure. But if you’re American, I’m told this is pretty straightforward process.
How Can A Belize Company Work For Americans?
You may be wondering, I thought America is cracking down on Americans hiding their money overseas. It is crazy to me to hear this can work, but the answer I have heard is this.
High profile American politicians and rich executives in America have this exact same structure. So they won’t make laws that go against their own corporate structure.
So by having a company setup the same as the “big boys” in USA, man feel safe this can work for the long term. Or at least the longest out of the other options.
Hong Kong Case For Your Business
Hong Kong is great if you don’t want to setup this Belize structure with a USA bank account. Maybe you’re not sure how long that will work for. In Hong Kong you will be 100% operating in Hong Kong with a Hong Kong bank account and all your reporting and operations.
Hong Kong isn’t like these offshore island companies that don’t have established banking in their own jurisdiction. HK is a financial center of Asia and the world and has plenty of banking options.
Yes, I have been talking a lot on the Global From Asia blog about how it is getting harder to open a bank account. That is happening all around the world, and you need to have more reasons and cases for relevancy in that region. More enforcement by governments to make sure banks KYC (know your customer) but also report back to the USA government who has accounts there (FATCA) has caused these headaches for legitimate business owners.
What I’ve noticed is that while a Belize company may work for Americans, the hard part for everyone else is to get a USA bank account. This has then re-directed a lot of Europeans to talk to me about setting up shop in Hong Kong.
So Really – It’s About Where You Want to Bank
When it boils down between Hong Kong or Belize, you need to think about where you want to bank. Belize means you’ll apply to a USA bank, with a Hong Kong company you’ll apply for a Hong Kong bank. I have had other people get a bank in Europe via their Hong Kong company for tax reasons, which is pretty interesting and a future topic for the blog.
At any rate, a company in itself isn’t the critical factor – it’s about the banking.
Americans can get USA banks without a hitch. I am told (disclosure, I do not have this structure) that it is pretty straightforward to get a Belize company setup and a USA bank.
But if you’re not American, then you can open the Belize company but will have issues with a USA bank account. Then you may look at other company structures.
It Seems Risky For Me To Bank in USA to Avoid Taxes?
I’m not a tax guru, I’m a business owner. And yes, I’m American (I should put the scarlet letter on my forehead!). While no one likes taxes, I think it is part of life. The tax avoidance game will probably never stop and next year there will be some new way to get around paying your taxes.
Yet I know this is such a hot topic, and heck, may as well have a couple blogs on the site to see what comments we get.
I think it is kinda crazy, as an American, to open a USA bank account in an offshore company to avoid paying USA taxes. Sure, there are really smart people that say this works – but it seems so counter-intuitive. Maybe really wealthy American people do it, but those people probably have really smart lawyers watching over the laws. As soon as there is a policy update, they’ll immediately react and move to another complex structure.
So to me, you need to do what is right for your business. Not just about avoiding taxes.
Does Hong Kong Help For Your Asia Business?
What I’m more excited about when I write up these blogs is doing business in Asia. A lot of readers are buying from Chinese factories, or have development shops in Vietnam. In these cases, it helps a lot to have a Hong Kong company. Sure, taxes are also lower than other places in the world, but that isn’t my focus to recommend it.
You want to do business in Hong Kong because you can headquarter your global business here. Pay your suppliers in China, your outsourcing team in Philippines and Vietnam. And yes, receive your sales income from clients around the world.
You can also open subsidiary companies in China and even in Western companies to do sales and operate locally there.
So those wondering Belize or Hong Kong, try to step back and think where are you going to be operating your business ?
Think Long Term – Play To Win
Make long term decisions. For your competitive advantage as a business owner. Where will life be the most simple? Where can you go to stay on top of the trends in global business?
I’ve been witnessing Asia grow as a global player for almost a decade now. Do you think that will continue? Will you be raising money from investors? If so, where are those investors located? Where are they comfortable investing?
What Are Your Thoughts? Belize or Hong Kong?
I hope I helped you out. You’ll have a lot of other consultants and business experts talking to you about where is best to set up. Full disclosure, I am a consultant and agency to help you set up shop in Hong Kong, so I have my natural bias. Yet I tried my best to give the pros and cons of both sides.
I’m not sure what the yearly upkeep fees for a Belize company are. But in Hong Kong, we have a guide covering the yearly fees you can check out.
Please, leave me a comment below. Am I missing something? I am completely ignorant! Let’s all share and learn together.
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.
Why?
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.
Paypal
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!
Company or thinking about registering one? Do you buy things online too? For your company, not personal. Right.
Then you’ll need to get a business credit card.
First, There Aren’t Debit Cards, Just EPS/ATM Cards
In Hong Kong, they don’t have what we know of as “debit cards”. It would make life a whole lot easier for us though, and I may not even need to make today’s guide post.
A debit card is a card that has the Visa / Mastercard logo on it, and you can buy things online just like a credit card. The difference is it takes that cash out of your bank account that the debit card associated with it.
Nope, not available in Hong Kong, for what reason, I’m not sure.
So you will get a “card” when you get your bank account, but it won’t have a Visa / Mastercard logo on it. Instead it will have no “credit card” logo on the front.
What logos are on it? If you flip it over, you’ll see:
EPS
Unionpay
Now, EPS is electronic payment system. This you can use to buy things at merchants who accept EPS. This I have only found at shops inside of Hong Kong borders. You then swipe this card and enter your ATM PIN code and they directly debit the cash from your bank account.
UnionPay, this one is a Chinese version of Visa / MasterCard. But in the case of the bank account card you get with the new account, you can’t use this as a “credit card”. Instead, this means you have to find an ATM network that has the UnionPay logo. There is where you can use the ATM to withdraw cash from your bank.
Unionpay network is expanding everywhere, but please keep this in mind and look for ATMs that have it. Also, make sure you turn on the overseas ATM limit, so you can withdraw cash when outside HK. And also make sure you have HKD (Hong Kong dollars) in the checking or savings account. This is because you can’t take cash out of other currencies at the ATM, anywhere in the world. It will always take out from the HKD account (yes, even if you’re in Thailand and have Thai Baht in the account).
OK, well we’re getting in a bit deeper than I planned for the “default” card explanation. Just remember you get this when you open your bank account in Hong Kong, but you can’t use it to buy things online.
Get a Credit Card So You Can Buy Things Online
Yes, so if you open a Hong Kong company and live overseas, you’ll notice later that you can’t buy things online with your bank card. As we just covered, it will not have the Visa / MasterCard logo on it.
Next you will then apply for the credit card, so you can buy things online – in your business name. I’ve met many blog readers and podcast listeners who get the bank account opened, fly back to Thailand, get approved. Which is great. But then they realize a couple weeks later they can’t use the card to do online business.
So if you’re doing business around the world, you’ll need to find a Hong Kong based credit card for our business – as 99.9% likely you’ll need to buy things online.
The other option. If you have a company overseas for your operations there, you can keep your expenses in that company and on that company credit card. Then keep the Hong Kong company as a trading company, only for bank transfers.
Try To Keep Your Business Expenses Separate From Personal
Another reason you’ll want a Hong Kong credit card is that you have a personal credit card for your own life. Yes, you have a life and aren’t a walking company. That would be weird.
Bookkeepers and accountants hate it when you mix up your personal and business expenses. Governments hate it even more. If you do ever get an inquiry from the Hong Kong IRD (Internal Revenue Department), let’s just hope you don’t. If talking about your business expenses and start whipping out personal credit card statements – watch out. That can be the beginning of a long, long back and forth discussion.
This is another reason why you should get a business credit card. At least, have a separate credit card for your personal expenses and another credit card dedicated only for your business expenses.
The Credit Card Will be in Hong Kong Dollars (HKD)
Whether you like it or not, Hong Kong works in Hong Kong Dollar currency. Sure, the government locks the HKD to USD at about 7.78 HKD/ 1 USD. But when you buy something, you’ll see it on your credit card statement as a HKD amount. Well it will show the USD amount (or whichever foreign currency) on the left column, and on the right it will show the HKD amount.
So yes, you’ll pay in HKD, and then if you have USD in your bank, you’ll need to convert that to HKD to pay the bill. That means you can do 2 foreign exchanges for 1 transaction, the first for buying the goods in USD, and the other for converting to HKD to pay the HKD denominated bill.
While this sounds like a lot of FX exchanges (and spreads to pay banks), this will still help you keep all your income and expenses in 1 company account. Will make accounting and bookkeeping much easier, and keep all business activity in one company.
The other option is, have a credit card in another country and wire money over to pay it. Or have multiple companies in multiple countries and pay the bills from one company to another, etc etc. You get what I mean, that is another overhead and expense.
There Is An Annual Fee, But Can Get It Waived
There is an annual fee for the HSBC card. It’s about 125 USD. Yes, you can get a refund if you call and ask. Just put a reminder to do so!
Points and Benefits
There are points added to the account but nothing like US credit cards. I got like a wallet one time or something. The big benefit I use is the free airport lounge pass at HK airport – take a shower, get buffet, grab a nap. Not sure how often you come through HK international airport?
Main Benefit
What’s the benefit of picking up the card? I’m assuming I’ll get a debit card with the bank, do you use the CC for expenditures to make it easy on accounting? or rack up some nice points for anything?
The benefit of the card is to keep your company expenses in the company accounts. The points aren’t as good as in USA and other countries, but you do get to go to the HK airport lounge free when traveling. There are points but not so great.
Need a Security Deposit
The credit card we recommend is a secured credit card. That means that you need to put a deposit of the matching amount the balance is. The lowest amount if 10,000 HKD (about $1,200 USD). If you want to have a higher balance, you need to have a higher security deposit.
If accepted, they will mail it to your correspondence address 3 weeks after they approve your bank account.
the credit card security deposit: Is that locked into the credit card and I only get it back when / if we close the account? Or does this deposit somehow become ‘available funds’?
The security deposit cannot be for operations. You can get the deposit back by closing the card. After requesting to close the credit card, it will take 60 days to release the security deposit. Which will then post to your HSBC HK HKD account. So keep that bank account open!
The “security deposit” on the credit card itself… I’m not familiar with the mechanics of this. Does this mean it’s a card that you “load up” with cash and have access to the cash you’ve “loaded”? I.E. You put 10k on the card, and can spend that 10k. Or, is the security deposit permanently “held”?
The security deposit will not be able to be used for operations. It is essentially locked in a time security deposit account accruing something like 0.0001% interest. You can get the deposit back by closing the card. After requesting to close the credit card, it will take 60 days to release the security deposit, which will then be posted to your HSBC HK HKD account.
Unsecured Credit Card Is Possible
Don’t want to lock up your cash in a time security deposit? Yea, we understand.
The banks do offer unsecured credit cards – but that application process is a bit more stringent.
First, what’s an unsecured credit card? It is a credit card that most people are familiar with! Its where you apply, and then get a credit line for X amount of money. Say its only $1,000USD. This means that the client can spend a thousand bucks and not pay it back. Sure, it will hurt their credit score and they won’t get approved for another card – but it is possible the bank could not get that money back.
So its unsecured, they don’t have your house, or cash, or other assets to claim (take) if you don’t pay it back.
So in Hong Kong, this is riskier – it’s not USA and they don’t look at your American credit score. They don’t know who you are and if you don’t pay it back, maybe you’ll just never come back to Hong Kong and they’ll have no way to even “mark your account” in a credit system.
This is why it’s more difficult, in general, to get credit in Asia. There aren’t these credit bureaus with established systems like in America.
So you can try to get an unsecured card in Hong Kong – but you should have some kind of track record in Hong Kong. And almost 100% sure you will need a Hong Kong residential address. They just feel safer if you live in the Hong Kong boundaries.
Cancelling Your Secured Credit Card
So, it’s always good to think ahead, to think with the end in mind. So what happens when you want to close the account? I hope you’re not starving and waiting for this security deposit to come back.
It will take 60 days to credit back to your account. Yup – 2 months. So there are ways to speed it up a bit, pay some fines and get it in a month. But still a long time. So you’ll need some patience.
Best to just not expect to be able to use this security deposit for quite some time.
Hope This Helped! Consider Letting Us Help You?
We hope this guide helped you out today. These are questions our banking clients always ask us, so why not share it with everyone.
If you want us to work alongside you through this credit card application process, we have a service just for you! Check it out.
Also, have you applied yet for a credit card? Any issues or questions, we’d love to hear from you in the comments. Let others learn from some of the issues you’ve had!
In terms of shopping or paying, there is no greater thing than a cashless transaction – it is fast, easy, and accurate in terms of paying the exact amount; it has made online shopping easier, and it is safer. Since Hong Kong banks do not offer debit cards, and you may find credit cards a little too complicated, there’s another option called Tap & Go.
Tap & Go is basically an e-wallet / prepaid mobile MasterCard that can be accessed at your fingertips through your smartphone.
Application for Tap & Go offers 3 plans with different eligibility requirements and features
TYPE
A
B
C
Age
All ages
11 years old or above
18 years old or above
Supporting Documentation & Information
None
valid Hong Kong/Macau identity card or Macau/PRC passport or Exit-entry Permit for Travelling to and from Hong Kong and Macau
(a) A copy of your valid Hong Kong/Macau identity card or Macau/PRC passport or Exit-entry Permit for Travelling to and from Hong Kong and Macau; and (b) A copy of your permanent residential address
To use Tap & Go with your mobile phone, your operating system must be iOS 7 / Android 4.2 or higher for you to be able to download the app either from Google Play or App Store.
Once you have downloaded the app, you have to purchase a Tap & Go Card through a designated branch or retailer. The easiest way to acquire a card is at 7-Eleven, which is basically available on almost every corner in Hong Kong.
To activate your account, you will have to link the card with your mobile app. In this step, you will have to submit/upload an identification card using your phone’s camera.
Here are links to more detailed tutorials on how to use Tap & Go:
The card is customizeable; they have a limited promo called Selfie-a-Card wherein you can choose any photo to use as the design of your card — it could be a selfie. Cool, right?
Peer-to-peer fund transfer
Discounts at selected stores
It enables you to settle payment anywhere worldwide or online via MasterCard® contactless technology embedded in the SIM or Tap & Go Card
Tap & Go Disadvantages
Fees – $300 cancellation fee if you wish to close your account within 1 year from date of activation, and the refund for the remaining balance takes a maximum of 3 months to arrive. Moreover, if you do not use the card within 6 consecutive months, your account becomes dormant; hence, you will be charged a HK$10 maintenance fee every month.
Unlike a debit card, there is no interest payable on the account
Not many rewards
Tap & Go for Foreigners?
Based on their website, it says that as long as you are aged 11 and above and possess a Hong Kong/Macau identity card, you may be able to open and activate a Tap & Go card. Unfortunately, as per Tap & Go’s terms and conditions, a US citizen may not be qualified to open an account. See below for reference:
1. WHO CAN APPLY FOR TAP & GO
1.1 By activating for Tap & Go, you confirm and declare that you are not a US Person as defined in US Tax legislation or a U.S. taxpayer for any other reason, in particular, (i) you are not a U.S. citizen, U.S. resident or U.S. green card holder; (ii) you do not fulfill the “substantial presence test” in the U.S.; (iii) you are not born in the U.S.; and (iv) you do not have a mailing address or contact details in the U.S
If Tap & Go does not allow Americans to open an account, then that’s another addition to its disadvantages. Overall, it’s far less complicated than applying for a credit card in Hong Kong, so to me, Tap & Go could be a great alternative for cashless and online transactions.
Are you currently selling on Amazon, in your personal name? Or maybe you have a company in your home country for your Amazon business?
Sales are taking off and you want to start looking global for the right jurisdiction to establish a proper corporate entity.
Then look no further! Today we’ll discuss why Hong Kong is a great place for you to headquarter your Amazon FBA business. Start selling on Amazon US and other global markets from HK and Asia direct.
There are massive courses written on how to sell on Amazon. This guide is focused on setting up your account from Hong Kong, but we also give some general tips on Amazon FBA selling in general to start.
It consists of two parts, 1) Finding a good product and 2) optimizing your Amazon listing once its listed.
Here are a few tools many Amazon sellers use, here are a couple our readers discuss:
Jungle Scout – One of the first and most diverse collection of Amazon seller tools out there.
AmaChete – a newer, more affordable tool for Amazon sellers.
Try out one that works best for you – to dig through the massive amounts of data to find products that have a good opportunity for you.
Easy To Buy From Chinese Factories
Hong Kong is where everyone setups up their business for their import and export business. It is right next door to Mainland China, without the complexities and headaches that you’d get in the PRC.
So your Chinese factories, many of them, will already have a HK company and a Hong Kong bank account, most likely HSBC HK. You can pay them immediately, no fee, and they will receive the funds almost at the same time.
You can envision one of those drug deals in the movies, or hostage situations. One side brings the “goods” (drugs, hostage, etc) and the buyer brings the cash. Well, in more modern action movies, it’s not a suitcase of cash anymore. Instead its a laptop or a code that sends the funds to their bank account with the press of a button.
Not to correlate drug dealing and buying from factories, but you can be inside their factory for the deal. You finish doing a quality inspection, and whip out your HSBC Hong Kong online banking afterwards. Show them you transferred the funds (spin the laptop around and show the screen). Also you’ll have a reference number on the spot. They can check that same instant. They confirm the funds received, and they let the container ship leave the factory dock.
If you do this from an overseas bank, it would at least be 24 hours or so, and much higher fees. Are you buying from many factories and doing a lot of factories transactions often? You can save a ton of time, fees, and headaches by having a HSBC HK bank account.
Low or Zero Percent Tax
The corporate tax rate in Hong Kong is 16.5%, which is low already in the global index. On top of that, if you can prove you’re an offshore business, you can get a 0% exemption on the earnings you make outside of Hong Kong.
If you’re selling in Amazon USA, then, that isn’t Hong Kong right? Enjoy this offshore tax while also being in a great jurisdiction like Hong Kong. This way you can enjoy the legal protection and corporate image. Best of both worlds.
Amazon Has Overseas Sellers Programs That Make It Easy
Amazon allows sellers from around the world to sell in the Amazon USA marketplace. And now that you can piggyback off their fulfillment operations via FBA (fulfillment by Amazon). No longer do you need the headaches of a warehouse and logistics center in USA.
Buy your products from the factory in China, pay from your HSBC HK bank account, and ship them direct to the Amazon FBA warehouse in America.
Once the sales start to come in, Amazon pays out the sales proceeds every two weeks. Get an account with Payoneer and have the funds sent direct to Hong Kong. Nice and smooth.
Don’t get left behind with others who have more complex business operations. Take it from me, e-commerce was a lot, LOT harder ten years ago. Nowadays, you don’t even need a website, just load up in Amazon and get the sales payments twice a month.
Credit Card + Phone Verification
We have gotten a lot of attention from Amazon entrepreneurs going through the HK setup process, and a good question we received is below:
A problem I see is they’re asking for an international credit card (which my HK company does not have- just UnionPay). How did you do it? some of their support articles and comments from people on the internet seem to indicate they need to verify that you have a phone number in HK too.Alvaro
This is why we suggest people to apply for a credit card at the bank – the same time they go in for a new account opening.
Phone number, people use online numbers like Skype in.
Can Grow Into More Business Opportunities Later
Selling on Amazon is a great business. Lots of people are making good monthly income from. But maybe once you get the sales coming in and the business running, you want to try something else.
No problem, you can leverage the power of this Hong Kong company for your new venture too! You can apply for the many merchant account options and get that connected direct to your Hong Kong business bank account. Open your own shopping cart and pay direct via Shopify or another cloud based shopping cart.
Can You Sell on Amazon USA with a Hong Kong company?
Yes, this is possible. You register your Amazon seller account with your Hong Kong business registration certificate. It will ask you a million and one times if you are American or not. You need to be a non-American to do this – legally. But for those non-USA citizens, this is a great way to connect your Amazon USA sales to your Hong Kong business.
You can then have Amazon send money to your Payoneer or World First account and then receive the funds in your Hong Kong bank directly. With the funds in Hong Kong, you can then directly wire money to your Chinese factory. Often times they have a Hong Kong bank account, such as HSBC, so there are no fees and the transfer happens within seconds.
Talk about fast and efficient! This is pretty close to F2C (Factory to Consumer) – you can also read up a blog post where we discuss F2C
Will I Receive USD or HKD (Hong Kong dollars) from Amazon payments?
The next most popular question is what funds you will receive. Most think they must receive Hong Kong dollars and get hit on the foreign exchange (FX) fees. But there are other options. We discuss this a lot in our member’s forum for client.
Here’s an interesting answer from one of our clients:
There are a couple of companies that can keep your money in USD and have way lower fees than Payoneer. We are looking at OFX right now and also World First. OFX has an office in HK. Looks like that is what we will do. And then link to Hk bank account once we have itGFA Client
Many of our clients have also been using Remitsy as a way to get money into China successfully while banking is pending.
Of course, these policies and fees are always changing, so best to ask these service providers.
Connecting HSBC HK to Amazon
While there have been people saying that Amazon won’t wire to Hong Kong – I have had readers (as of October 2016) tell me that they can add their HSBC Hong Kong business bank account to their account directly.
No 9 digit routing — and few people online say dont use first 3 of the 12 number of your account (say 1st 3 numbers are bank not account number)
After a lot of chats with Amazon seller support, my contact was able to connect his HSBC Hong Kong bank directly, simply by choosing Hong Kong and then using the above trick to get the account number to fit. Others please help update me.
Doing Your Amazon FBA Bookkeeping
So once people get the Hong Kong company setup for their Amazon business, they then ask how do they best balance their accounting books? While there is no difference in bookkeeping for an e-commerce business as there is for any business, there is a setup that many sellers have been using.
This is called A2X Accounting – it is a plugin on top of Xero software that connects automatically to FBA’s database and imports all your sales numbers in. This way you can save time from data entry as well as worrying about “fat fingers” and other issues with humans.
What Do You Think? Ready to Leverage Hong Kong for your Amazon FBA Business?
So I know how stressful it is when structuring your corporation. Or even more stressful it is to restructure and close down a company and move funds and assets to another. But that is the only way we grow and stay competitive.
I’d love to hear any and all comments. Maybe you don’t agree – please share! You should be at a certain level to maintain the upkeep costs of an international business. And also able to come to Hong Kong at least once for the bank account opening. We offer services for Amazon sellers and online business owners who aren’t in Hong Kong to make the process as simple and smooth.
If you like this article and blog, we’d be ecstatic if you’d consider our HKVIP Hong Kong registration package. We will take care of everything from A to Z. We work with a lot of Amazon sellers and will give you pointers and tips we have seen along the way.
Even one of those tips during the setup process could save and make you thousands of dollars, so we hope to see you soon!
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