Introduction:
Many foreigners who want to set up a company seek help from local formation companies.
These company formation services help with the whole procedure from
- the application,
- communication with local authorities, and
- receiving your registration documents on your behalf.
Why do foreigners choose formation companies in the first place?
Short answer: They have no other choice.
We get into the underlying rules of Hong Kong business registration in more detail within this article.
Who is this article for?
This article is for self-employed (freelancers or business owners) who have decided to register a Hong Kong company.
However, they are confused about which formation company to choose from for registering a company.
They typically have questions such as:
- What type of formation companies exist?
- What is the difference between them?
- Which is one suitable for me?
You should read this before the registration of a company to make sure you choose the right service.
The takeaway
After reading this article, you will understand:
- Key steps to maintaining your Hong Kong company
- The pain points associated with non-CPA agencies
- Why you should start and maintain your Hong Kong company with a licensed CPA firm
1. Company formation services: What, why, how?
1.1 What are company formation services in Hong Kong?
Company formation services help individuals to open a company in Hong Kong.
1.2 Why do company formation services exist?
There are two reasons why business owners choose a company incorporation service rather than doing it by themselves.
Reason 1: Time
They don’t want to use their time to learn about how to set up a company (and potential headache due to mistakes), as they may see their time better invested in other activities:
- investing the time into their business
- investing the time to relax
Reason 2: Legal prerequisites
If they do not hold a Hong Kong passport, they cannot open a company themselves in the first place. So due to law restrictions, they have no other choice than to work with a formation company.
Important note:
Every company incorporation service must hold a TCSP license to form a company in Hong Kong. Only a Hong Kong citizen (read: Hong Kong passport holder) can obtain the TCSP license.
1.3 How to check whether a company formation service is not a scam?
Check that the validity of the TCSP license (obligatory for a company formation service) is in the national company TCSP license registry. You can simply search by name or by the license number (if you have it).
For example, you can search for our TCSP license in the registry. You can enter “KSHK” in the text field Name of TCSP Licensee in English and you receive our TCSP license number (see screenshot below).
1.4 What types of company formation services exist?
There are two types of company incorporation services:
- Agencies (who obtained a TCSP license) such as Sleek or Osome.
- Accounting firms (who have both a TCSP and a CPA license), meaning they can execute accounting/audit tasks.
Both of them are very similar when it comes to setting up a company.
The differences between them are further along the way during the maintenance of your company (audit, accounting, tax filing, etc.). We discuss this in more detail in the next section 2 below.
1.5 How to differentiate between agencies and accounting firms (CPA firms)?
In Hong Kong, “Certified Public Accountant” (CPA) (a fancy term for accountants/accounting firms) is a legally authorized title.
You can verify this by conducting a public search in the official CPA directory on the Hong Kong government’s website. You can find our firm’s name by searching for “Reachtop KSHK CPA Limited” and you will see our registration number (see screenshot below).
2. Company formation services: What are the differences between formation services?
We will list the differences between agencies and accounting firms (CPA firms) in more detail in this section.
2.1 What are the differences during incorporation?
A – Services during incorporation
During company incorporation (a fancy term for the registration of a company) the services between agencies and accounting firms are similar.
They may vary in quality, service, and communication, but this is just a matter of how well the internal workflows are structured.
B – Consultation session.
But there is one difference:
The consultation before execution.
Most agencies lack the in-house legal knowledge to give you a 180-degree consultation.
They may still be able to advise on setting up the company, but they cannot look ahead for topics down the line in a few years (accounting, taxation, offshore claim, etc.).
To make things worse, often the person who sits in front of you is a salesperson instead of a legal expert.
As we know that opening a company needs proper consultation, we at Reachtop KSHK have decided:
- You will always have a legal expert (one of our CPAs) sit in front of you to answer your questions based on current Hong Kong lawfully.
- We will do our best to make sure we look ahead for you, so you don’t have to discuss topics such as:
- Do you fulfill the prerequisites to open a company in Hong Kong?
- Are you aware of the obligations for you as a Hong Kong company owner?
- Does a Hong Kong company align with your business and personal goals?
If you are still uncertain about whether a Hong Kong company is right for you, book a first free consultation call with us to answer any further questions.
2.2 What are the differences during yearly maintenance?
During the yearly maintenance, the difference between agencies and Accounting firms is bigger.
Agencies are by law only allowed to cover topics such as
- yearly business renewal
- yearly bookkeeping
But they cannot handle other tasks, such as:
- Yearly audit
- Tax advice (offshore claim etc.)
- Tax filling
To still offer those services to their customers, they usually have an accounting company as a sub-provider, and they work as a middleman between their customers and the accounting firm.
The consequences are usually:
- Slow communication (due to communication between multiple parties)
- Miscommunications (more parties involved means more misunderstandings)
- Wrong advice
As we are an accounting firm, we can therefore guarantee
- fast communication (we answer you within 72 hours by mail or WhatsApp)
- correct advice (as you have a dedicated account manager who is a legal expert)
If you want to know more about, how our service works and the website does not answer all your questions, book a free consultation with us.
3. Company formation companies: Advantages of accounting firms
Choosing a non-CPA firm is like relying on a nurse while selecting a CPA firm is like having both a doctor and a nurse. A nurse might assist you with basic health needs, but for complex medical issues, you need the expertise of a doctor.
Similarly, a CPA firm offers comprehensive services, from
- incorporation and
- annual renewals to
- in-house auditing and
- tax filing,
all under one roof.
Non-CPA firms lack the necessary licenses and expertise to provide these critical services, limiting their support to only the most basic functions.
Let us go through the advantages of accounting firms one by one.
3.1 Advantage 1 for accounting firms: Time-Efficient
Communication with accounting firms is usually faster as there is no middleman involved as in agencies. For our customers, we guarantee a reply within 72 hours via email or WhatsApp (yes, believe it or not – also CPAs know how to use WhatsApp!).
3.2 Advantage 2 for accounting firms: No misunderstandings
More people involved means more communication and more misunderstandings.
With an accounting firm, you talk directly to a legal expert about your case and questions.
We make sure that every client has a dedicated account manager, which means
- Every client has their own legal expert (so one person knows your whole case, and you don’t have to reexplain it to a new person)
- We keep a healthy ratio between one legal expert and the number of clients, so our staff actually can handle the workload
3.3 Advantage 3 for accounting firms: Qualified advice and operations
As an accounting firm knows and knows your case from the start very well
3.4 Advantage 4 for accounting firms: Trust by Other Services
Be it when
- opening a bank account or
- whether the tax authorities look over your tax offshore claim of the last 3 years,
having an accounting firm watching over your company makes your business more credible in front of governmental authorities and also other business partners.
Conclusion
In conclusion, choosing the right formation agency for your Hong Kong LLC is crucial for seamless incorporation and ongoing maintenance. While non-CPA agencies can handle basic services, only a licensed CPA firm can provide the comprehensive, one-stop solutions necessary for long-term business success. From qualified professional advice to efficient auditing and tax filing, partnering with a CPA firm ensures your company remains compliant and well-supported, ultimately saving you time, money, and potential headaches. Prioritize a CPA firm for your Hong Kong company formation to benefit from their expertise, trustworthiness, and holistic service offerings.
FAQ
1. How Much Does a Company Formation Service Usually Cost?
The cost of company formation services in Hong Kong varies depending on the service package you choose. Generally, the market price ranges from US$1,100 to US$2,000.
2. Can I Incorporate a Hong Kong Company by Myself?
No, self-service incorporation is not possible under the Company Ordinance. Every limited company must have a local company secretary, and this secretary cannot be the same person as the company director if there is only one director.
3. How Can a CPA Firm like Reachtop Streamline the Incorporation and Maintenance Process?
At Reachtop, we provide an advice-based, one-stop, and direct service. We offer initial advice before incorporation and develop a tailored ongoing maintenance plan for your Hong Kong company, especially focusing on tax advice. While incorporation can be completed in less than 24 hours, the maintenance process is a lifelong commitment that requires serious attention and expertise.
4. What Should I Consider When Choosing a Company Formation Service?
When selecting a company formation service, ensure the company has the full qualifications to handle both incorporation and all maintenance procedures directly. Pay special attention to their ability to conduct mandatory auditing, which only licensed CPA firms can perform.
5. How Can I Verify if a Formation Company is a Middleman or a CPA Firm?
To verify whether a formation company holds a CPA license, you can search for their name on the Accounting and Financial Reporting Council’s official website. This is the government body that certifies qualified CPA firms.
6. What Questions Should I Ask to Ensure the Formation Company is Reliable?
A reliable formation agency should provide comprehensive services, from company formation to ongoing maintenance. Ensure they are a licensed CPA firm with the professional knowledge to assist you with any issues, particularly taxation. Key questions to ask include:
- Do you handle all aspects of company maintenance?
- Are you a licensed CPA firm?
- Can you provide in-house auditing and tax services?
By asking these questions, you can ensure that the formation company you choose is capable of meeting all your business needs.