Company Incorporation: Hong Kong vs. Delaware
6 minute read
Hong Kong is a popular tax haven where English is one of the official languages. This region is known for its great banking services and supportive legal systems that make the location ideal for a number of entrepreneurs.
Delaware, on the other hand, is a state in the United States of America. This is one of the first states that ratified the US constitution. However, it is also known for its grant programs for small businesses and overall great conditions that stimulate entrepreneurs to incorporate in this state.
Let’s take a look at the differences between Hong Kong and Delaware and evaluate both options when it comes to the business environment and important factors to consider when incorporating a company.
Fortunately, banks in both regions are well-equipped and experienced enough to conduct international business transactions.
However, it is worth noting that both Delaware and Hong Kong banking institutions have fairly high banking fees and minimums. To be precise, Hong Kong banks have been increasing the fees and maintenance charges in the past few years.
Also, you have to be present in person when opening a bank account in Hong Kong. and non-US citizens must appear in person at the bank in Delaware if they want to have an account and thus do business within the US.
If you decide to go to Hong Kong to open a bank account yourself, know that the procedures tend to be difficult. However, there are alternative providers that can meet the needs of traditional banks.
When it comes to the company compliance issue, Hong Kong only requires the company to have a local secretary, while the entire board of directors can consist of foreigners.
When it comes to Delaware, it is important to know that the law there stipulates that every business entity needs to have and maintain a Registered Agent in the State of Delaware who may be either an individual resident or business entity authorized to do business in the State of Delaware.
This agent needs to have a physical street address in Delaware. To see the list of Delaware Registered Agents, click here.
Both Hong Kong and Delaware do their best to promote their startup scenes.
The Hong Kong government is always offering incubators and various programs to help kick things off the ground for many aspiring entrepreneurs who come to the region with great business ideas.
Hong Kong’s main focus is placed on growing its angel investors since younger members of wealthy local families gain interest in diversifying their family’s investment portfolios.
When it comes to Delaware, the environment is also attractive regarding various investment funding options. Thanks to Delaware’s business-friendly laws, investors come in numbers to help new businesses get on track.
Top-notch investors and business leaders understand the Delaware system and often Venture Capitalists and investment banks prefer Delaware corporations.
On top of that, if you are considering venture funding or going public, it would be smart to incorporate in Delaware from the beginning rather than having to convert the company to a domestic Delaware entity later on.
One of the biggest advantages of Hong Kong is its position, since it is located right next to Mainland China.
However, Hong Kong still is a SAR (Special Administrative Region) and it enjoys autonomy to a certain extent. The most important part of this is that Hong Kong has its own economic policies.
This is what makes Hong Kong quite an attractive place to base your company if you are looking to take advantage of the huge markets located in Asia.
On the other hand, you should also consider incorporating in Delaware due to a few important reasons:
- First of all, Americans prefer to deal with American companies. That means that a Delaware company formation would sit well with American businesses.
- Also, if something goes wrong with other American companies, they can easily resolve a dispute at home.
- The state of Delaware is one of the best jurisdictions in terms of corporate governance law.
So, depending on whether you want to tap into the Asian or American market, you will choose either Hong Kong or Delaware.
At the moment, your odds of getting a work visa are better if you decide to give Hong Kong a chance. It is not complicated to acquire a visa to work in Hong Kong. Visas can be granted for startups that are accepted into various incubator programs.
Additionally, there is a visa called Investment Entrepreneurs that is designed for foreign entrepreneurs who wish to start a business and move to Hong Kong.
On the other hand, if you want to move to the States and start a business in Delaware, your best shot is the E-2 Investor Visa. This is the most common visa type for foreign investors. This visa is granted to the entrepreneurs of countries that have a valid Treaty of Trade and Commerce with the United States of America.
There are no official minimum or maximum investment limits for the E-2 Investor Visa. However, the investment must be significant and irrevocably committed to the enterprise. This means that you would be at risk if your business venture fails.
It is clear that both options have their own advantages that could be beneficial depending on your business plans.
If you are, however, interested in basing your business in Hong Kong, do not hesitate to contact us for custom-tailored help and consultancy.