How would freelancers benefit from setting up their own business entities?👍🏻
Whether you are a seasoned freelancer or someone who is just getting started with your passion project, considering setting up your own business entity is a good exercise to prepare for your career and business prospects down the line.
This article outlines the potential signs of when you need to consider setting up your company, and the key benefits of having your own company can bring. The article will also cover overviews of the setup process in both Hong Kong and Singapore, to help understand the differences and factors you may need to consider when setting up.
🚦Sign 1: Growing and increasing transaction
One of the first signs to start considering registering your business is when you’re becoming busier and the transactions are happening more frequently. As your freelancer career takes off, it is natural that you bring on more clients and more business. This is a good point to set up your own business entity and consequently, open a business bank account. As your transactions increase, you would want to start separating your personal and business accounts to keep clarity for later tax and audit purposes.
🚦Sign 2: Collaboration with other businesses
Another key sign is when you start to collaborate with other companies or work on bigger projects. This is a good time to register your business and to protect yourself from a liability standpoint. It will also help build your brand image and make your business look more professional when you are interacting with bigger companies. If you are looking to hiring help and assistance for your business, then it is definitely a good idea to incorporate your business to protect you and your employees.
🌟Benefit 1: Tax relief
So now that you know a few of the signs as to when is a good time to register your business. Let’s discuss a few concrete benefits to setting up your business. The first, and one of the biggest, is tax exemption. The Hong Kong government recently adopted a tax relief scheme to further encourage smaller incorporated businesses. The first 2 million HKD of the taxable income will be taxed at only 8.25%, with the rest taxed at a normal rate of 16.5%. This scheme is independent of your individual tax benefits, so you can enjoy both regulations.
🌟Benefit 2: Protection from liability
Another benefit that we have previously mentioned above is protecting yourself from a legal standpoint. Think about your business for a minute. Does the service you offer come with any potential risks to your client or other businesses? If so, you should consider incorporating a Hong Kong Limited Company to protect your private assets from being exposed.
Once the company is incorporated, you will be a shareholder of the company, and only be liable for your investments and fund you put into the company. Although, please note as a shareholder or director, you will be liable if your company pursues any illegal activities and crimes.
🇭🇰Company Registration in Hong Kong
Now that you are aware of the benefits and timings of when to incorporate, let’s briefly walk through the incorporation process in both Hong Kong and Singapore. In Hong Kong, you first have to decide on the type of your business entity and a company name. The minimum requirement of a company in Hong Kong has to have at least 1 shareholder, $1 HKD minimum of share up capital, a company secretary and a local Hong Kong office address.
After deciding on both and confirming the rest, there is a list of pre-incorporation documents to submit along with your application to the Hong Kong Companies Registry and Business Registration Office. The entire process, depending on the applicant’s experience could take up to 1 to 2 weeks, not including collecting the documents.
🇸🇬Company Registration in Singapore
The requirements of incorporation are slightly different in Singapore. For local citizens incorporating a company, the individual has to provide 3 company name options and submit the relevant documents to ACRA (Accounting and Corporate Regulatory Authority). Whereas for foreigners, the individual will be required to appoint a local director based on the regulations.
Therefore, the minimum requirement for a foreign entrepreneur to register a company needs at least 1 shareholder, $1 SGD minimum of share up capital, 1 company secretary, 1 local director, and a local Singapore office. The entire process time may vary based on the government agencies required for the approval.
Outsourcing company incorporation and secretarial duties are now a popular alternative for those that are looking for a simplified and seamless experience while cutting costs for headcount and office space. Furthermore to the registration procedures mentioned above, there are items such as Article of Association, First Board Resolutions and Annual General Meeting that need to be prepared and collected. The Business Certificate will also need to be renewed every year – these can all be challenging and time-consuming for companies with less experience to navigate on their own.
Hopefully, you are now aware of the keys benefits and overview of procedures on setting up in Hong Kong and Singapore for freelancers. Sleekis experienced in helping freelancers and entrepreneurs to set up their own company and manage any company secretarial and accounting inquiries.
With offices in both Hong Kong and Singapore, Sleek is dedicated to bringing a seamless and hassle-free experience, saving time for you so you can focus on growing your business instead! Get in touch today.