Hello, I have a dropshipping business with products manufactured and shipped from South America, I have many customers in the US and I'm doing more than 200 transactions a year, so I'm afraid I can be considered ETBUS even if I don't have anything in the US, so I'm considering forming a Hong Kong company instead of the LLC, do you think is a wise idea? What are the costs compared to an LLC and do you know a reputable provider for such setup? Thank you and happy new year
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HONG KONG VS DELAWARE LLC for dropshipping
- Thread starter ciccino
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You would find it hard to find banking unless you source products from China (e.g. Shenzen) or have a large customer base in HK/China.
If you do not, you need to stick to emi. The british origin lawyers in HK located in central are quite good but not cheap as is the company which will cost money.
Id consider uae for the time being as alternative and you can also do immigration paperwork later down the road as well.
No and exactly that makes the difference and things so reliable in Dubai.
One of the most important things about the Dubai Setup is that it requires you to open Bank Accounts in person and gives you a Residence Visa - otherwise things would be 10x more worse same like in every other Offshore Jurisdiction.
If you are fine with banking on EMI's you can stick to HK or US but most of the members here want to avoid banking on EMI's with 6 figures for obviously reasons and that's why they improve there US/HK/UK setup with just banking on EMI with Dubai Setup that contains Dubai Company, Dubai Residence and local Dubai Bank Accounts.
I've noticed in this thread a lot of untrue statements about Hong Kong as a location for business registration.
- You only need a company secretary to shuttle your company formation in Hong Kong and this is done entirely online.
- Banking in Hong Kong is difficult if you don't have a physical presence in Hong Kong, but with the advent of banking alternatives like digital business account providers (which are not banks but still provide business acccount) like Neat, Currenxie, and Statrys, you can now do this online, you just need to go through some KYC questions. There is absolutely no need for a lawyer to open a business account in Hong Kong. I don't know where users on this website got this idea.
If you are ETBUS and has ECI, it doesn't matter if you use a HK company or US LLC, you still need to pay federal taxes.
don't include $255 gov fees, i think totally will under $1000, not under $100
A word of warning - total costs of doing business in Hong Kong are much higher than you would expect from doing a little reading or you will be lead to believe by people wanting to sell you company registration services. The worst part is that the expenses are not transparent or clearly explained; they will just act like it is obvious when handing you a bill for something you never knew was required. Even if you operate completely outside of HK and do not owe any HK taxes you still have to file complex HK tax documents that are roughly as invasive as anything you would find in the US or Europe. Something I know from experience that doesn't get mentioned until you get the bill is that part of your HK tax filing requires you to have your accounts audited by an accounting firm in HK. This is a huge expense that provides no value for a very small business. Hypothetically let's say you sell on Amazon and get one monthly payout from them, so there are total of 12 deposits on your bank statement. Expect to pay at least HK$15,000 (maybe more) for those 12 deposits to be "audited" in a way that will be accepted by the IRD with your tax return. My auditing bill (with less 200 annual transactions) was always higher than all other expenses of owning my HK company combined (annual fee, registered agent, mail drop, bank fees, etc.).
Tax-free =/= headache-free
When you add in the fact that China has completely disregarded its agreement with the UK not to meddle with Hong Kong until 2047 I cannot recommend Hong Kong as an offshore jurisdiction under any circumstances. Singapore is still 97% of everything Hong Kong used to be and is what I recommend to people thinking about Hong Kong for tax purposes.
Before PT Shamrock disappeared they had a setup for a company account in the Philippines that didn't have any reporting or tax obligations for about 2000 USD. Now that PT Shamrock is gone I don't know who has the contacts to make that happen, but it might be worth looking into.
edit: Over the last 5 or so years it has become a lot harder to open decent bank accounts in both HK and Singapore. Sure, you can technically have HK company registratiion done in a day, but an account at HSBC to actually collect the money? Not so much. Do yourself a favor and pay more for a service that takes care of getting you an account with a decent bank along with providing registration services. If it saves you a plane ticket and 2 weeks of hotel expenses it doesn't really matter if they want an extra $500 or $1000 to facilitate the bank account.
Tax-free =/= headache-free
When you add in the fact that China has completely disregarded its agreement with the UK not to meddle with Hong Kong until 2047 I cannot recommend Hong Kong as an offshore jurisdiction under any circumstances. Singapore is still 97% of everything Hong Kong used to be and is what I recommend to people thinking about Hong Kong for tax purposes.
Before PT Shamrock disappeared they had a setup for a company account in the Philippines that didn't have any reporting or tax obligations for about 2000 USD. Now that PT Shamrock is gone I don't know who has the contacts to make that happen, but it might be worth looking into.
edit: Over the last 5 or so years it has become a lot harder to open decent bank accounts in both HK and Singapore. Sure, you can technically have HK company registratiion done in a day, but an account at HSBC to actually collect the money? Not so much. Do yourself a favor and pay more for a service that takes care of getting you an account with a decent bank along with providing registration services. If it saves you a plane ticket and 2 weeks of hotel expenses it doesn't really matter if they want an extra $500 or $1000 to facilitate the bank account.
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KalasZX:
Going thorough the same thing. long winded. invasive accounting. high tax / bills in HK. I want out and moving LLC to somewhere else. can you recommend an exit strat?
You are not ETBUS just for having clients in the US. To be ETBUS you would need facilities in the US, employees etc.
If you manufacture and ship from South America, you provide service from there and there is no ETBUS. I do not suggest you switch your US LLC to Hong Kong, it will only create more headaches, instead, speak with a US CPA to be sure, but if you do not have any connection with the US and are not a US person you will be fine.
Decide what your tradeoff will be and pull the trigger. Whether it makes more sense to form a new company in different country or transfer your current company is a discussion to have with someone that will help you set up in your new country.
Without knowing the specifics of your situation, I would say Singapore is probably your best bet. If you're using a bank that is already in Singapore could make the transfer easier. Your HK bank may or may not let you use the same account/open a new one for you after forming a new company in Singapore. That would be a conversation to have with the bank. You'll get hit with 17% taxes but fewer surprises. Everyone in the world considers Singapore to be legitimate so that cuts down the chances of any government treating you like a tax cheat. Depending on your level of profit, the tax could be less than everything you spend to be "tax-free" in HK, and is certainlky less of a headache.
The UAE offers a better tax rate, which could potentially be zero. You won't have quite as much legitimacy or prestige in the eyes of some by going that route. People here have said losing sales due to a small percentage of payment processing issues costs them more money than just paying a low tax rate somewhere that wouldn't have that issue. You also need to be on the ground for 24 hours every 180 days to maintain permanent resident status. Without being a permanent resident you get treated like a foreigner, and that would cause enough headaches to make Singapore the clear winner.
OTOH, if you do enough business to justify the costs, and can get people to wire you money instead using a credit card, nothing is going to touch a Cook Islands trust owning a CI international company.
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