When incorporating a business in Hong Kong, one small but crucial step is defining your company’s nature of business on the application. At a glance, this field may appear frivolous, but a well thought out designation of your business can mean less confusion for your staff, your customers, and the local government, and can also potentially allow access to benefits in the form of targeted government initiatives. This guide will walk you through what the nature of business means, why it matters, how to find yours, and how to craft an effective nature of business statement for your company registration.
What is the Nature of Business?
The nature of business refers to the core activity or primary industry in which your company operates. It is a description of what your business does, and what products and/or services it provides. This description will appear on your Business Registration Certificate and is reported to the Hong Kong Companies Registry (CR) and Inland Revenue Department (IRD) when you incorporate your company.
What is the Significance of My Submitted Nature of Business?
Your declared nature of business is more than a description on your certificate. By extension, having an accurate nature of business has several implications:
- Legal and Regulatory Compliance: It ensures your company meets Hong Kong’s filing requirements and helps the local authorities understand your business operations. It will also help qualify your business for any future government initiatives targeting your industry.
- Banking and Licensing: Banks often need to understand your business to open corporate accounts, as certain industries may need additional compliance measures to open a bank account, and certain licenses and tax treatments are also dependent on your nature of business.
- Operational Clarity: A clear classification can help you stay aligned to your business’s long term goals when deciding on your strategy.
- Public Record: Your business nature is publicly accessible, helping third parties understand your business for potential collaboration opportunities.
Nature of Business Type List
Hong Kong’s Companies Registry and IRD use a standardized list of business activities to classify companies. This nature of business list, found on the Company Registry’s website, groups business activities into types, according to their business functions or the assets involved. Codes are used to represent individual natures, to be entered onto the incorporation application. Common nature of business types include:
| Nature of Business Type | Function |
| Agriculture, forestry and fishing | Growing crops, raising livestock, harvesting timber, and growing aquaculture |
| Mining and quarrying | Extraction and processing of minerals and ores |
| Manufacturing | Transforming materials into products. Also includes repair and maintenance of machinery and equipment. |
| Electricity and gas supply | Power, gas, and hot water distribution |
| Water supply; sewerage, waste management and remediation activities | Control and management of water, waste, and pollution |
| Construction | Building and civil engineering works |
| Import/export, wholesale and retail trades | Buying and selling of goods with no added transformation. |
| Transportation, storage, postal and courier services | Transport, storage, and delivery of goods and/or people. Includes the rental of transport equipment with or without operators. |
| Accommodation and food service activities | Short-stay accommodations and food & beverage services |
| Information and communications | Production and distribution of information through all forms of media, IT platforms, and broadcasting services. |
| Financial and insurance activities | Finance, insurance, pension funding, asset holding activities and support services. Includes the activities of holding companies, trusts, funds, and other similar entities. |
| Real estate activities | Real estate development, trading and management, includes the facilitating of such activities |
| Professional, scientific and technical activities | Services that don’t fit in any other category. Includes legal, accounting, consulting, R&D, architecture and engineering, advertising and market research, design and photography, veterinary services, translation services, etc. |
| Administrative and support service activities | Business support and office services for other enterprises, usually relating to providing and managing manpower to other enterprises, including employment, travel, security, call centers, etc. |
| Education | Education and training activities of human students. |
| Human health and social work activities | Healthcare and social assistance |
| Arts, entertainment and recreation | Arts, culture, sports, recreation. Includes betting and amusement activities. |
| Other service activities | Includes industries not classified above. Includes the repair of vehicles, computers, personal and household goods, and other personal service activities. |
| Work activities within domestic households | Domestic and household services and goods. Includes employment of domestic helpers. |
What Are the Different Types on the Nature of Business List?
Businesses generally fall into three broad types based on their nature:
- Service-Based: Companies that provide intangible value such as consulting, legal services, or IT support.
- Product-Based: Companies that manufacture, distribute, or sell physical goods like tools or apparel.
- Hybrid: Businesses that combine both products and services, like an optical shop that sells glasses (the product) and provides eye care (the service).
Example of Choosing a Business’s Nature
To use a simplified example, Apple is a company that manufactures electronic gadgets while also selling electronic gadgets. If Apple was incorporated in Hong Kong, their nature of business classification could be as follows:
- Primary code: 026 – Manufacture of computer, electronic and optical products
- Secondary code: 047 – Retail Trade
How to Craft a Nature of Business Statement
A nature of business statement answers three questions essential to every business:
- What is your core activity: Are you service-based, product-based, or a hybrid?
- Who is your target market: Who are your customers or clients?
- What makes you stand out among your competitors – What is the unique value of your business?
Once you have answers to these questions, you’ll want to craft the statement using the following format:
- Brief but descriptive: Up to 60 characters in English (split into two lines) or 30 characters in Chinese.
- Specific: Avoid vague terms like “Trading” alone; specify what you trade or what services you provide.
- Reflective of core activities: Include your main products or services and target market where possible.
Examples of Nature of Business Statements
Some examples of nature of business statements are as follows:
E-commerce Retailer
“Operating an online platform for the sale and distribution of consumer goods across multiple categories and providing shopping and delivery services.”
Tech Product & Support Company
“Designing and manufacturing smart electronic devices while offering technical support, maintenance, and software updates to users.”
Veterinary Clinic
“Providing veterinary medical services for small animals and pets alongside pet-related products”
What if My Business Has Overlapping Business Natures?
Modern businesses often fall in between natures or provide multiple types of services and products. If you’re unsure of what the nature of your business is:
- Identify the nature closest to the core of your business.
- You can always update your business nature with the IRD and CR for free later.
- When writing your nature of business statement, you may mention multiple activities if they are relevant, but keep the description concise and focused on your core functions.
Conclusion
Defining your company’s nature of business in Hong Kong can influence your company’s legal compliance, banking, licensing, and business strategy. By choosing a clear, specific, and accurate description aligned with your core activities, you will set a strong foundation for your company’s identity and future growth. Your nature of business will continuously evolve, so keep it updated to accurately reflect your current operations.
If you need advice on how to choose your nature of business, we’d be happy to chat!
