3 Enticements U.S. Cities Could Copy From Hong Kong to Encourage Entrepreneurship
For 20 years Hong Kong has been ranked as the #1 place in the world to do business by the Heritage Foundation. Last year the United States came in at #12, dropping out of the top 10.
A year ago I moved myself and my family to Hong Kong to open an office in Asia for my firm. Since then I’ve had the opportunity to experience firsthand the process of doing business in this city of 7 million inhabitants. While Hong Kong isn’t perfect, a few key features make the place stand out. American cities could learn a thing or two if they want to attract more entrepreneurs. Here are three suggestions:
1. Make it easier to do business.
I incorporated my company in Hong Kong for about $200, without ever having previously stepped foot in the locale and without a visa. Once I was on the ground in Hong Kong I was able to set up a bank account in less than an hour -- again, without a visa or any sort of identification other than my passport.
At first glance doing business in California looks even less expensive, with a stated price of $100 for business incorporation, but a look at the fine print reveals this notice: “S corporations that are corporations or LLCs under civil law corporations must pay the annual $800 minimum franchise tax.”
Several years ago when I registered my business in California in order to set up a sales office, I was required to pay this $800 annual fee. Years after shuttering that office (open only five months), I learned that the state government had never closed my account and wanted several years' worth of the $800 fee, plus penalties and interest. I haven’t considered opening an office in California since, despite it being my home state.
Once I was on the ground in Hong Kong I was able to set up a bank account in less than an hour -- again, without a visa or any identification other than my passport.
Receiving a visa to live and do business in Hong Kong took a few months but was a relatively simple process.
Hong Kong consistently ranks second in the world, just behind Singapore, when it comes to ease of doing business, according tothe World Bank's annual Doing Business report. The United States comes in at a respectable fourth place, but in the area of “starting a business,” it is rated as # 20, while Hong Kong took fifth place.
Utah State Representative Jacob Anderegg recently supported legislation to thoroughly ease business-licensing regulations. Cities in Arizona’s West Valley area have been working to streamline building-permit wait times.
2. Lower taxes.
There is no capital-gains tax in Hong Kong. In the United States the tax rate is 15 percent or greater. Hong Kong’s top marginal personal income tax rate is 17 percent while U.S. rates can be as high as 39.6 percent.
Entrepreneurs pay a high price for doing business in the United States, and as the Internet makes it ever easier for entrepreneurs to do business anywhere, American cities and states will need to compete harder to attract the business owners who can keep their economies vibrant. Letting business owners keep more of what they produce sends a clear welcome message.
3. Offer a great standard of living.
Hong Kong has a reputation of being one of the most expensive cities in the world, but that’s only for those opting to live in its expensive quarters.
I live a 10-minute walk from a nice beach in a quiet resort town, a mere 35-minute ferry ride from the city's center. It costs me less for housing than what I paid for it in relatively low-cost Salt Lake City. The ample transportation options mean I don’t need to own a car, which lends a significant boost to my wallet.
Hong Kong has relatively low crime rates, and many of its inhabitants enjoy a long life expectancy. Plus, city is well structured for walking instead of driving. Without even trying, I receive a decent workout every day traveling to meetings around the city or riding a bike from my home to the grocery store.
Americans might consider shedding zoning regulations that separate housing areas from commercial spaces, making car ownership an absolute necessity. They should study other aspects of Hong Kong’s policies that have resulted in its being such a healthful and safe place to live.
It's never been as easy for entrepreneurs to live anywhere they want and do business on their own terms. It’s up to the U.S. officials -- at the city, state, and federal levels -- to compete for the talented individuals who are creating the jobs of tomorrow. Taking a closer look at Hong Kong would be well worth the effort.
I'm curious to learn what other U.S. states or municipalities are doing to ease regulations and streamline government processes to encourage entrepreneurs to do business.