Starting a business and setting up a company is a dream for many employees, but while company formation is easy, running it sustainably is a real challenge. Drawing on years of experience, General Accounting explains an easy way to estimate business costs, breaks down the eight core budgets for a business, and includes three key points to note before incorporation—so entrepreneurs can better understand cost budgeting before they start.
How do you calculate a business cost budget?
Business cost budget categories
Group costs into major categories, such as one-off startup costs before incorporation, operating costs, and shopfront or office costs. Then break each category down into items such as company setup fees, and record every potential expense by category.
Business cost budget checklist
Before starting a company, you should first list your business cost budget carefully, as well as the key points to note before launch and during operations:
| Operating plan |
|
| Costs can be divided into three main categories |
Depending on the industry, list costs under three main categories, for example:
|
| List the cost of each item |
Based on the three main cost categories, further break them down into different items, for example:
|
| Operating budget |
Based on your operating plan, list recurring expenses by year, quarter, and month, and divide the operating budget into “fixed expenses” and “variable expenses.” Fixed expenses are costs that remain the same within a given period, such as salaries and rent. Variable expenses are costs that fluctuate within a given period, such as water charges and transportation costs. |
Eight key startup budgets when starting a company
Startup budget 1: Company formation costs
Entrepreneurs should first consider whether to set up a sole proprietorship or a limited company, understand the differences between the two, and then plan the company formation costs. For details, please see: Company formation costs.
Startup budget 2: Company registration fee
If you decide to set up a limited company, you will then need to decide whether to incorporate it yourself or appoint a company secretary firm to handle it. You should also understand company registration fees in more detail. Fees for online incorporation and paper-based registration differ. See the comparison below:
Paper-based company registration vs online company registration
| Paper-based submission | Online registration | |
|---|---|---|
| CR e-Services account | Not required | Required |
| Processing time | At least 5 working days | Approval as fast as the same day |
| Company registration fee | $1,720* | $1,545* |
| Certificate collection | Must be collected in person at Admiralty | Download via CR e-Services login |
*Excludes Business Registration Certificate fee
Startup budget 3: Business Registration Certificate fee
Whether you set up a sole proprietorship or a limited company, you must apply for Business Registration. The Business Registration Certificate fee for 2024/25 is $2,200.
2024/25 Business Registration Certificate fee
| Registration fee | Levy | Total | |
|---|---|---|---|
| 1-year Business Registration Certificate | $2,200 | N/A | $2,200 |
| 3-year Business Registration Certificate | $5,720 | $150 | $5,870 |
| 1-year Branch Business Registration Certificate | $80 | N/A | $80 |
| 3-year Branch Business Registration Certificate | $208 | $150 | $358 |
Further reading: How to apply for a Business Registration Certificate
Startup budget 4: Shopfront or office rental costs
If you need to rent an office or shop, you should budget for rent in advance and other miscellaneous deposits.
1. Rent in advance and deposit
When renting a shop or office, you generally need to pay one month’s rent in advance and a 2–3 month deposit.
2. Real estate agent commission
If you rent through a real estate agent, you generally need to pay a 50% commission.
3. Renovation costs
4. Utilities and miscellaneous service deposits
5. Public liability insurance
Startup budget 5: Fixed asset purchase costs
Fixed assets (i.e., the tools of the trade) are costs you need to plan for before opening a shop, for example:
Examples of shop fixed assets (snack shop)
1. Equipment purchases, such as kitchen equipment and air conditioning
2. Inventory costs, such as ingredients
3. Furniture and computer supplies
Startup budget 6: Staff costs
1. Salaries and wages
2. Employees’ compensation insurance
3. MPF contributions
4. Headhunter fees (if any)
Startup budget 7: Contingency cash reserve
Before starting a business, you should estimate the total monthly fixed and variable costs, and set aside a contingency cash reserve of at least 3–6 months’ expenses to meet unexpected needs.
Startup budget 8: Other expenses
Recurring expenses vary by industry, for example:
1. Transportation costs
2. Business travel expenses
3. Advertising costs
More information: [APEC Card] How to apply for the APEC Business Travel Card (ABTC)? 5 key benefits for business travel!
What if your budget is insufficient? Government funding schemes for startups
In summary, it is clear that starting a business requires a certain level of capital support. If you have a viable idea but cannot raise the required funds in the short term, you may consider government funding schemes to pursue your entrepreneurial dream. You may refer to the following government funding schemes1:
- Innovation and Technology Fund for Better Living
- CreateSmart Initiative
- Patent Application Grant
- Innovation and Technology Fund
- BUD Fund
- SME Export Marketing Fund
- Social Innovation and Entrepreneurship Development Fund
- Youth Development Fund
- Enterprise Support Scheme (ESS)
Three key points to note before starting a company
1. Understand the differences between a limited company and a sole proprietorship
A limited company and a sole proprietorship are completely different legal entities. Before starting a company, you should first understand the differences between them.
For more details: What is the difference between a sole proprietorship and a limited company?
2. Starting a company on your own? If partnering, define the details in advance
If you start a business and run a company on your own, with only one decision-maker, internal operations and business directions and decisions are relatively easier to manage.
However, if two or more people invest together—whether setting up a limited company or a sole proprietorship—you should establish clear terms before incorporation regarding decision-making authority, roles, operating policies, and payroll expenses. Where necessary, seek independent legal advice or draw up an agreement to protect both parties’ interests.
3. Understand the tax responsibilities of setting up a company
Once you apply for Business Registration, you will definitely receive a tax return and have tax filing obligations. Therefore, you should understand company tax filing, when tax returns are issued, and tax filing fees in advance, so you can prepare and budget before starting a company.
Conclusion
Starting a business and setting up a company is a dream for many employees, but running it successfully requires solid knowledge. General Accounting has shared an easy way to estimate business costs, and the eight key budgets help you map out your overall business plan in greater detail. However, many entrepreneurs have a business plan but face insufficient capital; they can still apply for government funding schemes to raise funds.
General Accounting recommends that new entrepreneurs understand the differences between a limited company and a sole proprietorship, decide on partnership details, and learn about corporate tax responsibilities before incorporation—so they can budget and plan more specifically and embark on the entrepreneurial journey sooner.
Further reading:
Sources
1. Hong Kong Government one-stop portal: Entrepreneurship (Capital and Planning)
https://www.gov.hk/tc/business/supportenterprises/businesstopics/financialplanning.htm
