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Hong Kong Company

Hong Kong is one of the freest economies in the world offering a unique gateway to investment in China and the rest of the world.  It is truly unrivalled in location, infrastructure, services, communications, logistics and shipping.  Hong Kong is one of the most popular jurisdictions for setting up a company.  Obvious reasons for this being low taxes, absence of foreign exchange controls, political and economic stability and ease of company set up.

Foreigners do not need be physically present in Hong Kong to set up a Hong Kong company.  They are free to operate the business and manage the Hong Kong company from overseas.  A foreigner who plans to re-locate to Hong Kong to expand the Hong Kong business is required to obtain an appropriate visa.    Learn more

When considering starting a business, you have to decide whether or not to incorporate your business and to choose the type of legal structure.

Types of Companies

Unincorporated Business Entities

Unincorporated business entities have no legal existence.  The owners and the business are the same.  The owners are personally liable for the debts of the business.  There are two types of unincorporated business entities: sole proprietorship and partnership.  It is regulated by the Business Registration Ordinance.

Sole Proprietorships (sole traders)

Sole proprietorship is the simplest form of business and the easiest to set up.  But this is the riskiest as the owner and the business is the same, it offers no protection of personal assets.

Partnerships

A partnership allows 2 or more people to share ownership of a single business.  The partners are jointly and individually liable for the actions of the other partners.  A partnership is limited to 20 partners.  The partners may enter into a partnership agreement which sets out the duties and obligations of the partners.

Corporate Business Entities

A limited company can be incorporated by registration with Companies Registry under the Companies Ordinance.  It has a separate legal existence and can buy and sell properties, trade, enter into contracts and do business in its own name.  A limited company is the most common form used for doing business.

Limited companies can be company limited by shares and company limited by guarantee.

Company limited by shares

A company limited by shares has a share capital and the liability of the members is limited to the amount of the shares subscribed.  The company is controlled and managed by directors who may or may not be the owners.  Transfer of shares in the company is restricted and subject to the approval by the directors.
Most small to medium sized companies are set up as private companies limited by shares.  When medium to large companies who have achieved significant growth in the industry they may decide to take the company public by expanding their shareholder base.  These companies become non-private companies and the shares are listed on a stock exchange where it can be bought and sold by anyone.

Company limited by guarantee

A company limited by guarantee is usually meant for NGO’s and non-profit organizations.  It is usually set up for clubs and associations of a professional, educational, recreational and charitable nature.
A company limited by guarantee does not have a share capital.  Its members are only required to contribute a specified amount of money if the company is being wound up.
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Foreign Representation in Hong Kong

Foreign companies interested in doing business in Hong Kong can register a branch office, a subsidiary or a representative office.

Branch Office

Opening a branch office is one of the ways a foreign company incorporated outside Hong Kong can establish a presence in Hong Kong.  A branch office is an extension of the foreign company and not a separate legal entity.  In order to do business in Hong Kong, it has to be registered with the Companies Registry as a non-Hong Kong company.   Learn more

Subsidiary

A subsidiary is a Hong Kong company limited by shares wholly owned by a foreign company.  It is the most popular and preferred option for foreign companies to do business in Hong Kong.   Learn more

Representative Office

A representative office is similar to a Branch Office because it is an extension of the foreign company.  But while a Branch Office is a fully functional business office, a representative office may only engage in indirect sales activities.

This type of registration is more suitable when a foreign company only wants to check on business opportunities in Hong Kong.  A representative office is usually set up to perform market research and maintain contacts with prospective customers and business partners.  There is no tax payable and no accounts are required to be filed with the Inland Revenue Department.  It is more cost effective to set up and easier to manage.   Learn more

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Comparison Between Different Business Types

Business Type Advantages Disadvantages
Sole Proprietorship
  • Easy to set up
  • Simple to maintain
  • Not a separate legal entity
  • Unlimited personal liability
  • Own funds as major source of funds
Partnership
  • Easy to set up
  • Simple to maintain
  • Not a separate legal entity
  • Each partner has unlimited personal liability
  • Each partner is jointly and severally liable to all debts of the Partnership
  • Partners’ conflict may lead to business deadlock
Limited Company
  • Separate legal entity
  • Limited liability
  • Each shareholder is responsible for the value of shares subscribed only
  • Perpetual succession
  • Separate ownership and management
  • Public disclosure of information
  • Higher formation and maintenance costs
  • Strict and numerous reporting compliance and obligations
  • Cessation only by de-registration or liquidation

Business Licences

All types of companies, whether they are incorporated or unincorporated business entities, are required to apply for business registration. An incorporated business entity has to apply for business registration at the same time the application for incorporation is submitted. Unincorporated business entities are required to apply for business registration within 30 days from the date of commencement of business in Hong Kong.

There are certain business operations that may require additional specific government licences, permits and approvals. Usually, a department or agency of the Hong Kong government issues these licences. It takes about 2 to 8 weeks to obtain a licence or permit depending on the type.

Common Businesses with Licensing Requirements in Hong Kong

  • Employment Agency
  • Travel Agency
  • Restaurants and Food Shops
  • Training schools and research centres
  • Financial services company such as money lenders, insurance agents and brokers, remittance agents and money changers, deposit-taking company and licensed banks
  • Construction companies and building contractors
  • Galleries and Show Groups
  • Internet Cafes and Game Centres
  • Telecommunication Services Operators

If you want to know more about Hong Kong company and our other services, including formation, on-going compliance, virtual office and translation, please contact our 24 hour online support at enquiry@budgetaccounts.com.hk
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