Hong Kong Limited Company Registration
Registering a Hong Kong limited company is the most common practice for HK company incorporation when you have plans to start doing business in Hong Kong. A Hong Kong limited company is an independent legal entity. When a limited company owes a debt and is unable to repay, the shareholders of the limited company will not be liable for the debt. If Hong Kong entrepreneurs has visions to expand their business in the near future, a limited company is the most suitable strategic option.
Benefits to Register a Hong Kong Limited Company
To do business in Hong Kong, registering a limited company will have the following advantages.
1. Simple requirements to set up a Hong Kong limited company
The shareholders of a Hong Kong limited company must be persons aged 18 or above, and may be Hong Kong residents or non-Hong Kong residents (including Mainland China’s residents). To incorporate a Hong Kong limited company, a registered office address in Hong Kong must be provided. The appointment of a company secretary (which may be a natural person or a body corporate) is compulsory. If the company secretary is a natural person, this person must be a Hong Kong resident who resides in HK. If the company secretary is a body corporate, a registered office address in Hong Kong must be provided.
2. Capital required for a Hong Kong limited company registration
All an entrepreneur needs is capital of HK$1 (i.e. one Hong Kong dollar) for a Hong Kong limited company registration.
3. Permanent business operations and transfer of shares
All Hong Kong limited companies are regulated by the Companies Ordinance (Chapter 622), so limited companies will always be able to continue with permanent business operations. The company will not have to shut down due to the death of an individual shareholder.
Upon the agreement of company directors and/or shareholders, a limited company can redistribute shares, and the limited company’s shares can be freely transferred. This benefits the long-term business development and growth of the limited company. Through the redistribution of shares, it is possible to get professionals with vast management experience or investors with visions to participate in the business.
4. Protection to the shareholders’s private assets
The liabilities of the shareholders of a limited company is limited. In the case when a limited company is in debt but has no ability to repay the debts and has to shut down, the shareholders (as individual persons) are not liable to the debts. The debts are always under the name of the limited company. This ensures the shareholders will not have to repay the debts of the limited company using their own private assets.
Hong Kong limited companies can raise funds by issuing shares. This ensures the company will always have sufficient funds to run its operations.
6. More tax deductions
The salaries paying to the directors of a limited company can be reported as salary tax and become deductible expenses of the company.
Hong Kong Limited Company vs Unlimited Company
What are the differences between a limited company and an unlimited company?
A Hong Kong unlimited company is a sole proprietorship or partnership company. Very often small businesses prefer to register unlimited company.
Sole proprietorship companies and partnership companies must be registered with the Business Registration Office (a department under Inland Revenue Department) within one month after the incorporation. This is to comply with the regulations of Hong Kong Companies Ordinance.
An unlimited company registered in Hong Kong is not required to appoint any director or company secretary, but must have a registered business address in Hong Kong.
Shareholders and partners need to own assets or sign contracts under their own names. Shareholders of an unlimited company will have to bear unlimited liabilities or company’s debts, when the company ceases business due to insolvency. In that case, the shareholders will have repay all the company’s debts using their own private assets.
Convert Unlimited Company to Hong Kong Limited Company
Can an unlimited company be converted into a limited company in Hong Kong?
Technically, it can be done.
However, you can convert an unlimited company into a limited company through the following method.
Transfer the business of the unlimited company to a Hong Kong limited company
- Before using this method, you will first need to have already incorporated a Hong Kong limited company. This means at the same time, you own two companies (i.e. a limited company and an unlimited company).
- You will transfer all business, assets, and liabilities of the unlimited company to your limited company.
- Once you have completed the transfer process, close your unlimited company, and use your limited company with its full capacity for business.
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Resources on Limited Company Registration
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