Business Entities in Hong Kong You Need to Know Before Starting a Company

Posted by HongKong Company Registration on July 14th, 2021

Being one of the most valuable financial hubs in the world, Hong Kong is mostly preferred by business people, planning to start a company in Asia.

In Hong Kong, there are many entity types---from different sizes and purposes, they are diverse. The business entities in Hong Kong can be classified into private and public company, limited by shares or guarantees, sole proprietorship, partnership, branch, and representative office.

Once you have decided to register your company in Hong Kong, you can select the most suitable form of legal classification according to your business requirements. Let’s take a look at the different types of business entities in Hong Kong so you can find what will best serve your needs. 

Sole Proprietorship in Hong Kong

The most basic and entry-level of business to create in Hong Kong is a sole proprietorship. A single owner is fully liable for all profits and losses made by the business. The ownership of the business may be transferred by selling the assets.

Advantages of Establishing a Sole Proprietorship in Hong Kong

• Simple to register — The easiest of all business entities to register with the Business Registration Office
• Low income tax — Income is taxed at only 15% as opposed to 16.5% for corporate income.
• Minimal tax reporting — Just one annual tax return to be filed with the Inland Revenue Department.

Disadvantages of Establishing a Sole Proprietorship in Hong Kong

• Liability — a sole proprietorship has the highest degree of personal liability. There is no distinction between the business and the owner as a legal entity.

Business Partnership in Hong Kong

A partnership is the natural expansion of a sole proprietorship, where two or more people join forces to grow a business and share the profits. There can be from two to a maximum of 20 partners in a partnership, and they will all usually have equal rights in the business. If it grows above 20 partners, it must register as a company in Hong Kong. 

There are two kinds of business partnerships in Hong Kong —  a general partnership and a limited partnership.

A general partnership means the partners are personally liable for profits and debts. Partners can also be held liable for the actions of other partners. 

A limited partnership has both limited and general partners, where the limited partners are only liable to the amount of their capital contribution, where the general partners have unlimited liability. The general partners cannot have a say in the operation of the business however, while general partners do.

Read more about the different types of business entities in Hong Kong at this Hong Kong Company Registration blog.