Hong Kong is currently the most known region in the world. Although, it is not a country but a special administrative region under the control of the people’s republic of China. It is one of the most stable places in terms of business structures.

Most of the income of Hong Kong comes from different business structures. The Hong Kong company formation method is very easy; that’s why many people prefer to register a company from their assets.

Hong Kong government department allows their former employees to register as private limited companies. These private limited companies are very popular in Hong kong. These private companies are registering under the Hong kong companies ordinance.

Hong Kong inland revenue department also doesn’t charge a huge tax from these companies. That’s why an already existing company prefers to convert to a private company. Before getting in-depth, we will look at the types of companies in Hong Kong.

Limited Companies In Hong Kong

Mainly, limited companies are the most famous business structures in Hong Kong. These limited liability companies are working under the guidelines of the business registration ordinance. It is further divided into types.

• Private limited companies
• Public limited companies

Here, our main focus this on the companies that are working privately. We will discuss the registration method, its benefits, and its drawbacks.

Hong Kong Private Limited Companies

There is a vast majority of private companies in Hong Kong. These companies are allowed by the business registration ordinance. A single natural person above 18 can start his own private company.

These private companies are working great in enhancing the economy of Hong Kong. Due to being a separate legal business entity, the corporate shareholders are secure about their personal assets. Corporate shareholders can be Hong Kong residents or out of Hong Kong.

The Hong Kong government has allowed a maximum of 50 persons; that’s why it is comparatively a small company. You will also require a company secretary who can be considered a registered agent. A company director or owner can’t be a company secretary.

The company director needs to be a Hong Kong resident with residential address proof. He will ensure that the private company limited has a unique company name. If the company name matches another private company, his proposed company will get unregistered.

Requirements For Hong Kong Private Limited Company Registration

Forming a company in Hong Kong is not a difficult task. By following the companies registry policies provided by a business registration service, company secretaries can easily register a private limited company.

• Company name

The first requirement to register a company in Hong Kong is to have a proper unique name for a new company. Companies incorporated in Hong Kong Private limited companies are mostly trading companies known by their name.

• Corporate directors and company secretary

Companies’ registrar makes sure that the corporate director and company secretary are Hong Kong residents. A private limited company can have more than one director and secretary in their company.

• Shareholders

Shareholders are the person that invests their assets in Hong Kong companies. According to Hong Kong private companies ordinance, a maximum of 50 shareholders can invest in a Hony Kong company.

Each shareholder has a separate legal entity in the profits arising from the Hong Kong company. Due to this legal entity, nominee shareholders get limited liability. The company carrying the profits tax will benefit the shareholders.

• Share capital

A Hong Kong private limited company desires to have one share capital by a single shareholder to establish a business in Hong Kong company. A sole shareholder can invest in any currency and is not be bound to pay in Hong Kong dollars.

As the companies are not bound to have Hong Kong currency, several foreign shareholders invest in different financial institutions.

• Registered office address

For companies registry, you will need to provide a registered office address of Hong Kong. Hong Kong company formation will be declined if the office’s address is incorrect or out of Hong Kong.

• Capital gains tax

Profits tax for a private limited company doing business in Hong Kong is only 16.5%. Also, these companies have tax benefits because they don’t have to pay any capital gains tax or withholding tax on GST/VAT and dividends.

• Audited accounts

Audited accounts with audited financial statements are compulsory for a company to register. Without a bank account, companies registering in the registry’s cyber search centre can have a heavy fine, or even their registration can get canceled.

• Business registration certificate

It is mandatory for a company doing business in Hong Kong to renew its business registration certificates every year. You will have to pay an annual registration fee to get a renewed business registration certificate.

Some companies also have a three-year registration plan, and then they have to renew their certification after every three years.

The above requirements are necessary to establish a company in Hong Kong. Once you provide the above company documents, you can now apply for the Hong Kong companies registry in Queensway government offices.

Hiring A Professional Services Firm

Some companies register themself with the help of a professional services firm. Limited liability companies don’t have to gather the documents and visit registration offices for companies’ registries.

A professional service firm will do the necessary tasks to register your new company in Hong Kong. These firms are helpful initially, and make sure that they will help your company in the future. You can rely on such a professional services firm.

These firms will help collect all necessary documents regarding complete information regarding shareholders, directors, and company secretaries. Also, they will be responsible for registering a good and unique company name.

After collecting important documents, these professionals visit the registration office and submit the documents. If any issue arises, these firms will be responsible for solving them.

After completing the registration process, the firm will collect the registration certificate from the inland revenue department. They also help their customers open a bank account in the required bank.

Benefits And Drawbacks Of Establishing A Private Company

Hong Kong private limited companies are serving great to enhance the country’s name worldwide. If these companies have some benefits, then they also have some drawbacks. This section will discuss the major benefits and drawbacks of these companies.

Benefits

These private firms have a lot of benefits that we will discuss here.

• Sole proprietorship

A private company is not answerable to anyone. A single normal person can run it according to the private companies’ ordinance. Such companies don’t have to show any legal distinction between the director and the business entity.

• Easy to setup

A private company is way easier to set up than a public company. The documentation work and other requirements to establish a private company are easy to manage. Mostly, the whole registration process only takes one day to get complete.

A company incorporated with more than one shareholder can easily establish itself as a private firm. Also, the overall expense of establishing a business in Hong Kong is very low.

• Easy language

Hong Kong is a republic place that is under China’s control. The national language of Hong Kong is Chinese and English. All the people almost know these two languages in Hong Kong.

Most of the documentation work is done in English, making it easy to communicate with foreign shareholders. Due to the easy understanding of the language, more foreign shareholders invest in Hong Kong companies and help enhance its currency.

• Annual returns

These companies are making great annual returns. All the company particulars get a heavy annual return in a private company. Also, there will be no profit tax if the annual return is from dividends.

That annual royalty payment keeps the shareholders in the business and enhances a company’s reputation.

• Limited liability

Limited liability is one of the great advantages of a private company in Hong Kong. Limited liability means that a shareholder’s investment in their personal assets, and if the company faces any loss, it will stay secure.

The company will pay the debt from their money without risking the investments of company shareholders. Also, a shareholder can easily sell their company shares anytime they want.

• Raise capital

Raising capital is an extremely easy task in a private limited company. Being a separate legal entity, the share capital of each shareholder is their own money. By selling more shares to existing shareholders, you can easily raise capital.

If your company has less than 50 shareholders, you can also add more shareholders into your business and raise the capital. Ensure that the number of investors doesn’t increase from 50 as this is the limit for a private company in Hong Kong.

• Taxation

The taxation procedure of a private limited company is very simple and easy. The government only takes 16.5% of tax from the profits raised within Hong Kong. They have no share in the profits outside Hong Kong.

In simple words, if your company is only doing business from outside Hong Kong, then there will be no tax on your company. This amazing taxation procedure attracts more people to build a private company instead of a public company.

• Easy ownership transfer

The transfer of ownership in a private company is quick and simple. The transformation of ownership of a company between different shareholders by selling or buying shares from the company is easy. The documentation work is also very easy and can be done within 24 hours.

• Shareholders

Big or public sector companies require many shareholders to get started. But that’s not the case in a private limited company in Hong Kong. A private limited company can be registered even with a single shareholder.

That helps small business owners to register their company easily. Also, a private company Doesn’t need a registered agent as a company secretary can perform this task properly. But a director can’t be the personal sectary in a company.

Drawbacks

Although, the registration procedure of a private company limited is easy and very convenient for small business structures. But there are also a few drawbacks of these companies.

• Expensive setup

The overall expense to set up a private limited company is usually more than establishing a public company. If you don’t have a vast budget, it will get difficult to register your company privately.

• Unique company name

You can’t register your company if you don’t have a unique name. If your company’s name matches another company name, your company’s registration can get canceled.

• Requires several documents

To build a company, you will need to submit several documents to the registration office. It can get a bit tiring and disturbing sometimes. You need to submit the complete details of the shareholders, their residential address, director’s and secretary’s complete information.

Also, you will have to publicly disclose some confidential information for the registration of your company. You will need to tell the investment of your shareholders and your annual income. Some people might find it disturbing and sells their shares from your company.

• Limited numbers of shareholders

If you want to build a big company, it will be impossible in this corporate body. The government has limited the number of shareholders to only 50. If you exceed this number, you can have a heavy amount of fines.

• Company secretary

A private business company must appoint a company secretary to manage all the work. If a company doesn’t have a secretary, they can’t register their company. Also, a director of the company can’t be a secretary simultaneously.

• Difficult to windup

Winding up a company in Hong Kong is more difficult than establishing it. A lot of procedures requires to wind up the complete setup. If you have to face a loss in your company, you can’t finish the winding procedure before clearing the whole debt.

It becomes difficult for a business owner who immediately wants to wind up their business. The procedure of winding a company setup can take a few months. Also, the charges from shutting a private business are too much than other companies.

Bottom Line

Hong Kong is currently the most successful and known place in business. The main reason behind the success of Hong Kong is its business structure. People living in Hong Kong prefer Private limited companies to public limited companies.

In a private company, you can establish your business according to your requirements. The government will only charge a little tax to help you build your business. If your company wants to do trading with foreign companies, it will be tax-free.

Additionally, if you cannot perform the registration procedure, you can hire a professional team on our behalf. In short, establishing a private company is more secure and easy than establishing other companies.