Formation of Hong Kong Limited Company
To carry on business in Hong Kong, one must registered as a legal entity and obtain a Business Registration Certificate. There are three types of legal entity in Hong Kong:-
Limited companies can also be classified as:-
We provide service for formation of limited company, please click here for the service detail and charge.
Introduction to Hong Kong Limited Company
Introduction to Overseas Company
to Limited Company in Hong Kong
STRUCTURE OF LIMITED COMPANY
Limited company, where the liability of its members is limited by shares, is the most widely adopted form of legal entity in Hong Kong. All the limited companies have to register with the Companies Registry, and have to obtain Business Registration Certificate within one month of commencement of operation.
Limited company is limited liability. According to the Companies Ordinance, a limited company must has at least two directors, two shareholders and one company secretary. While their capacity can be overlapped, for example, Person A and Person B jointly formed a limited company, they can be both shareholder and director, one of them can also be the company secretary.
The term "limited liability" does not refer to the company itself, which remains fully responsible for all its liabilities to the extent that it has sufficient assets to meet them. It refers instead to the liability of the company's members in the event that the company is wound up. It recognizes that the owners are seperate legal persons who cannot be held responsible for any debts incurred by the company.
Remarks: Directors and shareholders are not necessary to be Hong Kong resident, but the secretary must be a Hong Kong resident or a body corporate having its registered office or place of business in Hong Kong.
COMPARISON OF SOLE TRADER, PARTNERSHIPS AND COMPANIES
Private Limited Companies
|Formation||A sole trader can commence business after paying a registration fee.||
||A company is formed by registration under Companies Ordinance and must therefore comply with a number of formalities, including the preparation of a written memorandum and articles of association and the payment of a registration fee.|
|Legal status||No seperate legal identity, it is treated as mere an extension of the proprietor.||A
partnership is merely an extension of its partners and does not have a seperate
company has a seperate legal identity and is therefore independent of its
owners. This has the following effects:
|Transfer of ownership||The ownership of a sole trader cannot be changed. It is treated the same as the proprietor himself.||New partners cannot be introduced unless all the partners agree to the change. A partnership is therefore necessarily more static.||Shares in public company can be freely transferred and the ownership of the company can change hand easily. Private companies are more restricted since they must impose certain limitations on share transfers in their articles, but ownership can nevertheless change comparatively easily.|
|Size||1 person||2 - 20 persons||2 - 50 perosns(excluding members)|
|Management||A sole trader is run by the proprietor solely.||A partnership is run by the partners on democratic lines, subject to the terms of the partnership agreement. Usually all partners will be fully involved in the management process.||Members of a company have no automatic right to be involved in the management of the company unless they are elected directors, although they do have the right to vote on certain resolutions, including the appointment of the board. In practice, the owners of a small private company will often be the managers of the business as well.|
|Liability||The proprietor has unlimited liability. If the company becomes bankrupt, the proprietor must be liable for the debts.||Partners are jointly and severally liable for the debts of the firm, although it is possible for the liability of one or more partners to be limited. In such circumstances, however, the liability of at least one of the partners must remain unlimited.||The liability of the members of a company is limited to the amount (if any) unpaid on their shares.|
|Agency||The company is same as the proprietor.||A partner is an agent of the firm and may bind the partnership by his acts.||A member of a company is not an agent of the company unless he has a seperate agency agreeement.|
|Borrowing powers||A sole trader cannot borrow on debenture, nor can it create a floating charge.||A partnership cannot borrow on debenture, nor can it create a floating charge.||A company has greater facilities for borrowing since it can borrow on debenture. It can also create floating charges to secure its loans, thus making it a more attractive prospect to a potential lender.|
|Formalities||A sole trader is not bound by formalities as long as it carries business lawfully.||A partnership is not bound by formalities other than those which are self-imposed through a partnership agreement. In particular, it does not have to have an annual audit and its account are not required to be open for public inspection.||A company is subject to a number of formalities, including the requirement for an audit and the need to submit an annual return.|
|Tax||A sole trader is subject to profits tax at lower rate and the proprietor may apply for personal assessment.||A partnership is subject to profits tax at lower rate and each partner may apply for personal assessment.||A company is subject to profits tax and there is no right to personal assessment.|
|Powers||Not applicable||The partners specify the partnership's powers and these can be changed at will if all agree.||A company's powers are laid down in its memorandum and cannot be changed easily.|
|Share capital||Not applicable||A partnership is not governed by any regulations on the raising or maintenance of capital||A limited company is subject to provisions in the Companies Ordinance governing the raising and maintenance of its share capital.|
|Arrangements with creditors||A sole trader can make any arrangement with its creditors which the proprietor thinks fit.||A partnership can make any arrangement with its creditors which the partners think fit.||A company may make only those arrangments with its creditors which are authorized by the Companies Ordinance.|
|Termination||A sole trader can be dissolved by its proprietor.||A partnership can be dissolved by only one member.||A company cannot be wound up by only one member unless it can be proved by the court that it is just and equitable to do so.|
MANAGEMENT OF LIMITED COMPANY
Our company can incorporate private limited company in Hong Kong. The formation of which is by registration under the Companies Ordinance and must therefore comply a number of formalities. Limited company must submit document to the following two government departments:
Limited company has to report to the Companies Registry any appointment or resignation of directors, secretary, change of company address, creation of charge, share capital and change in shareholdings, etc. The information of limited company will be open for public inspection.
Every private company having a share capital must within 42 days after its most recent anniversary of its date of incorporation submit an annual return to the Companies Registry. The following registration fees are payable on delivery of an annual return:-
|If delivered within 42 days after the anniversary of incorporation||
|If delivered more than 42 days after but within three months after the anniversary of incorporation||
|If delivered more than three months after but within six months after the anniversary of incorporation||
|If delivered more than six months after but within nine months after the anniversary of incorporation||
|If delivered more than nine months after the anniversary of incorporation||
Late delivery will be subject to a maximum fine of HK$50,000.00 and daily penalty of HK$700.00. We will remind our clients one month prior to the anniversary of incorporation for delivery of annual return.
Inland Revenue Department
Company has to furnish tax return with IRD every year. If a company cannot provide audited report and tax return within a stated period of time, IRD can assess the tax liability of the company by estimation. In order to avoid excess tax liabilities, directors should prepare the accounts of the company as soon as possible and hand to the auditor for preparation of audit report. A newly incorporated company can prepare its first audit report within 18 months of its incorporation. If you receive the tax return from IRD, you should inform us or your auditor at once.
On the other hand, company also has to pay to IRD a Business Registration fee of HK$600 every year.
Annual General Meeting
A company's first AGM must be held within 18 months of incorporation. Unless the Registrar of Companies agrees in writing to an extension in a particular case, the period between annual general meetings must not exceed 15 months.
Books of Accounts and Business Records
Every person carrying on a business or profession in Hong Kong is required to keep sufficient records in English or Chinese to enable the assessable profits of such business or profession to be readily ascertained. The penalty for failing to comply without reasonable excuse is at maximum HK$100,000.00
Under normal circumstances, a member of a private limited company will also act as a director of the company, so a director can withdraw cash from the company in the form of director remuneration so as to reduce the profits tax which is levied at a higher rate than that of perosnal tax.
On the other hand, directors can also reduce the profits tax by effective tax planning, please click here for details.
Notification of Commencement of Employment
A person who commences to employ an individual in Hong Kong is required to give written notice to the Commissioner of Inland Revenue no later than three months after the date of commencement of such employment, stating:
Procedure of Incorporation of Limited Company
Limited companies incorporated in Hong Kong are regulated by the Companies Registry in Hong Kong. In accordance with the Companies Ordinance (Chapter 32), every limited company has to lodge its detailed particulars with Companies Registry for the public inspection.
All limited companies shall appoint a company secretary to implement and comply with provisions of the Companies Ordinance (Chapter 32). Any contravention to the Companies Ordinance may result in serious consequences.
You need to suggest a company name for the proposed company.
You are required to conduct a name search at the Companies Registry to ensure that the intended company name has not been registered. Please note that a company name will not be registered if it is already appearing on the index of company names maintained by the Registrar of Companies.
Submit the following documents at the shroff office of the Companiesy Registry together with the prescribed fees:-
It may take around seven days for the Companies Registry to issue a Certificate of Incorporation (CI) and the presentor will be notified accordingly. Every limited company is required to hold a valid Business Registration Certificate (BR Cert) which is issued and regulated by the Inland Revenue Department (IRD). A copy of CI and BR Cert application form shall be submitted to IRD together with the prescribed fee. The BR Cert will be issued instantly.
According to the Companies Ordinance (Chapter 32), the following statutory items are required for every limited company in Hong Kong:-
Click here for the service detail and charge of incorpration of a Hong Kong Limited Company.
to Overseas Company
POPULAR OVERSEAS REGISTERED PLACE
ADVANTAGES OF OVERSEAS COMPANY
1. Information of the director will not be disclosed and no annual return is required
2. No tax shall be paid for business carried on outside the registered place and exchange control
3. Allowed one director and shareholder
4. No limitation on the nationality and residence of director and shareholder
and no filing shall be made in relation to any change in director or shareholder
USAGE OF OVERSEAS COMPANY
1. Holding of bank accounts, trust, funds, etc.
2. Holding of company shares
3. Holding of real estates
Procedure of Registering a Overseas Company in Hong Kong
Register of an overseas company must be within one month of establishing a place of business in Hong Kong
Submit Form F1 in reporting :
(If the above items is not written in the Chinese or English language, a certified translation into Chinese or English should also be filed)
Click here for the service detail and charge of incorpration of Overseas Company.
[ Home | Our Service | Contact | Technical Support ]