Several forms of company ownership are available in Hong Kong that will fit different kinds and scales of business. However, foreign entrepreneurs most often prefer to register private limited liability companies in the jurisdiction.
A Hong Kong-based limited liability company can have one owner who holds 100% of the ownership shares or it can have several owners. The company shareholders receive incomes in the form of dividends. Let us analyze the advantages of registering a limited liability company in Hong Kong and discuss some sensitive issues to be taken into account.
Main advantages of registering a private limited liability company in Hong Kong
Financial liabilities of the company are not your personal liabilities. The company is a legal entity that is distinct from its owners. This means that in case something goes terribly wrong with the company, the owners will not have to sell their personal property in order to cover the company’s debts.
This is the main advantage of a limited liability company over a sole proprietorship or a general partnership. Imagine the following situation: John’s company designs applications for Google Play. One day, the company is accused of distributing malevolent software and Google takes it to court. The judge finds John’s company guilty, which means that compensations are due. The compensation amount is so high that the company has to go bankrupt. However, as it is a limited liability company, John gets to keep his house and his car. If his company were a sole proprietorship, he would have to sell his personal property.
In an LLC, the liability of the company owners is limited by the amounts of contributions that each of them has made to the company registered capital. Now imagine the following situation: Mary and Jill have registered a private limited liability company in Hong Kong to design interiors. Each of them holds a thousand Hong Kong dollar worth of ownership shares. One day, a dishonest partner lets them down and their company acquires a debt of forty thousand Hong Kong dollars. The company thus goes bankrupt but Mary and Jill lose not more than a thousand dollars each. If they had registered a general partnership, they would be liable for the debt by their personal belongings.
A private limited liability company in Hong Kong can belong to a foreign national. It does not even matter if the company is an independent legal entity or a subsidiary of a foreign corporation: the condition holds in any case.
It is possible to register a subsidiary or an affiliated company in Hong Kong that would have a different form of ownership, but its possibilities are going to be limited. At the same time, a limited company will have unlimited possibilities! It can engage in any kind of business that can be totally different from the business that the parent company is involved with.
One more advantage of the private limited liability company is that it will still exist even if its shares change hands and the directors are displaced.
The ease of attracting new investors and a positive image of a Hong Kong-based private limited liability company. Company owners can sell their shares (or part of their shares) to somebody else even if the company does not go public. In addition, banks put more trust in LLCs rather than sole proprietorships and partnerships. The latter two types of companies often struggle obtaining business loans.
Sensitive issues that you have to be aware of when registering a private LLC in Hong Kong
Company registration procedure and maintenance issues. First of all, you will have to meet all the requirements related to the corporate documents and company officers. You have to draw up company By-laws, obtain the Certificate of Incorporation and Registration Certificate.
A private limited liability company in Hong Kong has to have a secretary. It has to file financial reports and tax returns every year. Besides, the Registration Certificate has to be extended annually and there is an associated fee. If your business activities require licensing, the license also needs to be extended. Shareholder meetings have to be held on a regular basis and minutes of these meetings need to be kept. Keeping the books and having audits is also required.
Offshore Pro Group will be happy to provide full support in maintaining your LLC in Hong Kong. We will make sure that all the requirements are satisfied and your company thus remains functional. If you register a private limited liability company in Hong Kong, you can certainly count on our support!
Difficulties associated with closing the company. There are two ways to close the LLC in Hong Kong: deregister it or liquidate it. The first way is simple but it can be used only if the company has no debts and if it has been idle for at least three months prior to deregistration. In all other cases, only liquidation is available and this is a long (9 months minimum) and a costly process.
What is required to set up a private limited liability company in Hong Kong?
To register an LLC in Hong Kong you have to satisfy the following requirements:
Minimum one shareholder is required. The maximum number of shareholders is fifty. Both private individuals and legal entities can act as the company owners. The minimum required registered capital is one Hong Kong dollar. The recommended amount of the registered capital to be deposited is 10,000 Hong Kong dollars. Other currencies such as euro, yuan, yen, and so on can be used to deposit the company registered capital.
A company secretary is required. It can be a legal resident of Hong Kong or a licensed firm with an office in the jurisdiction. The secretary is responsible for keeping the records and preparing the reports for submission. The company secretary also keeps the register of company beneficial owners.
Minimum one company director is required. A local director is NOT required, unlike in Singapore, Indonesia, or Malaysia, for example. The foreign national can simultaneously be the sole company owner and its director.
Company name. You will have to suggest a couple possible names in English or in Chinese for your limited liability company in Hong Kong.
Company founders and directors’ documents. Only a passport copy and a proof of address are required to register a private limited liability company in Hong Kong.
As you can see, the requirements are not overly burdensome. Moreover, the company can be registered remotely. You will have to send us the required documents and we will do everything else!
Here we promote the registration of a private limited liability company in Hong Kong but for some business purposes, setting up a sole proprietorship or a partnership may turn out more sensible. So please do not completely disregard these forms of company ownership when considering the possibility to set up a company in Hong Kong.
Please apply for a free consultation of the matter by writing to our email address or using the live chat and the WhatsApp numbers. We will gladly help you choose the optimal form of company ownership in Hong Kong.
What forms of company ownership are available in Hong Kong?
Various forms of company ownership are available in Hong Kong: private and public limited liability companies, partnerships, sole proprietorships, subsidiaries, and affiliations. Choosing the most appropriate form of company ownership will depend on your business objectives.
What taxes are payable by a limited liability company in Hong Kong?
Limited liability companies in Hong Kong pay only 8.25% of the first two million Hong Kong dollars earned and 16.5% of the amount of earnings exceeded two million. They do not have to pay any dividend tax, nor VAT, nor sales tax. Besides, some tax incentives are available in Hong Kong.
Is it simple to set up a private limited liability company in Hong Kong?
The procedure of registering a private limited liability company in Hong Kong is quite simple and this can be done remotely. All you have to do is send us the required documents and supply the necessary information and we will register an LLC in Hong Kong for you.