The Ultimate Guide to Understanding the Types of Companies in Hong Kong

Hong Kong is known for its favorable business environment, strategic location, and low tax rates, making it a popular destination for entrepreneurs and investors. Understanding the different types of companies in Hong Kong is crucial for setting up a business in the region. In this article, we will explore the various company structures available in Hong Kong and their features, advantages, and disadvantages. 

Introduction

Hong Kong’s business-friendly policies and excellent infrastructure make it an attractive destination for investors and entrepreneurs. Setting up a business in Hong Kong can be a straightforward process if you understand the different types of companies available in the region. 

Sole Proprietorship

A sole proprietorship is a business arrangement in which a single individual owns and manage the business. It is the simplest form of business entity in Hong Kong and is ideal for small businesses with a low risk of liability. The owner is fully responsible for the business’s debts and liabilities. 

Advantages

• Easy and quick to set up 
• Low set-up costs 
• Complete control over the business operations 

Disadvantages

• Unlimited liability 
• Limited ability to raise capital 
• The business’s success is dependent on the owner’s skills and abilities 

How to Set Up a Sole Proprietorship

• Complete the business registration process at the Business Registration Office. 

• Obtain any necessary licenses or permits 
• Open a bank account 
• Register for taxes 

Partnership

A partnership is a type of business structure in which two or more individuals jointly own and operate the business. In a general partnership, all partners bear personal responsibility for the business’s debts and legal matters. In contrast, in a limited partnership, there exists at least one general partner with unrestricted liability, and one or more limited partners with liability limited to their investment in the business. 

Types of Partnerships in Hong Kong

• General partnership 
• Limited partnership 

Advantages

• Easy and quick to set up 
• Shared financial burden and workload 
• More capital available than a sole proprietorship 

Disadvantages

• Unlimited liability 
• Disagreements between partners can lead to complications 

How to Set Up a Partnership

• Complete the business registration process at the Business Registration Office. 
• Draft a partnership agreement 

• Obtain any necessary licenses or permits 
• Open a bank account 
• Register for taxes 

There are two types of limited companies in Hong Kong: private and public.

Limited Liability Company (LLC)

A limited liability company (private limited company) is the most common type of company in Hong Kong and is ideal for small to medium-sized businesses, also is a separate legal entity from its owners.  The owners’ liability is restricted to the capital they have invested in the business. 

Types of LLCs in Hong Kong

• Private limited company 
• Public limited company 
• Guarantee company 

Advantages

• Limited liability for owners 

• Ability to raise capital easily 
• Perpetual existence 

Disadvantages

• It is more intricate to establish compared to a sole proprietorship or partnership. 
• Higher set-up costs 

• Greater regulatory requirements 

How to Set Up an LLC

• Choose a company name and conduct a name search 
• Draft the company’s articles of association 
• Provide the documents for incorporation to the Companies Registry. 

• Obtain any necessary licenses or permits 
• Open a bank account 
• Register for taxes 

Public Limited Company (PLC)

A public limited company is a type of LLC that can issue shares to the public, also is suitable for larger companies with multiple shareholders and requires more extensive legal and financial requirements. 

Advantages

•  The capacity to secure a significant amount of capital. 
• Enhanced credibility with customers and investors 

• Limited liability for owners 

Disadvantages

• More complex to set up than other types of companies 
• Higher regulatory requirements 
• More expensive to maintain than other types of companies 

How to Set Up a PLC

• Follow the same process as setting up a private limited company 
• Obtain approval from the Securities and Futures Commission to issue shares to the public 

Branch Office 

A branch office is an extension of a foreign company’s operations in Hong Kong. The foreign company remains liable for the branch’s debts and liabilities. 

Advantages

• Easy to set up 
• No minimum capital requirement 

• Can benefit from the foreign company’s existing reputation and customer base 

Disadvantages

• The foreign company is liable for the branch’s debts and liabilities 
• Limited autonomy 
• Non-Hong Kong Company 

• Foreign Company 
• Offshore Company 

FAQs