There are many types of business structures that the entrepreneur and business owners may choose from. However, in Hong Kong, one option stands out as the undisputed champion: company limited by share. This opening part explains why Hong Kong private limited companies are the first solution for such individual entrepreneurs, startups, and expanding businesses with regional aspirations. From the critical and practical advantage of limited liability to the attractive opportunities for expansion into rapidly growing economies this article will reveal the many reasons why Hong Kong private limited companies are attractive to the investor.
Content Outline
What Does A Private Limited Company Mean?
A company limited by shares is the most preferred type of business form that is used in conducting transactions and commerce in Hong Kong. It has the legal status of an individual legal personality which makes it have the capacity to own property, enter into contracts, borrow, and execute legal documents in its own name.
This entity structure functions with the concept of shares and has a share capital that is subdivided into shares of a specified value. In return, the shareholders of these shares are entitled to a portion of the profits of the company and receive dividends at the rate of their share in the company. In the event of losses, shareholders can suffer losses that are proportional to the shares they hold in the company.
A private limited company is subjected to a number of rules and regulations such as restrictions on shareholders (limited to 50 shareholders excluding employees and former employees), prohibition on the transfer of shares by shareholders and prohibition on invitation to public for subscriptions for shares or debentures. It is also necessary to have natural person directors with no limit on the number of directors and the nationality, domicile or residence of director’s corporation s. In addition, a company may have only one shareholder and at the same time be represented as the director of the company.
It is a requirement of the company to appoint a company secretary and have the registered office in the city of Hong Kong. But in a case when a certain company has only one director, the same person cannot be both a director and a secretary. If the company secretary engages in a natural entity, he or she normally has to be a resident of Hong Kong. On the contrary, if the company secretary is a company, it has to be a registered or managed office or place of business in Hong Kong.
Can Foreign Individuals Or Companies Form A Private Limited Company In Hong Kong?
Yes, Hong Kong is not restrictive about limited company ownership for foreigners. They can act as the sole director and shareholder and there are no local resident requirements. Additionally, foreign entities are able to run their Hong Kong offshore limited company from outside the territory.
Benefits Of Operating A Private Limited Company
Limited liability
One of many advantages of this structure is limited liability, which means that your personal assets are not at stake. Shareholders are only liable to the number of shares that they have paid for and this is an added advantage when it comes to debts of the business.
Streamlined Banking
With most local banks the process of opening a corporate bank account in Hong Kong is relatively easy. This will help you in professional management of finances for your business.
Swift and Easy Setup
One of the most remarkable things about incorporating is that the whole process, from beginning to end, takes approximately a week (or less) if everything happens smoothly. This is good for the businesses that are interested in taking advantage of the events that may be available only for a short period.
100% foreign ownership
Hong Kong offers 100% local or foreign shareholding without any particular limitations on foreign ownership.
Transferable Ownership
The transferring/selling of the company’s ownership from one shareholder to another or from an investor is not difficult. The transfer of ownership is also pretty straightforward, giving room for easy change of ownerships of a business.
Tax-Friendly Environment
The corporate tax rate is 16.5% of accessible profit. In particular, the tax payers in Hong Kong will only be taxed on the profits earned in Hong Kong while the profits earned in other nations are not subjected to taxation in Hong Kong, thus making Hong Kong one of the most preferred nations for tax optimization strategies.
In essence, a Hong Kong private limited company is therefore one of the best forms of business entities for such protection, efficiency and opportunities. It comes as no surprise that it is the choice for companies that want to anchor their operations in this part of the world.
The Requirements To Set Up A Private Limited Company
A Distinctive Company Name
Develop a distinctive and brandable name that has not been used by another business. A proof of name availability is a simple name search with the help of the Companies Registry.
At Least one Shareholders
The Owners: You will require at least one shareholder who may be individuals or even a body corporate so long as they are not resident in a prohibited jurisdiction. These Shareholders are the owners of the Company under law.
At Least one Directors
At least one director is needed to handle the business activities of the company. Although it is not necessary that directors should reside in Hong Kong they should be individuals who can contribute to directing the company in an efficient way.
A Company Secretary
It is therefore important that a company secretary be appointed on the basis of his/her qualifications. This individual, or registered company, acts as a watchdog for the regulation of the company and keeps their records. A company secretary must be domiciled or register in Hong Kong.
A Local Business Address
Your company will require to have a fixed place of business as its registered office in Hong Kong. This address will be used for official correspondence together with record purposes.
Share Capital Flexibility
The other significant benefit is that there is no minimum share capital in Hong Kong. It is possible to set a share capital that the company requires at its establishment stage, and you can do it in any major currency.
Steps for Private Limited Company Incorporation
Step 1. Choosing your business name
Choose a special name for your business which can either be in Chinese, English, or both languages.
Step 2. Business registration your company with Companies Registry
Step 3. Incorporate your business with selected business entity
Fill up the forms and submit them through Hong Kong’s 24-hour Companies E-registry.
Step 4. Setting up a corporate bank account
You can choose to go to any of the local or foreign banks in Hong Kong and set up your bank account.
Step 5. Securing work permits
It is quite common for the majority of nationalities to get a work permit in Hong Kong and it is quite easy. Foreigners should have the proper work permit to be able to work in Hong Kong. (only if applicable)
Step 6. Getting a permit and license
Different types of Permits and licenses issued to a business depend on the nature of the service and products provided by the business.
Step 7. Bookkeeping
Keep all your transactions recorded and be prepared for your management accounts like profit & loss and balance sheet.
Step 8. Understand your tax obligations
Hong Kong’s current profit tax rate which applies to all businesses operating under the jurisdiction of Hong Kong is 8.25% on the first HKD2 million of the profits and 16.5% thereafter and no capital gains tax. The company must comply with the tax rules and rates for each financial year it operates.
Step 9. Annual Filing
It is important to keep in mind the deadlines set by the Companies Registry. You will have to ensure the annual registration of your business entity is as follows.
- Every year on the due date, you should be filing an annual return under the Companies Ordinance (CO).
- The tax return must be filed with the Inland Revenue Department (IRD) by the respective accounting year, accompanied by the accounting records.
The year-end submission requirements are different depending on the business type whether you have a Registered Non-local (non-Hong Kong company), or a Local Company Limited in Hong Kong.
How FastLane Group Can Help?
Ready to start your journey towards establishing a private limited company in Hong Kong? Let FastLane Group guide you through the seamless process. From company incorporation to tax compliance, our expert team ensures a smooth and efficient setup, allowing you to focus on growing your business. Contact us now to get started!