It is simple to register a business in Hong Kong for business owners and the simplest way to get started is by registering a sole proprietorship. This business structure offers very minimal startup requirements and low administrative burden so it is a popular option for those that want to launch small-sized, low-risk businesses. In this guide, we will explain everything you need to know about how to establish a sole proprietorship in Hong Kong, including its benefits, limitations, and compliance requirements, so that you can make an informed decision if it is the most suitable structure for your business.
Content Outline
Key Takeaways
Simple Setup with Minimal Requirements
A sole proprietorship is the easiest and most cost-effective business structure in Hong Kong, ideal for small, low-risk businesses.
Full Control but Unlimited Liability
The sole proprietor has complete decision-making authority but is personally liable for all debts and obligations.
Registration Process is Straightforward
Registering a sole proprietorship involves choosing a name, submitting documents to the IRD, and displaying the Business Registration Certificate.
Restrictions for Foreigners
Non-residents without a valid HKID cannot register a sole proprietorship; forming a limited company is the viable alternative for foreign entrepreneurs.
Ongoing Compliance Obligations
Sole proprietors must renew their Business Registration Certificate, notify IRD of any changes, and file profits tax returns annually.
What is a Sole Proprietorship?
Sole proprietorship is the easiest and most commonly used business structure in Hong Kong. It is owned and operated by a single individual, the sole proprietor and there is no legal distinction between the owner and the firm. Therefore, the owner of the business is personally responsible for the profits, losses, debts, and liabilities of the business.
Advantages and Disadvantages of a Sole Proprietorship
| Advantages | Disadvantages |
| Easy and low-cost setup – Simple registration process with no capital requirements | Unlimited liability – Owner is personally responsible for all business debts and liabilities. |
| Full control – Sole proprietor makes all decisions without the need for approval. | Difficult to raise funds – Investors and banks prefer incorporated entities with limited liability. |
| Keep all profits – All business income belongs to the owner. | Lower business credibility – May be perceived as less professional than a limited company. |
| No double taxation – Profits taxed once as personal income. | Limited tax deductions – Cannot deduct business expenses from personal income. |
| Flat tax rate – Profits taxed at 15%, generally lower than corporate tax rates. | Financial confusion risk – Without proper accounting, personal and business finances can become entangled. |
| Eligible for certain tax deductions – e.g., work-from-home expenses. |
How To Set Up A Sole Proprietorship In Hong Kong
The requirement for starting a sole proprietorship in Hong Kong is to register with the Business Registration Office of the Inland Revenue Department and obtain a valid Business Registration Certificate. The registration has to be completed within 1 month from the date your business operations start. The business register number that will appear on the business registration certificate is also a sole proprietorship tax filing number.
Step-by-Step Registration Procedure
1. Choose a suitable business name
- The business name can be in English, Chinese or both.
- A Chinese name must be in Chinese characters and not made up of English words.
- The name should not state that the company is “limited liability”. Avoid using terms like “Limited” or “Ltd.”
- The name should not reflect any sort of affiliation to the Government or public authority involvement.
- The name should not infringe on trademarks or be offensive or misleading.
2. Submit Application to the IRD’s Business Registration Office
- The application can be submitted in person, by post, or online.
- Once approved, the Business Registration Certificate is issued, typically within one working day, assuming all documents are in order and no name objections arise.
3. Display the Business Registration Certificate
- The BRC must be clearly displayed at the principal place of business at all times as required by Hong Kong law.
Required Documents For Sole Proprietorship Registration
For sole proprietorship business registration in Hong Kong, the following documents need to be submitted:
- A completely filled application form that includes your proposed business name, nature of business, business address and owner’s details.
- Hong Kong identification document if the owner is a Hong Kong resident.
- A copy of the passport or official identification card for non-resident owners.
Can Foreigners Register A Sole Proprietorship In Hong Kong?
Hong Kong is well-known for its business-friendly environment, minimal tax regime, and ease of company setup. However, when it comes to sole proprietorships, foreigners without Hong Kong residency face significant restrictions.
If you’re a non-resident entrepreneur looking to start a business in Hong Kong, it’s essential to understand the legal limitations and available options.
Are Foreigners Allowed to Register a Sole Proprietorship?
No, foreigners who do not hold a valid Hong Kong Identity Card (HKID) or do not reside in Hong Kong cannot directly register a sole proprietorship in their own name.
A sole proprietorship is not a separate legal entity — it is legally tied to the individual operating the business. As such, the business owner must:
- Be physically present in Hong Kong
- Possess a valid HKID
- Provide a local residential address
There is no provision under Hong Kong law to appoint a representative or nominee to register a sole proprietorship on behalf of a non-resident individual.
Can Foreigners Run a Sole Proprietorship with an Investment Visa?
While Hong Kong offers an Investment Visa under the General Employment Policy (GEP) for foreigners wishing to relocate and manage a business, this visa route is not typically approved for sole proprietorships.
The Immigration Department generally requires applicants to establish a Hong Kong private limited company and submit a comprehensive business plan showing:
- Clear business model and scalability
- Economic contribution to Hong Kong (e.g., local employment, supplier engagement)
- Proof of funding and operational readiness
What’s the Best Option for Foreign Entrepreneurs?
If you’re a foreigner planning to start and operate a business in Hong Kong, the most practical and compliant approach is to:
- Register a Hong Kong private limited company
- Apply for an Investment Visa under the company’s structure
This structure not only meets immigration requirements but also offers:
- Full foreign ownership
- Limited liability protection
- Better access to banking, investors, and clients
- A more professional and scalable setup
Post Registration Formalities
Apply For A Relevant Business License
After you have complied with the registration of your business in the Inland Revenue Department, you are also required to have a business license before starting your operations, depending on the nature of your business activities. Businesses like restaurants, educational institutions, travel agents, financial services, and importation/exportation will require a business license to operate.
Read How To Get A Business License In Hong Kong
Open a Business Bank Account
After you have finished registering with the Inland Revenue Department, you can open a business bank account with any of the major banks in Hong Kong. Some Hong Kong banks have procedures that require you to be physically present at the bank. However, a few of the banks do not expect you to be there personally while opening an account. It is recommended to talk with the consulting service that will help you to choose an ideal bank that will meet your business needs.
Ongoing Compliance
Filing Changes to Informations About Business
The IRD must be notified in writing within a month of any change in the business registration particulars, whether a change of business address, a change of business name, or a change of the nature of the business. If you cease business, do not forget to inform the IRD within a month following the cessation.
Filing Profits Tax Return
As part of the Hong Kong company law, sole proprietorships that are formed in Hong Kong must prepare annual filing of their profits taxes. Normally, the first notification for a newly registered business from IRD for its tax-return filing will be sent 18 months after the date of business registration. Normally, return filing should be done within one month from the date of notification.
For small businesses whose gross assets don’t exceed HKD 2,000,000, no financial statements are required to be attached to the tax return. Nonetheless, they need to prepare the account, file the taxes in accordance with the accounts prepared, and preserve the records and the papers for possible inquiry by the tax auditors.
The sole proprietorship businesses that have an income higher than HKD 2,000,000 will be required to meet the following requirements in addition to handing in their tax return:
- A certified statement revealing the company’s balance sheet and revenue and expenses associated with the basis period.
- A tax computation proving the method of achieving the amount of assessable profits (or adjusted losses).
Renewing The Business Registration Certificate
The renewal of the Business Registration Certificate must be done one month before expiry, either on an annual basis or every three years provided that the Certificate is valid for either one year or three years.
Conclusion
A sole proprietorship is considered the easiest and least costly business structure to establish. The process will be time-saving since registration is done within a day and it does not involve many documents. However, the major disadvantage of sole proprietorship is the personal liability risk which is faced by the person who runs the business alone as there could be an impression of a small business by the clients and suppliers. So, it is advisable to be aware of the risks that this type of company brings. These risks can be solved but not in the short term. On the contrary, the suggested form of business setup is a private limited Hong Kong company.
How FastLane Group Can Help?
Transform your business vision into reality with FastLane Group! Our experienced team can seamlessly guide you through the registration process, ensuring compliance and efficiency every step of the way. We provide comprehensive support tailored to your needs. Contact FastLane Group today for a free consultation whether a Sole Proprietorship or Limited Company is right for you.
