There is no word that can wholly describe the benefits of doing business in Hong Kong brings.
Hong Kong is long known for its favorable business environment for startups and SMEs. Among the vast majority of business entities in Hong Kong, private limited companies remain the top choice. Let’s take a look at this type of business entity!
1. Private Limited Company in Hong Kong in a glance
As stated in the Hong Kong Companies Ordinance, which came into effect on 3 March 2014, Private Limited Company (also known as Private Company Limited by Shares) are among 5 different company types that can be formed.
It is no exaggeration to say that this is the most commonly used business entity for SMEs or trading companies in Hong Kong. Thanks to its separate liability, investors can rest assured that their personal assets are completely secured.
Interesting, isn’t it? Let’s discuss more of its features!
2. Advantages of Private Limited Company
Ease for setting up: a private limited company can be established rather quickly. Normally, it only takes 24 hours to register one. Not to mention the fact that you can use company formation services from a reliable provider to open an enterprise for you on your behalf.
Shareholders: This type of business entity can be started with a minimum of 1 member (and a maximum of 50 members), 1 natural director, Hong Kong local secretary, and 1 registered office.
Separate legal status: a private company is deemed as a distinctive business entity that is separate from its members. Thus, it can acquire, dispose of assets, enter contracts, sue, and be sued under its name.
Limited liability: As mentioned above, the liability of each shareholder is limited. To make it clearer, if a private limited company runs into a loss, the personal assets of the shareholders of this company are not at risk. They can sell their company shares to clear the debt or liability, but their personal assets stay with them.
Easy ownership transfer: shares of a private company can be partly or wholly sold.
Strong public perception: a private company is more credible than other types of business entities in Hong Kong due to its stable business structure and other characteristics. Therefore, the ability to raise capital for a private company is better since banks and other financial institutions take it more seriously.
Tax Benefits of a Private Limited Company: A private company is entitled to a favorable tax regime in Hong Kong. The first 2 million HKD of taxable income is taxed at 8.25%, the remaining amount is taxed at 16.5%. Not only that, if you can prove that the earned income of your company is generated from outside of Hong Kong, that income will be completely exempted from corporate income tax.
3. Disadvantages of Private Limited Company
Heavy compliance requirements: there are many on-going requirements that a private company needs to comply with. Just to name a few, the main requirements are holding annual general meetings, filing annual returns with the Companies Registry, filing tax returns with the Inland Revenue Department, and other maintenance requirements.
Information disclosure: Some certain information needs to be made available to the public.
Hassle dissolution: a private company may go through a complex winding-up because of debts in order to be closed down.
4. Procedure to incorporation
As one of the perks of a private limited company, the incorporation process is quite hassle-free. If you decide to opt-for a Private Limited company, then the very next thing to do is to pick an appropriate and unique name for your company.
After picking your company name, the next steps are deciding on your company structure and proceeding to register. The following documents are required to submit to the Companies Registrar (CR) to set up a Private Limited Company in Hong Kong:
- Application form
- A copy of Articles of Association
- A copy of each passport, residential address proof for foreigners
- A copy of each Hong Kong ID card (for Hong Kong residents)
- Copies of all company documents for corporate shareholders
After preparing all the required documents as listed above, here are two main steps in the process of Hong Kong company formation:
- Filing an application for approval of the proposed company name with the CR.
- Submitting all required documents to the CR.
5. BBCIncorp – Your trusted company formation service provider
It is undeniable that the private limited company in Hong Kong is an ideal type of legal entity for SMEs. From the renowned business environment to the minimum requirements, private limited companies are a top-notch option to start investing.
With a fully online incorporation process at BBCIncorp, you can now easily register your own private limited company in Hong Kong. But form a company is not something to decide in a rush, in case you need further consulting, our experts are always available to assist you. Just drop us your questions at firstname.lastname@example.org.
Only after hours, and your private limited company is ready to kick off. See more about the Hong Kong Company Formation of BBCIncorp!