Prestigious Hong Kong. One of the most coveted financial market in the world. Have you ever wondered what are your chances of business here are? First off, let’s dive into types of business entities in Hong Kong that are available to foreign investors.
Limited Liability Company (LLC)
The LLC in Hong Kong is divided into the following categories: private company, public company, company limited by shares, and company limited by guarantees. However, in this short article, it is better to discuss only the most popular category: private company.
Before jumping into the real pros and cons of the private companies in Hong Kong, it is advisable to let you know whether this type of company is suited to you or not. If the following are your intentions when you want to open your business in Hong Kong, then the private company is a promising decision:
Limit the liability of the members
Have a discrete legal entity to utilize the business operation
Adopt movable assets of the company as security and receive the highest support from the bank
Appoint another individual to manage the company on your behalf
So, does it sound like what you want to achieve? If yes, here’re the pros and cons of private companies in Hong Kong. And if the answer is, unfortunately, no, then keep reading is not a bad idea after all, as you can gain more knowledge about a popular legal entity in Hong Kong. Or an expert’s opinion might be what you need, BBCIncorp is a great option when it comes to incorporation consulting.
Advantages of Private Company in Hong Kong
Please be noted that these are the main pros and cons of Private Company Limited by Shares – the most prominent type of business entities in Hong Kong:
As an independent entity, private companies can attain assets as well as become indebted. Sign new contracts, sue or be sued in its name is also a big perk of this type. Plus, shareholders don’t have the responsibility to pay off debts.
The liability of each shareholder is limited by his or her corresponding investment.
The amendment of a member doesn’t affect the company’s existence as shares can be easily transferred.
Even after incorporation, private companies can have new shareholders and issue more shares for business expansion.
Ownership transfer.
Tax benefits.
Disadvantages of Private Company in Hong Kong
Like any other business entities, private companies in Hong Kong also come with its own sets of drawbacks:
Statutory compliance.
Identities of all shareholders are required to publish.
Incorporation and maintenance are big-budget.
Company dissolution is cumbersome, arduous, and pricey.
Sole Proprietorship in Hong Kong
If you’re looking for an easy-peasy and economical registration process, then Sole Proprietorship might be the one for you! Not only does this type of business entity offer you low-cost and time-saving solutions, but it also comes with several ideal characteristics such as low-risk business, adequate funds to operate (without bordering any external financial support or expertise). To sum up, the sole proprietorship is a basic legal entity in Hong Kong.
Advantages of Sole Proprietorship in Hong Kong
Below are the benefits when you decide to settle on Sole Proprietorship:
Easy-peasy to register and maintenance.
Fast directorial process as you’re the one who makes decisions.
Gain all the profits.
Disadvantages of Sole Proprietorship in Hong Kong
As ideal as it might seem, a sole proprietorship does come with some drawbacks:
The major source of capital comes from personal wealth, therefore it might cause some hindrances on the early stage or even after incorporation.
No legal separation, which means all the loss and debt of the company are liable to the owner.
High pressure as you’re the one who makes the call.
The business life cycle is limited.
Partnerships in Hong Kong
A partnership in Hong Kong is established when a group of investors joins together to conduct a profitable business. It takes at least two members to form this type of business entity. A partnership is definitive if you want to:
Lower the risks and share duties with other members while doing business.
Work with a partner who can cover your lack of skill and knowledge.
Have a shared goal among the members.
Partnerships in Hong Kong are categorized as 2 main types: Limited Partnership and General Partnership.
Advantages of Partnership in Hong Kong
The benefits of partnership in Hong Kong are:
Shared responsibility and workloads
Low procedures and maintenance costs when compared to other business entities
Easy expansion to attract new members
Utilize each partner’s knowledge
Disadvantages of Partnership in Hong Kong
And of course, partnerships do come with some drawbacks:
Personally liable for all the obligations.
Share the profits.
Lengthy discussion if disagreements about business operations occur.
Disruption is easily caused by disputes between members.
Branch and Representative Office in Hong Kong
Among the business entities that are mentioned above, there are two more quite popular types: Branch and Representative Office.
A branch in Hong Kong is an extension of the parent company that is located overseas; therefore, it is not an independent business entity. While a representative office is a business entity allocated only for companies established outside of Hong Kong. These two types of business entities seem to be excluded when compared with the above entities. However, if your most desire is to promote and get to know the Hong Kong market, these can be the ideal decision.
By now you should have a brief overview of the Hong Kong business entities that are available to you. Even so, whether which type to go with might need deeper research and consideration.
