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Company Formation in Hong Kong

Overview :

Hong Kong is known for its openness and dynamism, Honk Kong is the most advanced economies in Asia. It distinguishes itself from other Asian cities by its strategic location in the heart of Asia, economic freedom, free flow of information, low tax regime, transparency, rule of law, robust protection of IPR, widespread use of English as the language of business and proximity to and experience in trading with mainland China. HK is service-oriented economy. Service sector now accounts for about 90% of Hong Kong’s GDP. Hong Kong has one of the busiest airport and port in the world.


Advantages of Incorporating Business in Honk Kong :
  • The Freest economy in the world for 18 years
  • The second easiest place to do business in world
  • The word’s most service oriented economy
  • The world 11th most largest exporter of commercial services
  • 3rd largest stock market in Asia and 6th largest in world
  • 2nd largest recipient of foreign direct Investment in world
  • Sound legal system

Attractive Tax Regime :

Hong Kong boasts of being one of the lowest tax jurisdictions in the world. Personal Income tax or its salary tax as it is known, starts at 2% and goes up to 17% for income above HKD 120,000/- Corporate tax is set at 16.5% of assessable profits for corporation and 15% for unincorporated businesses. There is no capital gain tax not any withholding any dividend tax on dividend and interest or collection of social security benefits. Furthermore there is neither sales tax nor VAT.


Types of Entities in Hong Kong

The most common type of business entity in Hong Kong are companies, sole Proprietorship and Partnerships.


Limited Liability Company:

The most common business vehicle is a Limited Liability Company. A limited liability company offers protections of personal assets from business risks and liabilities and has separate legal status. Companies can be Limited Liability Company as well as Unlimited Liability Company. The preferred choice in Hong Kong is Private Limited Company where liability is only limited to the assets in the company and their personal assets is protected from business risks and liabilities.


Private Limited Company:

Most small to medium sized companies in Hong Kong are set up as “private companies limited by shares” and are commonly referred as private limited companies. There are many tax benefits and incentives available to private limited companies in Hong Kong.


Public Limited Company:

A public company limited by share is logically incorporated company in which shareholders are more than 50. Usually, a medium or large company who has achieved significant growth in the industry decides to take the company public, by expanding the shareholders base. Most public companies are listed on stock exchange. The main advantage of a public company is easy access to capital, strong public perception and ease of implementing merger and acquisitions. The disadvantages include public disclosure requirement, time consuming, complex and expensive to establish.


Public Company limited by Guarantee:

 A company limited by guarantee has no share capital. It has members and not shareholders, who undertake/guarantee to undertake to contribute to predetermined share of liability which becomes due in the event of wind up. The advantage is the members enjoy limited liability and remains democratic control over business. The disadvantage is that the profit cannot be distributed and there is lack of working capital. This form of business is meant for Non-Profit Business Organisations.


Sole Proprietorship:

Suitable for small scale and low risks businesses with sole owner, sole proprietorship are easy to set up. However, this is not recommended business structure for entrepreneurs as it does not constitute a separate legal entity and does not protect owner’s personals assets from business liabilities and risks.


Partnership:

The Business structure allows two or more persons to share ownership of a single business. Partnerships enable a sharing of responsibility and increase the ability to raise the funds. However, the partners are jointly and individually liable for the actions of the others partners. The most common form of partnership is a Limited Partnership, as it offers limited liability to limited partners. Partnership is governed by the Partnership Ordinance and are of two types: General partnership and Limited Partnership


General partnership:

Similar to sole proprietorship, general partnership makes every partner in the firm personally liable for debts and liabilities of the business. Additionally, each partner becomes liable for the actions of another partner (as long as the action is done in course of the partnership business.)


Limited Partnership:

Limited partnerships constitute both general and limited partners. A general partner has unlimited liability for the firm’s debt and is responsible for day to day running of the business, while limited partners liability limits liability to the amount of unpaid share capital of the firm. Limited partners cannot participate in the management of the partnership.


Foreign Company Office:

Foreign Company interested in setting up an office in Hong Kong can register a branch office, subsidiary or a representative office.


Time Period

Usually, Incorporating a Company takes about 4-7 days to in Hong Kong.