top of page

Subsidiary vs. Branch Office vs. Representative Office in Hong Kong: A Comprehensive Comparison

When it comes to establishing a business presence in Hong Kong, foreign investors have several entity types to consider, each with its own set of advantages and considerations. From subsidiaries to branch offices and representative offices, each entity type offers distinct benefits tailored to different business needs. To assist you in making an informed decision, let's explore a comparative overview of these entity types.

Entity Type

Pros

Cons

LLC (Private Limited Company)

- Separate legal entity - Easy fund-raising - Better public image - Seamless ownership transfer

- Setup complexity - Numerous compliance requirements - Public disclosure obligations - Complex liquidation process

Public Limited Company

- Easy fund-raising - Positive public image - Smooth mergers and acquisitions

- Costly and intricate setup - Vulnerability to takeovers - Profits sharing and statutory compliance

Public Company Limited by Guarantee

- Limited liability - Maintain control over operations

- Non-distributable profits - Limited capital options

Sole Proprietorship

- Simple setup process - Clear decision-making - Exclusive profits

- Subject to legal scrutiny - Full personal responsibility - Limited funds and business lifespan

General Partnership

- Easy fund-raising - Simple setup and maintenance - Combined expertise

- Unlimited liability - Divided goals and ideas - Profits sharing and accountability for co-partners' actions

Limited Partnership

- Limited personal liability for limited partners - Easy fund-raising - Improved efficiency

- Full personal liability of general partners - Limited roles for limited partners - Expensive setup costs


Investment Structures Comparison

Among the most common investment structures in Hong Kong are subsidiaries, branch offices, and representative offices. Evaluating each based on various practical aspects such as legal responsibilities, compliance requirements, and permissible activities is crucial for foreign investors.

Aspect

Subsidiary

Branch Office

Representative Office

Separate Legal Entity

Yes

No

No

Liability

Limited Liability

Extends to the parent company

Extends to the parent company

Entity Name

Can be different from the parent company

Must be the same as the parent company

Must be the same as the parent company

Allowed Activities

Can be different from the parent company

Must be the same as the parent company

Market research or coordination activities, no profit-generating activities

Ownership

Can be 100% foreign or locally owned

An extension of the parent company only

A temporary administrative arrangement

Maximum Number of Members

Yes, maximum 50

Not applicable

Not applicable

Key Officer Appointment

A local Hong Kong resident or corporate body required as a company secretary

A local Hong Kong resident or corporate body required as an authorized representative

A local Hong Kong resident required as a chief officer

Timeframe for Registration

4-7 working days

14 working days

1-2 working days

Audit Requirements

Mandatory

Depends on the parent company's audit requirements

Depends on the parent company's audit requirements

Profits Tax Obligation

Applicable for Hong Kong-sourced profits

Applicable for Hong Kong-sourced profits

Not applicable

Filing of Annual Return

Yes

Yes

No

Annual Filing

Must file an audited report of the Hong Kong subsidiary with the IRD

Must file branch office’s and the parent company’s accounts or audited reports with the IRD

Not applicable

Conclusion

Choosing the right entity type and investment structure is crucial for success in Hong Kong's competitive business landscape. Whether you opt for a subsidiary, branch office, or representative office, understanding the distinct advantages and considerations of each will help you make an informed decision aligned with your business objectives.

Can Woodburn help you?

 

Woodburn Accountants & Advisors is one of China’s most trusted business setup advisory firms.


Woodburn Accountants & Advisors is specialized in inbound investment to China and Hong Kong. We focus on eliminating the complexities of corporate services and compliance administration. We help clients with services ranging from trademark registration and company incorporation to the full outsourcing solution for accounting, tax, and human resource services. Our advisory services can be tailor-made based on the companies’ objectives, goals and needs which vary depending on the stage they are at on their journey.

 

Talk to an expert


Schedule a 30-mins complimentary, no-obligation call to see how Woodburn can help you. Book a call with our Head of Business Advisory - Kristina Koehler-Coluccia.

Topics we can advise on include:

  • Company Registration

  • Cloud Accounting & Financial Reporting

  • Cloud Payroll Services

  • Tax & Audit Services

  • Recruitment

  • Employer-of-Record

  • Visa Application

  • Trademark Registration

  • Switch to Woodburn

  • Partner with Woodburn (cross referral) 

Our calls are automatically scheduled via Zoom - or via Teams, WeChat or WhatsApp upon direct request. 

Our advisory calls are available from Monday-Friday from 8am to 5pm CEST and Wednesday until 9pm CEST.

 


Comments


Woodburn Accountants & Advisors is one of China and Hong Kong’s
most trusted business setup advisory firms

bottom of page