Foreign investors can establish businesses in Hong Kong using various structures. Understanding these options is crucial for selecting the most suitable business type based on their specific needs and goals.
Business Structures Available in Hong Kong
Hong Kong Incorporated Companies
Branch Offices of Foreign Corporations
Representative Offices
Sole Proprietorships
Partnerships
Choosing the right structure depends on the specific advantages and disadvantages of each option. Here’s a detailed overview of each type.
Hong Kong Incorporated Companies
Foreign investors often establish their presence in Hong Kong by forming a Hong Kong-incorporated company. These companies can be either limited or unlimited, and public or private. The main types include:
Private Companies Limited by Shares (Private Limited Companies)
Public Companies Limited by Shares (Public Limited Companies)
Companies Limited by Guarantee without Share Capital
Private Unlimited Companies with Share Capital
Public Unlimited Companies with Share Capital
Private Limited Companies
Private limited companies are the most common type of company in Hong Kong, accounting for 99% of all companies. They are suitable for profit-making businesses.
Key Features:
Limited liability for shareholders
Share transfer restrictions
Maximum of 50 members
No public share offerings
Advantages:
Separate legal entity
Limited liability
Positive image among banks and investors
Easy ownership transfer
Setup Requirements:
No minimum share capital
Setup within one week
Requires a company secretary, a director, and up to 50 shareholders
Public Limited Companies
Public limited companies can offer shares and debentures to the public and often get listed on the Stock Exchange of Hong Kong.
Key Features:
Stricter regulatory requirements
Suitable for medium to large companies aiming for significant growth
Setup Requirements:
No minimum share capital
Setup within 1-4 days depending on the method
Requires a board of directors, a designated representative, a company secretary, and at least one shareholder
Companies Limited by Guarantee (Without Share Capital)
These companies are ideal for non-profit activities.
Key Features:
No share capital
Member liability based on contributed assets
Suitable for non-profit organizations
Setup Requirements:
Incorporation fee based on the number of members
Setup within 4-6 weeks
Requires one member, two directors, and a company secretary
Annual audits and public financial statements
Unlimited Companies
Unlimited companies have no limit on the liability of their members, who must continuously invest to prevent financial collapse.
Key Features:
Members' liability is unlimited
Distinct legal entity
Branch Offices
Branch offices are extensions of their foreign parent companies and share the same legal identity.
Key Features:
Full liability of the parent company
Same legal and tax requirements as local companies
Setup Requirements:
Registration with the Companies Registry
Setup within 12-14 days
Representative Offices
Representative offices cannot engage in profit-making activities and are mainly used for promotion, communication, and market research.
Key Features:
No distinct legal identity
Exempt from profit tax returns
Setup Requirements:
Business Registration Certificate from the Inland Revenue Department
Setup within 2-3 days
Sole Proprietorships
A sole proprietorship is a simple business structure owned and managed by one person.
Key Features:
Full liability of the owner
Simplified tax advantages
Setup Requirements:
Business Registration Certificate
Setup within 1-2 days
Partnerships
Partnerships involve two or more individuals sharing profits and liabilities.
Types:
General Partnerships: Full liability for partners
Limited Partnerships: Liability limited to the capital contributed by limited partners
Setup Requirements:
Business Registration Certificate
General Partnership: Setup within 1-2 days
Limited Partnership: Setup within 5 days
Restrictions on Foreign Investment
Hong Kong generally welcomes foreign investments but imposes restrictions in specific sectors like broadcasting and telecommunications to protect public interest.
Broadcasting:
Foreign ownership requires Broadcasting Authority consent at specific shareholding thresholds
Radio:
Foreign ownership capped at 49%
Licenses only available to Hong Kong-based firms
By understanding these structures and requirements, foreign investors can make informed decisions about establishing a business presence in Hong Kong. This guide aims to provide clear and concise information to help you navigate the options available for starting a business in Hong Kong.
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.
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