What Is a Sole Proprietorship in Hong Kong?
- Kristina Coluccia
- Jan 22
- 3 min read
When starting a small business in Hong Kong, one of the simplest and fastest options is to register as a sole proprietorship. This business structure is ideal for individuals who want to run a low-risk venture independently with minimal startup costs and administrative requirements.
In this article, we explain what a sole proprietorship is in Hong Kong, its key features, advantages, disadvantages, and how to register one.
What Is a Sole Proprietorship?
A sole proprietorship is an unincorporated business owned and operated by one individual. It is not a separate legal entity, which means the owner is personally responsible for all profits, losses, and liabilities of the business.
This structure is particularly popular among freelancers, consultants, and small business owners who want to keep things simple and cost-effective.
Key Features of a Sole Proprietorship in Hong Kong
Single owner: Owned and managed by one individual
Unlimited liability: The owner is personally liable for all debts and obligations
Simple tax treatment: Business income is taxed as personal income
Minimal regulatory compliance: Fewer filing and reporting obligations than a limited company
Low startup costs: No need to appoint directors, secretaries, or issue shares
Advantages of a Sole Proprietorship
Easy and Quick to Set Up Registration is straightforward and can be completed within a few days with the Inland Revenue Department (IRD).
Low Cost of Maintenance No need for annual audits, company secretary, or corporate filings.
Full Control The owner makes all business decisions without needing to consult shareholders or directors.
Simple Tax Filing Income is reported through the owner’s personal tax return, making compliance relatively simple.
Disadvantages of a Sole Proprietorship
Unlimited Personal Liability The owner is legally responsible for all debts, lawsuits, and liabilities, putting personal assets at risk.
Limited Access to Funding Banks and investors may prefer incorporated entities, making it harder to raise capital.
Lower Credibility Compared to a limited company, a sole proprietorship may appear less professional to clients and partners.
No Perpetual Succession The business ends when the owner dies or decides to cease operations.
How to Register a Sole Proprietorship in Hong Kong
Choose a Business Name It can be your personal name or a trade name. The name must not be misleading or already in use.
Apply for a Business Registration Certificate Submit Form IRBR37 to the Inland Revenue Department within one month of commencing business.
Pay the Required Fee The current fee for a 1-year certificate is HK$250, plus a levy. (Always check the IRD website for updates.)
Display the Certificate Your Business Registration Certificate must be displayed at your business location at all times.
Should You Choose a Sole Proprietorship?
A sole proprietorship is best suited for:
Freelancers and independent consultants
Small retail or service-based businesses
Entrepreneurs testing a business idea before scaling
However, if you're planning to grow, raise investment, or limit liability, setting up a private limited company may be a better long-term choice.
How Woodburn Can Help
Woodburn Accountants & Advisors provides expert guidance for entrepreneurs choosing the best structure to start their business in Hong Kong. We help you:
Evaluate the right business structure
Register your sole proprietorship or limited company
Understand tax and compliance obligations
Grow and scale your business with strategic support
Whether you're just starting out or planning to expand, we ensure your business is built on a solid foundation.
Get in touch with Woodburn today to explore your options and register your business in Hong Kong the smart way.
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.
