All You Need To Know About Private Limited Company In Hong Kong

No words can wholly describe the benefits of doing business in Hong Kong brings.

Hong Kong is long known for its favorable business environment for startups and SMEs. Among the vast majority of business entities in Hong Kong, private limited companies remain the top choice. Let’s take a look at this type of business entity!

Private Limited Companies in Hong Kong at a glance

As stated in the Hong Kong Companies Ordinance, which came into effect on 3 March 2014, Private Limited Companies (also known as Private Company Limited by Shares) are among 5 different company types that can be formed.

It is no exaggeration to say that this is the most commonly used business entity for SMEs or trading companies in Hong Kong. Thanks to its separate liability, investors can rest assured that their personal assets are completely secured.

In this article, we will be discussing more details on the Hong Kong private limited company’s features.

Advantages of A Private Limited Company

• Ease of setting up

A private limited company can be established rather quickly. Normally, it only takes 24 hours to register one. Not to mention the fact that you can use company formation services from a reliable provider to open an enterprise for you on your behalf.

• Shareholders

This type of business entity can be started with a minimum of 1 member (and a maximum of 50 members), 1 natural director, a Hong Kong local secretary, and 1 registered office.

• Separate legal status

A private company is deemed as a distinctive business entity that is separate from its members. Thus, it can acquire, dispose of assets, enter contracts, sue, and be sued under its name.

• Limited liability

As mentioned above, the liability of each shareholder is limited. To make it clearer, if a private limited company runs into a loss, the personal assets of the shareholders of this company are not at risk. They can sell their company shares to clear the debt or liability.

• Easy ownership transfer

Shares of a private company can be partly or wholly sold.

• Strong public perception

A private company is more credible than other types of business entities in Hong Kong due to its stable business structure and other characteristics. Therefore, the ability to raise capital for a private company is better since banks and other financial institutions take it more seriously.

Tax benefits of a Private Limited Company

A private company is entitled to a favorable tax regime in Hong Kong. The first 2 million HKD of taxable income is taxed at 8.25%, the remaining amount is taxed at 16.5%. Not only that, if you can prove that the earned income of your company is generated from outside of Hong Kong, that income will be completely exempted from corporate income tax.

Disadvantages of Private Limited Company

• Heavy compliance requirements

There are many ongoing requirements that a private company needs to comply with. Just to name a few, the main requirements are holding annual general meetings, filing annual returns with the Companies Registry, filing tax returns with the Inland Revenue Department, and other maintenance requirements.

Information disclosure

Some certain information needs to be made available to the public.

Hassle dissolution

A private company may go through a complex winding-up because of debts to be closed down.

Procedure to incorporation

As one of the perks of a private limited company, the incorporation process is quite hassle-free. If you decide to set up a Private Limited company, then the very next thing to do is to pick an appropriate and unique name for your company.

After picking your company name, the next steps are deciding on your company structure and proceeding to register. The following documents are required to submit to the Companies Registrar (CR) to set up a Private Limited Company in Hong Kong:

• Application form
• A copy of the Articles of Association
• A copy of each passport, residential address proof for foreigners
• A copy of each Hong Kong ID card (for Hong Kong residents)
• Copies of all company documents for corporate shareholders

After preparing all the required documents as listed above, here are two main steps in the process of Hong Kong company formation:

• Applying for approval of the proposed company name with the CR
• Submitting all required documents to the CR

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The final step in this formation sequence is to be aware of all your compliance obligations such as tax filing timelines and renewal fees. Staying on top of your corporate compliance is key to maintaining a stable level of growth for your business.

Some notable annual maintenance and compliance requirements are as follows:

• Renewal of registered office and company secretary

All companies in Hong Kong are required to have a registered office, staffed with a corporate secretary to handle administrative tasks. This means that you will be subject to an annual renewal fee which will usually be included in the invoice sent from your registered agent on the anniversary date of your company.

• Filing of annual return

You will need to file an annual return typically within 42 days after your company’s incorporation date. Note that failure to comply with the said timeline will result in either a court-issued fine or even prosecution depending on the severity of your non-compliant case.

• Book-keeping and annual statutory audit

The ambit of corporate auditing applies to all companies in Singapore. Your company will need to prepare financial statements and enlist a third-party accounting firm in Hong Kong to perform the procedural audit on the provided financial statements. Note that the service cost is dynamic and depends on variables such as the turnover amount, nature of business, and transaction volumes.

You can find further more information on compliance matters via the Companies Ordinance (Cap.622). For a more compact outlook on the compliance status of your Hong Kong private limited company, take time to try out our Guide to Countries’ Annual Compliance.

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BBCIncorp – Your trusted company formation service provider

It is undeniable that the private limited company in Hong Kong is an ideal type of legal entity for SMEs. From the renowned business environment to the minimum requirements, private limited companies are a top-notch option to start investing.

Only after hours, and your private limited company is ready to kick off. See more about the Hong Kong Company Formation of BBCIncorp!

With a fully online incorporation process at BBCIncorp, you can now easily register your own private limited company in Hong Kong. But forming a company is not something to decide in a rush, in case you need further consulting, our experts are always available to assist you. Just drop us your questions at service@bbcincorp.com.