Basic Understanding
If your company’s international operations are significant enough to justify structuring a company or an office in Hong Kong and you are already aware of the advantages it brings, it is time to decide what type of company to register and understand the requirements to maintain it.
Hong Kong is considered one of the most liberal and business-friendly cities/regions in the world, but this does not mean there are no procedures to follow for maintaining a company. It is actually the opposite, the government requires Hong Kong companies to maintain a reasonable standard of corporate governance and accurate record-keeping. It is essential to keep this in mind before proceeding.
Below, we provide general information about the characteristics of each type of structure in Hong Kong. However, we always recommend a professional analysis of your specific case. Brasia offers consulting support and studies to help you decide on the best type of structure, considering your business and operations, local requirements, and the legal and tax impacts of the chosen structure.
Types of Companies in Hong Kong
• Private Limited Liability Company The private limited liability company is undoubtedly the most popular way to structure a business in Hong Kong. This type of company is a legal entity formed by up to 50 shareholders whose liability is limited to their equity. There is a clear separation between the shareholders' assets and the company’s assets. This type of company offers a broad scope of operations.
Shareholders can be either individuals or legal entities. If a shareholder is a legal entity, the Hong Kong company will effectively act as a subsidiary of the foreign company.
• Public Limited Liability Company The difference between a public limited liability company and a private limited liability company is that the public limited liability company can have more than 50 shareholders and typically offers its shares to the general public through the stock exchange. • Sole Proprietorship A sole proprietorship is a business owned and operated by a single individual. Since it is not considered a legal entity, there is no separation between the individual and the business. Think of it as a freelancer or a small service provider.
• Partnership A partnership can be categorized as a general partnership or a limited partnership. Like a sole proprietorship, a general partnership has no separation between the partners' personal assets and the partnership’s obligations. Partners assume unlimited liability for the partnership.
In a limited partnership, there are two types of partners:
A general partner, who is fully liable and responsible for the company’s operations.
A limited partner, who has limited liability but cannot participate in managing the company.
Offices or Companies for Foreign Entities
When a foreign group plans to establish an office or company in Hong Kong, it should consider the intended scope of operations before deciding on the structure. The following options are available:
• Branch A branch is a legal entity incorporated in Hong Kong. However, it is not considered a separate entity from its parent company, which assumes its liabilities and risks.
• Subsidiary A subsidiary is a legal entity established in Hong Kong. This type of company has separate liability from its parent company. Essentially, it is a limited liability company with the parent company as its shareholder.
This is the most common way for international groups to structure businesses in Hong Kong due to its broad scope of operations and higher level of protection for the foreign company.
• Representative office A representative office is not considered a legal entity but an extension of the foreign company. Its scope is limited to providing support to the foreign business and does not allow for commercial activities. Since it is not a separate legal entity, the foreign company is directly responsible for the representative office’s actions.
Brasia's Support We assist our clients by analysing and recommending the most suitable business model based on their operational structure.
Once you decide to establish your company, it is essential to define the necessary requirements for structuring it. Click here to read an article we wrote about the requirements for opening and maintaining a limited company in Hong Kong.
For more information, contact us at info@brasia.hk.
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