A partnership is a form of business where two or more people come together intending to conduct a business. Partners will share the business responsibilities, the profits and losses that comes with the business operations.

Types of Partnerships

There are types of Partnership businesses that the partners who have decided to do business can start and operate. The partnerships include:

  • General Partnership
  • Limited Partnerships
  • Joint Venture

 

What are the advantages of choosing partnerships over other forms of business?

Some of the merits that accompany the partnership business structure include:

  • It is easy to set and maintain over a short time. The process requires a business owner to only register with the Inland Revenue Department’s Business Registration Office. This is as stated in the Business Registration Ordinance (Cap. 310): that any person carrying on sole proprietorship or partnership business shall apply for business registration within one month of the commencement of such business.
  • The ability to offer key employees the potential to one day become a partner, will motivate them to work hard. This results in making the business profitable and the employees more encouraged.

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What are the disadvantages of a partnership business?

The partnership business also has its own drawbacks, and as an investor, there are certain disadvantages of starting and operating a partnership business.

  • Unlike corporations that shield the business owners from being liable, partnerships have individual liability. All the partners will then become liable for their actions on behalf of the companies as well as become liable for other partners.
  • You lose out on various corporate tax incentives available in business-friendly Hong Kong. Including zero tax on business activities conducted overseas. If your business may include dealings in foreign markets, a partnership will require you to incorporate in those markets and pay the relevant taxes there.

One alternative to a partnership is to instead incorporate a private limited company. This will provide a separate entity from the owner of the business. This means that the owner is not personally liable for the finances of the business, and that banks and financial institutions will be more likely to loan money to the private limited company. Read more on how to register your company in Hong Kong.

Private Limited companies are able to fully utilize corporate tax incentives in Hong Kong. This includes not having to pay tax on business activities conducted overseas.

At Paul Hype Page, we are well versed in corporate tax planning and can help ensure you make full use of the various incentives for businesses, to ensure you do not overpay for your taxes. This includes knowledge on existing Double Tax Avoidance agreements in the region and around the world, for wherever you decide to expand your business.

 

Conclusion

In summary, anyone who intends to start and run a partnership business in Hong Kong must first register with the Business Registration Office of the Inland Revenue Department (IRD) within the first month of starting the business.