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Why start a Private Limited Companies in Hong Kong?

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Why start a Private Limited Companies in Hong Kong?

2021-01-04T07:34:42+00:00December 23, 2020|0 Comments

Reasons to start a private limited company

There are several reasons why most investors prefer investing in Hong Kong. Some of the reasons why people start a business in Hong Kong include:

Hong Kong is a top economy with maximum economic freedom

One of the reasons why most people prefer starting a business in Hong Kong is the economic freedom that exists in Hong Kong. Hong Kong is recognized as one of the cities with the most liberal and robust economy globally. There are no trade barriers, and the country does not impose any tariff quotas and there are no import and export fees in the country.

Large market base

Hong Kong’s nearness to Mainland China gives it more opportunity to large market base accessibility. China is the world’s most popular country and the fact that Hong Kong is close to China increases investors’ chances of increasing their market base and thus able to sell more goods.

Simple Taxation System

Hong charges one of the lowest tax rates globally in the world. Besides, the taxation system is simple and straightforward. Both local and foreign companies in Hong Kong are taxed at a flat

rate, which is 16.5%. Further, Hong Kong does not charge capital gains and neither does it charge withholding tax on dividends and interests. The other reason most people would prefer starting a business in Hong Kong is the zero-corporate tax on business activities outside Hong Kong.

World-class infrastructure

Investors will be more concerned with the infrastructure when considering starting a new business. The world-class infrastructures in Hong Kong are what makes the city-state well known globally to investors. Hong Kong has some excellent business infrastructures that include sea transportation, telecom services, and logistics.

These among others are some of the reasons why most people prefer starting a business in Hong Kong.

Thinking of incorporating in Hong Kong? Let’s get started.

E A S I E R • F A S T E R • B E T T E R

The benefits of incorporating a private limited company in Hong Kong

Taxation

One of the main advantages of starting a private limited company in Hong is its favorable taxation rate. The profits tax for a private limited company in Hong Kong is taxed at a 16.5% rate. Besides, the taxation system is territorial which implies that those gains that are derived from the outside of Hong Kong territories are not taxed.

Ease of start-up

Unlike the public limited companies, private limited companies in Hong Kong are easy to set up and has lesser requirements than public limited companies. Besides, the private limited companies are set within one to two working days. However, the pre-registered companies are available for immediate use, and the fact that it does not have a lot of regulations make it more preferred to the investors than the public limited companies.

It has a distinct legal entity

A private limited company is a separate legal entity. That means that it can acquire assets, enter new contracts, it can go into debts, and makes legal agreements using the name of the company. Therefore, a private limited company in Hong Kong is a separate legal entity from the owners and shareholders.

Ability to raise additional capital

Although it might not be as much as it is with the public limited companies, the private limited companies can equally raise additional capital if they need it for whatever reasons. Private limited companies are well recognized by both investors and banks that can easily inject more capital into the business. Besides, they can bring in new shareholders or even issue more shares to the already existing shareholders.

Perpetual succession

Since a private limited company is a separate legal entity, a company will have a going concern if it has a good standing will. Besides, changes can be made to a private limited company without necessarily interfering with its operations. In certain cases, taxation and other expenses may be affected by selling all or part of the company shares.

Private limited companies allow for ownership transfer

Transferring the ownership of a private limited company from one person to the next is simpler. The ownership of a private limited company can either be partially or fully transferred from one person to another either by selling part or all the company’s shares. It can also be done by issuing new shares to a new shareholder.

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What do you need to know about the private limited companies in Hong Kong?

The Company Name

You can choose the name of your private limited company in 2 languages:

  • English
  • Traditional Chinese

Therefore, you can choose to register your company either using an English or Chinese name but not a combination of English and Chines characters/ words.

Registered Office Address

  • All companies that are registered in Hong Kong need to have a physical registered address. However, it must not be a PO Box.
  • The company does not have to rent a physical office premise for address purposes
  • Any address in Hong Kong whether a shared office, business centre, or residential address is allowed when incorporating a private limited company in Hong Kong.

Information you will be required to disclose

Shareholders:

For the shareholders, you will be expected to disclose:

  • Names
  • Registered address
  • Number of current shareholdings
  • Class of shares

Directors

For directors, you will have to provide the following information:

  • Name
  • Passport number & the Issuing country
  • Residential address

The Company’s Secretary

The information of a company secretary that is needed are:

  • Name
  • Residential address
  • The passport numbers

Some of the mandatory items that you will be expected to avail of when incorporating a private limited company include:

  • The name of the company
  • The share capital and the initial shareholdings

You will be expected to state that the liability of the members of the company is limited up to a certain amount of the unpaid shares.

Accounting and Audit

The fiscal year is the period that a company’s financial statement is calculated. It covers a 12-month and may fall between 2 calendar year.

Legal Entity

A private limited company in Hong Kong is a separate legal entity from its owner and members.

The liability of the members is limited to the number of shares that they subscribe to the company and not on their assets.

In summary, a Hong Kong private limited company is preferred by most investors who choose to give their all into the business due to its advantages. Besides, it is expected that a private limited company in Hong Kong restricts its rights to transfer shares, its shareholders should not exceed 50 and it is prohibited from inviting the public to purchase its shares. Further, the shareholders of Hong Kong private limited companies can either be nationalities of Hong Kong or foreigners. The director of a Hong Kong limited company should be a natural person and there is no legal maximum for the number of directors.

Why start a Private Limited Companies in Hong Kong? FAQs

Who are the key stakeholders in Hong Kong private limited company?2020-12-23T01:22:17+00:00

The key stakeholders in a private limited company, include:

  • Directors: their role is to take up the management of the company to ensure that the company runs smoothly and conducts all its required mandate.
  • Shareholders: the owners of the company through the shares that they have.
  • Company secretaries: a private company secretary handles handling all the government statutory requirements to ensure that the company runs within the laid down standards, including submission of annual returns.
Who can incorporate a private limited company in Hong Kong? Is it for me?2020-12-23T01:22:01+00:00

A private limited company in Hong Kong can be incorporated and managed by anyone as long as they meet all the required standards and qualifications irrespective of their nationality.

What are the commonly incorporated companies in Hong Kong?2020-12-23T01:21:30+00:00

The commonly incorporated company in Hong Kong is the private limited company. However, one can still incorporate a public limited company, partnerships, etc.

What are some of the requirements to set up a private limited company in Hong Kong?2020-12-23T01:21:35+00:00

The following are some of the requirements of a private limited company in Hong Kong:

  • It needs to have at least one director
  • All private limited companies in Hong Kong need to file all their profit taxes correctly
  • The company’s key stakeholders need to keep an eye on the significant controllers’ register (SCR).

A private limited company in Hong Kong needs to have a company secretary who can either be a Hong Kong individual or a Hong Kong company that is licensed to act in the capacity of a company secretary.

What is a private limited company?2020-12-23T01:17:11+00:00

A private limited company is a legal business entity that is limited by shares and has the right to do business in Hong Kong. It can be called ‘HK Private Company Limited by Shares’ “Ltd” “a Limited Company”

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