Hong Kong Company Setup

Hong Kong company set up is completed through the Companies Registry, a government body that also administers companies, handles corporate compliance and disclosure requirements, and regulates statutory audits by public accountants.

Of the many legal entities permissible in Hong Kong, the limited liability company (LLC) is the preferred investment vehicle. More than 139,000 LLC's are incorporated in Hong Kong in 2010 alone. The government fee for setting up an LLC is US$550.

The following information must then be made available to the public: shareholders and directors information, date of incorporation, share capital, and registered address.

An example of how a corporate name in Hong Kong appears is “Acme Ltd”. Through this entity, an entrepreneur is able to i) open a corporate bank account ii) obtain local residence and employment visas  (e.g. Hong Kong Business Investment Visa) and iii) lease office or factory premises.

In accordance with Hong Kong Companies Ordinance, each company must:

i) appoint at least one director. Thereafter, an unlimited number of local and international directors may be appointed. Corporate directors are allowed. Note that there is a public register of directors and shareholders;

ii) appoint at least one shareholder. Both local and international, corporate and individual shareholders are allowed;

iii) appoint a local, resident company secretary and registered office. Individual or corporate company secretaries are permitted;

iv) obtain a Business Registration Certificate within one month of Hong Kong company set up by paying a business registration fee of HK$2,600 (US$335), payable annually;

v) submit an annual tax return and audited financial statements to the Inland Revenue Department (IRD);  

vi) have a minimum issued share capital of HK$1.

Also established via the Companies Registry, a Hong Kong Branch Office retains the legal identity of its foreign parent. The Hong Kong branch must adopt the same name as its parent, and is required to file audited financial statements (relating to its Hong Kong operations) annually with the IRD. The Branch Office must have a registered office in Hong Kong.

A Hong Kong Branch Office is taxed as an LLC in Hong Kong. The government fee to register a branch of a foreign company is HK$1,720.

Although this type of Hong Kong company set up is not popular among foreign investors, a foreign branch office is preferable to a Hong Kong-incorporated company because it may be easier to convince the IRD that its income is sources from abroad, thus exempt from local tax.    

A Representative Office is the most suitable entity to use if a foreign company wishes to conduct market research and initiate advertising campaigns in local media in Hong Kong prior to making a major capital investment in the city. The government fee for this type of Hong Kong company set up is HK$2,600 (US$334), i.e., the cost of obtaining a Business Registration Certificate from the Companies Registry.

A Hong Kong Limited Liability Partnership (LLP) requires at least two partners, who can be individuals or companies of any nationality. Because partner liability is limited, this type of Hong Kong company set up is attractive to some investors.

Due to the restrictions on activities placed on a Hong Kong Representative Office, this entity is the least preferred option by foreign investors. A Hong Kong Representative Office is useful for entrepreneurs wishing to conduct preliminary market surveys and feasibility studies before making a long-term investment commitment to Hong Kong. Because it conducts no business in Hong Kong and is not permitted to issue invoices, a representative office generates no profits and is therefore not subject to Hong Kong tax.

An LLP is also attractive because there are no obligations to submit audited financial statements or annual tax returns. An LLP is also required to appoint a local manager, whose primary obligation is to make an annual solvency/insolvency declaration to the Companies Registry. 

In accordance with Hong Kong tax regulations, each partner is taxed on his or its share of income from the LLP. Income tax is payable in the country where the partners are residents. Where a partner is a body corporate, its share of income from the LLP is taxed on the corporation tax rate, which is currently 17.5%.

As with an LLC, an LLP is obliged to obtain a Business Registration Certificate, the cost of which is HK$2,600 (US$334).

This is the most straightforward, flexible and cost-effective entity available in Hong Kong. A Sole Proprietorship has a single owner, who can be either an individual or a company of any nationality. Although the entity is registered with the Companies Registry, it has no legal status, and therefore cannot sue or be sued, or hold any property. The sole proprietor is not required to be Hong Kong resident, although if he/she is non-resident then the entity requires a local manager. The sole proprietor is liable to personal income tax, but not corporation tax.