Open Hong Kong Unlimited
Limited company vs Unlimited company: A table to see the core difference
In Hong Kong, private companies limited by shares and unlimited companies (i.e. sole proprietorships or partnerships) are the two most common types of business entities. There are fundamental differences in their laws, obligations and operations.
| Comparison Scope | Unlimited Company (Sole Proprietorship/Partnership) | private limited company |
|---|---|---|
| legal status | Not an independent legislatorThe proprietor and the company are treated as one. | It's an independent legislator.The company is legally separate from its shareholders. |
| Liability | Unlimited Responsibility: The proprietor or partner is required toAll personal propertyAssumption of corporate liabilities. | Limited LiabilityLosses to shareholders are limited to the share capital invested by them and their personal property is protected. |
| Establishment costs | LowerThe main reason for this is that Primary CoefficientBusiness Registration CertificateFees. | HigherIn addition to the business registration fee, the Companies Registry will also be required to pay the business registration fee. In addition to the Business Registration Fee, there is a requirement to pay the Companies Registry'sRegistration Fee(HK$1,545 in electronic form). |
| Annual maintenance | Simpler: Only need to renew business registration certificate, do accounts and file tax return. | More complicated: must be appointedCompany SecretarySubmissionAnnual ReturnsThe booklet was prepared by the author of the booklet, and the booklet was published on the website.AuditFinancial statements. |
| Taxation | Profit shall be calculated on the basis ofPersonal AssessmentThe tax rates are 7.51 TP3T and 151 TP3T, which can be assessed together with other income of the individual with planning flexibility. | Profits to be paidprofits taxThe tax rates are 8.25% and 16.5%. Audited financial statements must be submitted. |
| Business Continuity | The proprietor is deceased or bankrupt and the business is usually terminated. | A company as a legal person mayContinuityThe Company is not affected by changes in shareholders. |
| Fund-raising capacity | It is more difficult to do so, as it is mainly dependent on the proprietor's personal funds or borrowing. | Easier to attract investors by selling shares |
Unlimited Company Registration Fee
A Hong Kong company formed by a sole proprietorship, partnership or other unincorporated organization is an unlimited company.In order to start a business, you need to apply for business registration at the Business Registration Office within one month of the commencement of business. The application process is not complicated, so if you want to have peace of mind, just leave it to us and all the brainstorming of the incorporation process will be solved.
- 7 working days
- Provide a valid copy of your Hong Kong Identity Card or passport.
- Proof of address copy
- Completed Application Form
Benefits of starting an unlimited company
- Simple and inexpensive:be tenableUnlimitedThe procedure is very simple, you only need to apply for business registration with the Business Registration Office of the Inland Revenue Department, and you can receive the certificate on the same day at the earliest, with lower upfront government fees.
- Maintenance requirements are relaxed:There is no need to appoint a company secretary and no need to conduct statutory audits, which reduces the annual administrative burden and related costs.
- Flexible tax arrangements:Profit from operations will be treated as part of the proprietor's personal income and can be elected toPersonal AssessmentIn addition, the tax deduction effect is achieved by offsetting business losses against a person's other income.
- Decisions are efficient and direct:The owner has absolute control and a simple management structure that enables him to respond quickly to market changes.
Disadvantages and risks of opening an unlimited company
- Unlimited liability (maximum risk):This is the major drawback. Once the company becomes insolvent, the owner or partners will have to pay for the debts.Personal AssetsThe risk is extremely high, as all of them, including properties, savings, vehicles, etc., have to be used to settle debts.
- Business development is limited:The inability to raise capital by way of equity sales and the "unlimited liability" discouraged investors.Narrow financing channelsThe company is not conducive to the expansion of the business.
- Lack of professional image:Compared to limited companies, unlimited companies give the impression of being smaller in size, which may put them at a disadvantage when collaborating or bidding for contracts with large corporations.
- Inheritance and transfer difficulties:The business is highly tied to the proprietor personally and is difficult to resell or pass on.
Start your entrepreneurial journey the way you like it!
Whether you want to do the whole process online and enjoy the convenience of not leaving your home; or you are willing to visit the M&N office and have an in-depth exchange with our consultants, we are here, and M&N's professional team is the most flexible way to accomplish your fastest start-up.
Who is suitable to open an unlimited company?
- Self-employed persons (e.g. consultants, freelancers, hawkers) operating in low-risk sectors.
- Initial budget is very tight and the business model is simple for a startup.
- Entrepreneurs who are testing the market temperature and do not have long-term large-scale development plans.
⚠️ Important Reminder:If you work in an industry that involves potential debt exposure (e.g., engineering, trading, food and beverage) or plan to "grow your business", it is highly recommended that you opt for thecorporationThe firewall is a form of "firewall" for personal property.
Procedures and fees for setting up a Hong Kong unlimited company
Although the process of setting up an unlimited company is relatively simple, a step-by-step approach will ensure a smooth start-up.
Step 1: Determine the company name and nature of business
Step 2: Prepare and submit application documents
You need to fill it out:
- Sole proprietorship:Form IRC2411A
- Partnerships:Form IRC2411B
together with a copy of the proprietor's or partner's identity card, in person or by mail toBusiness Registration Office, Inland Revenue Department。
Step 3: Payment and Collection of Business Registration Certificate
Upon approval of the application, payment ofBusiness Registration Fee(currently HK$2,200 per year) and the relevant levy, you will be entitled toBusiness Registration CertificateThe company is now officially open for business.
Step 4: Important Next Steps
Notify the Inland Revenue Department:If you think you are liable to tax but have not received your tax return, you should take the initiative to inform the Inland Revenue Department in writing.
Bookkeeping and tax preparation:Complete business records (receipts, invoices, etc.) must be kept, and the business records must be kept until they are received.Profits Tax ReturnAfter completing and submitting the form, you should complete and submit the form in a timely manner. Late submission may result in penalties and estimated tax assessments.
Services related to registration of Hong Kong unlimited company
Company Formation Services
Company Secretary
Tax Services
Virtual Office
More Tips on Registering an Unlimited Company in Hong Kong
Comparison of Company Formation] Limited Company or Unlimited Company? Advantages and disadvantages in one article
Open a company】Open unlimited company / limited company process, fees in one article to see clearly
Malaysia Company Formation Process and Frequently Asked Questions: Must Read Tips for Company Registration in Malaysia
Can Hong Kong company's staff meal be tax deductible? The conditions and pitfalls of tax deduction for entertainment expenses in a single article
Frequently Asked Questions
unnecessary. Under the Companies Ordinance, only limited companies are mandated to appoint a company secretary. Unlimited companies do not have this statutory requirement and are more autonomous in their management.
Absolutely.All persons carrying on business in Hong Kong and generating profits All persons (including proprietors of unlimited companies) who carry on business in Hong Kong and generate profits are liable for tax. You are required to file a Profits Tax Return within the period specified in the tax form, even if there is no profit for the year.
canWhen the business matures, the unlimited company can be reorganized into a limited company through statutory procedures. When the business has matured, it is possible to reorganize an unlimited company into a limited company through statutory procedures for better protection of personal assets and to facilitate financing. This process involves transfer of assets and formation of a new company, and it is advisable to seek professional advice from an advisor such as M&N.