Types of Hong Kong Companies (The most popular for business starters)
In Hong Kong, the most popular forms of Business Enterprises for business starter are Sole Proprietorship, Partnership, and Private Limited Company.
| Legal Entity | Non Legal Entity | |||||
| Private Limited Company | Sole Proprietorship | Partnership | ||||
| Characteristics | Private Limited Company is the most popular business unit in Hong Kong. Under this business unit, there are between 1 to 50 owners or shareholders and the company should employ one director (min requirement) and 1 company secretary to manage the company. The shareholders can be same as directors of the company. |
Sole Proprietorship is owned by one person and he/she carries on business on his/her own. It can use the word “company” in its name, but are prohibited from using the word “Limited” or any related abbreviation. |
According the Partnership Ordinance, Partnership is the relation which subsists between persons carrying on a business in common with a view of profits”. | |||
| Partnership can use the word “company” in its name, but are prohibited from using the word “Limited” or any related abbreviation. Company Ordinance 1984 limits the number of partners in a firm to a maximum of 20. It allows certain professional partnership, e.g. solicitors, accountants, brokers, to exceed 20 members. | ||||||
| Advantage | 1 | Limited Liability | 1 | Low cost to set-up | 1 | Low set-up cost |
| Under common law, no person is responsible for anyone else’s debts without agreement to be so bound. It means that people can invest in a business without worrying about losing personal possessions because their liability to the business is limited to the amount they have invested in it. | The set-up cost of a Sole Proprietorship is very low. The businessman is only required to register with the Commissioner of Inland Revenue. The businessman will be issued with a Business Registration Certificate (BR). | The set-up cost of Partnership is very low. The businessman is only required to register with the Commissioner of Inland Revenue. The businessman will be issued with a Business Registration Certificate (BR). | ||||
| 2 | Legal Entity | |||||
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Private Limited Companies have a legal position in their own rights and they are not a group of partners. So, all the assets are owned by the corporation itself. They are not the property of the members. |
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| 3 | Perpetual succession | |||||
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The corporation exists in its own right. Changes in membership have no effect on the status of the company. It means that it has continuity. |
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| 4 | Finance is easier | |||||
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Finance is easier to obtain than in sole proprietorship or partnership |
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| Disadvantages | 1 | Complex to set-up | 1 | Unlimited Liability | 1 | Unlimited Liability |
| Under the Company Ordinance, Limited Companies should have two constitutional documents - they are Memorandum of Association and Articles of Association. | If the business fails, the businessman may lose not only the business, but also all personal possessions. | If the business fails, the businessman may lose not only the business, but also all personal possessions. a) liability of each partner in respect of the firm’s contract and debts is joint. (Partnership Ordinance Section 11) ; b) liability for wrongs acting in the ordinary course of business or authorized by the firm is “joint & several” (Partnership Ordinance Section 14) | ||||
| The above information are for reference only | ||||||
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