It’s easy to get wrapped up in the excitement of coming up with a unique business concept and to throw yourself headlong into the development of your great new idea. But whatever industry or sector you’re attempting to disrupt, at some point you’re going to be faced with a question:
‘Do I need to register a company to take this idea further and actually start trading?’
To help you answer this question, we’ve outlined some of the key considerations and explained the options and timelines for setting up a company in Hong Kong.
Company or sole proprietor as your legal structure
The first, and possibly most important, question to ask yourself is ‘Do I need a company at all?’
In order to trade in Hong Kong, you have three key legal business structures to choose from:
- Sole proprietor – With a sole proprietor set-up, you’re the sole owner of the business. This option is relatively quick and simple to set up and works best if you’re running a small-scale, low-risk business. If you’re a true entrepreneur, working in a disruptive or high-risk market, being a sole proprietor isn’t advisable as your business isn’t a separate legal entity. Unlike a limited liability company, using the sole proprietor structure doesn’t protect your personal finances and assets from business liabilities. So your business’s debt, for example, becomes your debt.
- Limited liability company – For most start-ups and entrepreneurial businesses setting up in Hong Kong, a limited liability company is the preferred option. As the name suggests, a limited company serves to limit your own personal liability for your business risks and liabilities. Your company is a separate legal entity, creating a clear division between your personal wealth and assets and those that belong to your business. A limited liability company offers protection of personal assets from business risks and liabilities and is a separate legal entity.
- Partnership – With a partnership, you and your business partner (or partners) share ownership of the business. This helps to share the inherent responsibilities but does make you jointly liable for the actions of fellow partners in the partnership. It’s a common business structure in the professional services sector, but less common in start-up and tech circles.
There’s a very helpful blog from our partner, Dragon Law, on the Stepping Stone Facebook page that gives you even more detail on deciding between these three fundamental business structures.
Timescales for registering your business
The second question to ask is ‘When do I have to do something about registering the business?’
Once you start trading as a business in Hong Kong, you have one month to apply for business registration with the Business Registration Office (BRO), part of the Inland Revenue Department (IRD).
Your responsibilities as the business owner are to:
- Register your business structure with the BRO within one month of trading.
- Display your Business Registration Certificate at your place of business.
- Inform the IRD within one month if there are any changes to the registered details of your business or company.
- Renew your certificate and registration either every year, or every three years, depending on the requirements for your particular business.
There are other considerations to think about beyond the initial registration process –registering for things like corporation tax and employment taxes etc. – but these are the first steps to take to officially create your new enterprise.
Help with registering your business
If you’re unsure which business structure is best suited to your new business, it’s advisable to talk with a professional adviser to get the lowdown on the pros and cons, and to get the help you need with the subsequent registration process.
At Stepping Stone, we’ve helped many successful start-ups to take their first steps as a new business. So we’ll deliver the insight, advice and administrative support you need to get your business started and registered with all the relevant bodies.
Get in touch for a chat about setting up your start-up and creating your ideal business structure.