Hong Kong Limited Company Formation – What You Should Know
Hong Kong Limited Company is a legal entity for conducting business under the law. Using your personal Hong Kong limited company, you can avoid unlimited personal liability incurred by undertaking business activities and enjoy low and simple tax. There are many benefits of company formation in Hong Kong for its residents wishing to establish a business venture.
First, Hong Kong limited company formation enjoys many benefits for setting up an office. You can save on office rent fees by having your office premises located at a meagre cost. The office space can then be shared with other local companies to accommodate clients visiting from different regions. You can also avail of business space at a lower price, provided you keep the points mentioned above in mind. A Hong Kong business owner can also choose to rent an office building at a lower price if he wishes to expand his business to attract more clientele.
Another benefit of Hong Kong’s limited company formation is that it makes managing your finances easy. It is because you only must deal with one creditor, your office landlord. You do not have to deal with several banks and concentrate on running your business smoothly rather than dealing with various creditors. Moreover, the company formation process is very straightforward and quick, requiring you to submit your application, duly filled by the statutory authorities, to the office concerned. The statutory authorities then verify the legality of the proposed company, and within twenty-four hours, determine whether the company complies with the stipulated requirements or not.
Another benefit of the company formation process is that you do not need to provide any collateral or security for the loan amount. All the financial backing you need for the start-up of the business comes from your savings and not from some external source. It is recommended that you use your home as the company’s collateral if you cannot do so because of specific reasons like your bad credit history. However, suppose you find it necessary to have some form of collateral for the loan amount. In that case, you may opt for a home equity loan from your bank, in which the bank issues you a business registration certificate, along with a copy of the loan agreement.
The third benefit of a Hong Kong limited company is that the little company has very few formalities to go through. No income or corporate tax needs to be paid, neither are any capital gains tax or capital expenditure tax required to be paid when setting up the company. The only formalities that may require your presence at the office are filing the annual return, giving the undertaking to attend meetings, updating the company’s register, paying the yearly membership fee, and stamping your annual report. You may also be required to appear before the Securities and Exchange Commission (SEC) for clearing your name in the company’s register.
The fourth benefit is that most of the requirements needed for forming a Hong Kong S corporation are that most of the body members must pass the statutory corporate resolution, which includes one member from each house of the legislature. These will be the essential criteria for the approval of the statutory corporate resolution. If all the conditions for approval are fulfilled, your company can now file its first annual report. A small company can file an electronic yearly report if it has installed an e- Accounting system, an updated electronic office software, and an authorized financial agent to handle the company’s affairs.
Fifthly, if your company does not comply with some regulations, it will be fined under the Corporations Act. There are different laws applicable to limited companies in Hong Kong. For instance, there is the income tax which will be imposed on your company’s profits. The amount of income tax will depend on the individual income of each member of the company, and this is calculated using the schedule of taxable income.
Limited company formation in Hong Kong can take up to three months. It will still be necessary to submit the documents required for the office for review and certification on completion. After this, you should be able to start operating as a legal entity recognized by the government. Furthermore, if you need to change the name of your limited company at any time, you will still be required to apply for a new name in the prescribed forms. If you wish to change your company’s business model at any point, it is advisable to apply for new registration.