The most preferred type of business organisation across the globe is a sole proprietorship. It works best for small or medium-level businesses because it allows entrepreneurs full control, especially on major decisions for faster growth. So, how do you register a sole proprietorship in Hong Kong?
This post is a comprehensive guide to sole proprietorships formation in Hong Kong to bring out two things: their structures and key requirements for their formation.
Sole Proprietorship in Hong Kong: What are the Main Features?
In Hong Kong, most start-ups, freelancers, and SMEs prefer using sole proprietorship because the cost of running them is low. Indeed, it is lower than other top business vehicles, from partnerships to limited liability companies. Check out the main features that define a sole proprietorship and its operations in Hong Kong below.
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A Sole Proprietorship is Not a Separate Legal Entity
In Hong Kong, a limited liability company is a separate legal entity from the owner. However, the opposite is true with a sole proprietorship in Hong Kong. After registering the business, you will be considered part of the business. This means that you are considered an extension of the business and, therefore, responsible for its expenses, debts, and other liabilities.
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You Get 100% Ownership
As the sole business owner, it implies that you get full control over every decision. Therefore, you get total freedom to manage the enterprise without seeking the input of shareholders or partners. However, you should always ensure that the strategies, decisions, and efforts used in the business are in compliance with relevant laws and policies of the island.
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You are the Primary Source of Finances for the Business
When it comes to funding, you are solely responsible for financing the business operations. During registration, you can fund the business from savings, proceeds from other enterprises, or loans from banks. These sources also apply when it comes to raising funds for business expansion or filling up short-term financial shortfalls.
When you approach financial institutions, such as banks, for funding, they will extend the assessment to personal finances. The banks hold the view that business operations might not be ample to determine their ability to repay loans. Therefore, it will be a good idea to get your personal finances, including credit rating, right before applying for a loan to fund a sole proprietorship in Hong Kong.
What Do You Need to Register a Sole Proprietorship in Hong Kong?
When compared to limited liability companies, a sole proprietorship in Hong is pretty easy to register. However, it can get very challenging if you do not know all the requirements. So, here are the main requirements and documents that should be filed with the Inland Revenue Department (IRD) of Hong Kong.
- The proposed activities that the business will be involved in.
- Your business plan for the sole proprietorship.
- Address and name of the owner.
- A copy of the sole proprietor’s identity card or passport.
- A copy of the business registration form with all the fields accurately filled.
- Your financial statements for the last 6-12 months.
Other requirements for registering a sole proprietorship in Hong Kong include a local bank account and physical local presence (office e). If IRD requires additional information, be prepared to provide it for the registration process to be completed fast.
Use a Firm of Experts to Register a Sole Proprietorship in Hong Kong
We must say that although Hong Kong has made the process of business registration relatively easy, many are those who find it challenging. Often, preparing business plans and other documents is never easy, especially for people outside the legal or business-related fields. The best alternative is working with an agency of professionals. Here are the main benefits of using an agency of professionals to register a sole proprietorship in Hong Kong:
- The experts help you to prepare top-notch documents for business registration.
- The agency will assist your enterprise in meeting all the compliance requirements.
- You are helped to craft good strategies for faster growth and success.
This post has demonstrated that a sole proprietorship is a good business structure that you can use to grow your presence in Hong Kong and beyond. To simplify the process of incorporating and rapidly growing your sole proprietorship in Hong Kong, the best method is to work with an agency of experts. Contact MBiA, one of the top-rated firms for business registration. The experts will hold your hand and carefully guide you to guarantee success.
