Start a Sole Proprietorship or Limited Company in Hong Kong
What is a Sole Proprietorship?
In Hong Kong, a “Sole Proprietor” refers to an individual who conducts their business in a personal capacity. Unlike an employee, a Sole Proprietor usually does not have a boss or a regular salary income. Instead, Sole Proprietors are small business owners, consultants, and freelancers who have their own businesses. A “Sole Proprietorship” refers to the type of business the individual needs to register with the Hong Kong Government Companies Registry.
A simple option, but proceed with caution
It seems straightforward, and in many industries this covers the needs of an individual for billing purposes. However, it’s important to note that there is no separation between the Sole Proprietor and the business, they are one and the same. Any assets or debts of the business are assets and obligations of the Sole Proprietor. So if a debt can’t be paid by the business, the owner is liable for it.
Can I have a Sole Proprietorship with another person?
Where multiple people start a business together in the manner above, it is called a “Partnership”.
The partnership is liable for any decisions taken by any one partner. Because there is no legal separation between business and the partners this can land you in hot water.
For example, if your partner enters into a contract on behalf of the partnership and the partnership is not able to fulfil the contract, the other party can stake a claim on either individual’s personal assets. For that reason, we don’t recommend operating as a Partnership unless this is required or the norm in your industry. If you want to start a business with a partner, it’s usually best to look at limited companies. A common example of a Partnership is a Law Firm.
How is a Limited Liability Company different from a Sole Proprietorship?
A Limited Company (also known as a Limited Liability Company, or LLC) is a “separate legal entity” from its owners (“shareholders”) and managers (“directors”). While a single person can be the sole owner and director of a Limited Company, the company assets and obligations are considered separate from the owner. This protects your personal assets from claims against the business. It also makes it easier to invite investors to join as shareholders in the business.
How can I decide which company structure is right for me?
Ask these key questions to determine if a Sole Proprietorship or Limited Company is right for your business.
But it's important to consider the advantages and disadvantages of each. You can also ask us for assistance when it comes to making this decision.
Hong Kong has lower barriers to entry than many other jurisdictions which makes it a great place to start a business of any structure. We recommend looking at what you need to know for a Limited Company setup and registration.
Starting a Limited Company in Hong Kong?
Appoint a company secretary you can trust
Who should register as a Sole Proprietorship Business?
Registering a Sole Proprietorship Business is right for you if…
You are running a business with a low risk of being sued; such as most freelance marketing consultants, selling handmade goods or providing online courses
You do not intend to hire employees or work with partners
The business is your side hustle; you are just starting to do some marketing research to see if your idea will gain traction
It is required by your industry or professional body that your business operates as a Sole Proprietorship
Register a Limited Company if…
You have a business partner – creating a Limited Company will ensure you will not be personally liable for any decisions taken by your partner for the business
You want to raise capital from third-party investors
You plan to hire employees
You operate in a high-risk industry. To protect your personal assets from claims against the company, make sure to incorporate a Limited Company
