Corporations
   
General information:
(1) Corporations must be registered at Hong Kong Companies Registry to become a legal person, and have to apply for a business registrations certificate from Inland Revenue Department within 1 month of company registration. For Company formation details please refer to "Company registration".

(2) Liability of shareholders are limited for corporations,according to Laws of Hong Kong Cap. 32,A Company must consist of 1 shareholder, 1 director and 1 company secretary. (Sole director cannot be the Company Secretary)

Note:Shareholders and directors can be non-Hong Kong residents. However, Company secretary position has to be either a Hong Kong resident or Hong Kong registered company.


   
Merits and demerits of a corporation:
 

Merits:

  1. Perpetual operations of business.
  2. Limited liability of shareholder, not involved in persona assets or properties.
  3. Business VISA can be considered at higher priority.
  4. Unique company name, less easy to be copied.
  5. Better impression to clients, bankers and suppliers.

De-merits:

  1. Accounting and audit cost per year for at least HK$4,000 per year.
  2. If the business is not risky, it will not make much difference as unincorporated business.
  3. Heavy penalty will be levied for late filings of documents e.g. Annual Returns for CR.
  4. Company cessation and deregistration takes quite a long time, at least 6 months.

   
Tax information for corporations:
 
  1. Generally, Business entertainment, travelling and trip expenses are tax deductible.
  2. Director salaries are tax deductible.
  3. Low tax rates 16.5% on net assessable profits (No sales / service tax)
  4. Double taxation can be avoided for those countries signed mutual agreement with HK.
  5. Depreciation allowance and some fully deductible items are available such as computer hardware and software.

   
Comparison with unincorporated business:
Sole proprietorship
Partnership
Corporations
No. of owner(s) 1 2 - 20 1 - 50
Legal status No legal status, one can only own assets and sign contracts in proprietor's name No legal status, one can only own assets and sign contracts in partner's name Have independent legal status.
Debt and liability Unlimited liability, proprietor faces risk of personal liability or even bankruptcy. Unlimited liability, partners face risk of personal liability of even bankruptcy. Liability of shareholders are limited to issued shares. Company liquidation normally not affect individual shareholders.
Financing power From proprietor Higher financing power as more partners available. Higher as more confidence for bankers.
Tax issues No statutory audit is required, 15% (2012/13) profits tax rate. Proprietor salaries are not tax deductible but can be transferred to personal assessment. Same as sole proprietorship Annual statutory audit is required. 16.5% (2012/13) profits tax rate,Director remuneration are tax deductible.
Others Business registration fee HK$250 (2013/14) per year, but in some circumstances can be waived upon application. Same as sole proprietorship Business registration fee HK$250 (2013/14) for IRD and HK$105 for Companies registry.


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