The most popular type of business in Hong Kong and across the world is a sole proprietorship. It is mainly preferred for small and medium enterprises because owners have total control over all the decisions of their organizations. This post takes a closer look at sole proprietorship in Hong Kong to demonstrate its key structures and the main requirement of its registration.
The Key Features of a Sole Proprietorship in Hong Kong
In Hong Kong, a sole proprietorship is mainly preferred for start-ups, SMEs and freelancers because the cost associated with registering and running it is lower than limited liability companies or partnerships. Here are the main features of a sole proprietorship in Hong Kong.
It Does Not Have a Separate Legal Entity
When people open limited liability companies, they are considered separate legal entities. However, this is different when it comes to a sole proprietorship in Hong Kong. With a sole proprietorship, there is no distinction between the business and its owner. Therefore, you will have to take full responsibility for the business’s liabilities, such as debts and expenses, once the operations commence.
Because you are the sole owner of the business, it implies absolute control over all decisions. You have the freedom to steer the business without seeking the approval of others, such as partners or shareholders. However, the decisions have to follow the law, such as the Employment Ordinance, which determines the minimum wages and statutory deductions.
Funding for Sole Proprietorship Extends to Personal Finances
As we indicated already, a sole proprietorship is directly linked or inseparable from the owner. This consideration also applies when it comes to funding the business. Most people fund their sole proprietorships from personal savings.
When seeking funds from a bank for the business, the lender extends the scrutiny to personal finances. Business transactions alone might not be enough to secure financial assistance for your business in Hong Kong.
In addition, the banks will want to learn about your personal financial history and credit rating before approving loans for the sole proprietorship.
Requirements for Business Registration
Now that you know the main structures of a sole proprietorship in Hong Kong, it is time to check out the requirements for its registration. Although pretty straightforward, it is important to understand and have all the requirements to avoid the application getting declined.
To register a sole proprietorship in Hong Kong, you have to prepare and file the following documents with Inland Revenue Department (IRD)
A duly filled business registration form.
Copy of your passport or identity card.
Description of the proposed business activity.
Name and address of the business owner.
Personal bank statements.
Your business plan.
In addition to the above requirements, it is important to ensure you have a physical presence on the island, a local bank account, and file returns in line with the Inland Revenue Department (IRD) requirements.
Use an Agency of Experts to Register a Sole Proprietorship in Hong Kong
Although the process of registering a sole proprietorship in Hong Kong is not as complex as that of a public or limited company, it is still challenging for many entrepreneurs. The better method of registering your business is by working with an agency of experts. Other benefits of working with experts include:
You are assisted in creating the required documents for registration.
The experts also help your business with compliance requirements.
You are assisted in drawing strategies for market entry and growth.
As you can see, a sole proprietorship is an excellent business vehicle, especially for small and medium-sized enterprises. To make the process of registering a sole proprietorship in Hong Kong easier and increase the chances of business success, contract MBiA for professional assistance. The agency’s experts will not only help you to register the business but also to draw strategies to navigate it to the next level.