There are many different types of company structures in Hong Kong.
These include private limited companies, public limited companies, sole proprietorship, and partnerships.
However, the most popular and common business entity in Hong Kong is the private limited company.
The main reason why entrepreneurs choose to incorporate their business as a private limited company is because of the advantages that come with it.
After addressing the basics, this article explains the 10 pros and cons of private limited liabilities in Hong Kong.
And if you have already decided to incorporate your private limited liability company in Hong Kong, then you can just check our complete guide.
What is a HK Private Limited Company?
Private limited companies are also known as “private companies limited by shares” or “limited liability companies” or “limited companies”.
A private limited company is a separate legal entity that is separate from its shareholders.
When compared to sole proprietorships and partnerships, it has different obligations and requirements.
It is set up directly with the Hong Kong Companies Registry and is governed by the Hong Kong Companies Ordinance.
Its key characteristic is that it operates in its own right.
What that means is that all of the company’s profits, assets, and liabilities are separate from the directors and shareholders of the company.
Unlike a public limited company, shares of private limited companies are not traded on a stock exchange and are simply issued to shareholders.
Shareholders are limited by their shares which means that in the case of any loss or the company being wound up, shareholders will only lose up to the amount of their shares.
How is a Private Limited Company structured?
The basic legal requirements applying to any private limited company in Hong Kong include are:
Shareholders – Limited number of shareholders between 1-50. Shareholders can be local or international individuals or corporations.
Minimum of one director – There is no limit to the number of directors a company can have.
Directors can also be both local or international individuals or corporations.
As opposed to Singapore, a company is not required to have an individual local director.
Company Secretary – If the Company Secretary is a natural person, then they must reside in Hong Kong.
If it is a professional company, it should hold a valid TCSP License issued by the HK Companies Registry.
The Pros of Private Limited Companies
1. Limited Liability
The shareholders of the company are not required to pay the company’s outstanding debts or costs from their personal assets.
This characteristic ensures that all assets are secured if the company ever runs into trouble and you will not be held liable.
In a sole proprietorship or a partnership, the founders are potentially liable on their personal assets.
2. Shareholders are protected
Due to the concept of limited liability, a company’s financial liabilities only affect shareholders up to the amount of their investment.
Therefore, shareholders are protected, and this provides them with an incentive to invest more as there is a limited risk as they would only lose the amount put into the company.
3. Easier to raise capital
A private limited company is the standard vehicle when it comes to raising funds.
It can raise capital after incorporation by issuing shares to new investors.
Shares can also be split into different categories to reflect different rights attached to different shareholders.
Also, it is generally easier for a private limited company to get bank loans compared to other business structures.
4. Easier transfer of ownership and perpetual succession
Unlike a sole proprietorship or partnership, the existence of the company continues despite any sudden deaths of members.
Reorganizing or transferring a private limited by issuing or selling shares company is simple and fast.
5. Attractive tax regime
One key benefit of operating a business via a HK private limited company is Hong Kong’s “territorial tax” system.
In simple terms, a HK company is only required to pay tax on profits derived from its Hong Kong operations.
6. Fast incorporation process
Setting up a private limited company is easy and only takes a few hours.
If you register your company with Air Corporate, we also guarantee you a business account in 48 hours.
7. Business name protection
Once a private limited company is incorporated, its name is protected as well.
Companies registered after your company will not be able to use an identical name.
8. Credibility
Running your business with a private limited company will convey more trust to your customers than a sole proprietorship.
The Cons of Private Limited Companies
1. Annual audit
All companies in Hong Kong are legally required to prepare annual audited accounts.
Small private companies can however prepare simplified accounts.
2. Public information
Both shareholders and directors of a private limited company in Hong Kong are required to disclose their identity to the Companies Registry.
This means that anyone can check who are the direct shareholders of a private limited company.
The identity of the indirect shareholders is however not public or reported to the Companies Registry.
Final words
A few things to have in mind:
Private limited companies are the most common types of companies in Hong Kong
As shareholder of a limited company, you are not personally liable for the debts of the company
It is easy, fast and inexpensive to incorporate a Hong Kong private limited company and get a business account
Hong Kong offers one of the world’s most attractive tax regime for private limited companies
Looking for advice, or maybe you want to form a new company?
When you set up your company in Hong Kong, you will receive a Business Registration Certificate issued by the Inland Revenue Department.
This document is absolutely crucial to your company.
This article outlines everything you need to know about Business Registration Certificate in Hong Kong: what it is, how you can get one and why you need one, including any other additional guidelines around it.
1. What is a Business Registration Certificate?
A Business Registration Certificate (BR Certificate) is an official document issued by the Business Registration Office of the Inland Revenue Department upon registration.
A BR Certificate contains all the details of a company including its:
Business registration number
Company name
Business name (if different from company name)
Address
Nature of business
Type of business
Date of incorporation
Expiry date of the BR Certificate
If you change any details of your business, you must report to the Business Registration Office within 30 days.
The registration number on the BR Certificate is also known as tax identification number (TIN) of your company.
2. Which businesses need a Business Registration Certificate?
The Inland Revenue Department states that the following types of businesses and activities are required to be registered with the Business Registration Office:
Local and overseas companies that have established a business in Hong Kong regardless of there being any business activity carried out or not
Overseas companies that have a representative or liaison office in Hong Kong
Overseas companies that have let out their property based in Hong Kong, regardless of whether it has an established place of business in Hong Kong.
All types of trade, craftsmanship, commerce, profession or activity carried out for gain
Any club that provides services, facilities and exclusive club premises to members for social interaction and recreational purposes.
To keep in simple, all companies, sole proprietorships or partnerships in Hong Kong need to register get a Business Registration Certificate.
Exceptions exist. For example, charitable institutions do not need a Business Registration Certificate.
There also is an exemption for individual shoe polishers.
3. How to obtain a Business Registration Certificate?
When you register a company in Hong Kong, you will automatically obtain a BR Certificate as soon as it is incorporated.
Even if it is issued by the Inland Revenue Department, the Business Registration Certificate will be collected from the Hong Kong Companies Registry together with the Certificate of Incorporation.
If you register a sole proprietorship, you have to apply to the Business Registration Office to get your BR Certificate.
There are different forms depending on the structure of your business. All you have to do is select the option that applies to you and fill in the corresponding form.
Also, if you have a business at another branch, you will need to obtain a BR Certificate for that branch.
It is advised by the Inland Revenue Department to either register a Chinese name only, an English name only, or register both a Chinese name and English name.
A Business Registration Number is a unique number used to identify and register a business with the Inland Revenue Department.
The unique eight-digit number is mentioned on the BRC.
It needs to be provided when conducting business activity that is regulated by government bodies.
People often get confused between the Business Registration Number that is displayed on the BRC with the Company Registration Number displayed on a Company Registration Number.
To understand the difference between both certificates in detail, please refer to our previous article on this topic here.
6. Displaying Business Registration Certificate for Inspection
You are required by law in Hong Kong to display the original BR Certificate at the place of business including its branches so the relevant officer or representative from regulatory and governmental bodies can see and verify it during an inspection.
Not only should you do this to comply with regulations but also because it can be beneficial for your business.
Seeing an original Business Registration Certificate gives an excellent impression to existing and potential customers.
7. Failure to comply
Non-compliance can result in heavy fines if you fail to register on time or register too late.
If you register too late, you will have to pay a fee for all the years that you have not complied with including any additional penalty that is imposed.
Non-compliance can cause significant disruptions to your business as you may face difficulty in filing tax returns.
8. Other Licenses and Permits
It is important to note that along with a BR Certificate, you may need other licenses and permits to run your business.
These licenses and permits will depend on the nature of your business (e.g. food importation license, SFC license, money service operator license, etc.).
Final words
Here is what you should always have in mind:
A Business Registration Certificate is required for your Hong Kong company
The Registration Number on the BR Certificate is also known as your company’s Tax Identification Number or TIN
The Registration Number on the BR Certificate is different from the Company Number mentioned on your company’s Certificate of Incorporation
You must ensure that your Business Registration Certificate is renewed on time upon expiry
When using the service of Air Corporate, you can access and download your Business Registration Certificate 24/7 from our secured cloud platform.
Looking to incorporate your business in Hong Kong?
In recent years, Hong Kong has become the place to start a business.
People worldwide flock to the city to take advantage of low taxation, economic growth, and the wide opportunity that Hong Kong offers to investors.
However, as with any business venture, there are some complicated paths to navigate before taking the plunge.
Before you begin, be sure that you understand the regulations, apply for all of the appropriate paperwork, and know what is needed to make your business a success.
Your initial step is to register with the Companies Registry to gain limited company status.
Next, to be accepted as a Hong Kong business, you must register with the Business Registration Office.
When moving through the process, you’ll find that two numbers are imperative when filling out all legal documentation.
Whether you’re renting office space, opening a bank account, or signing contracts, you will need to provide both the company registration number and the business registration number.
The problem with this is that the two numbers are easily confused, even by those who have a business background.
Many people don’t know what they look like, or even exactly what each one is for.
In this article we’ll take a closer look at both the company registration number and the business registration number, explaining everything you need to know about these essential pieces of Hong Kong business.
A Closer Look at Hong Kong Company Registration Number
In Hong Kong, there is a strict line that separates a “business” from a “company”.
Therefore the company registration number (or CRN) is completely different from the business registration number (BRN).
The company registration number can be found in the top left-hand corner of your Certificate of Incorporation.
This number is in essence a “social security number” for your company.
It identifies your company and is required on all documentation for the business as well as any government record.
A Closer Look at the Business Registration Number
If the company registration number is your business identifier, then why do you need a business registration number?
The BRN is a different number than the CRN, and this number is used for tax purposes rather than identification purposes.
The business registration number will be required on all forms related to taxes and day-to-day business operations.
You may acquire a BRN by applying to the Hong Kong Inland Revenue Department (IRD), along with paying a fee and levy.
If your company is accepted, you will then receive a Business Registration Certificate.
Under the Hong Kong law, all overseas companies in Hong Kong must register with the IRD, including those that have a liaison office in the city, rent out their Hong Kong property, or establish an office in Hong Kong (even if they don’t actually do any business in the city itself).
The BRN must be issued by the Hong Kong Inland Revenue Department before a business is allowed to open a base of operation in Hong Kong.
Once you’ve submitted the appropriate paperwork and your business is granted a Business Registration, you can identify the BRN as the first 8 digits of your Business Registration certificate number.
The format looks like this: 11111111-&&&-&&&-&&-&. The BRN is the number represented by the ones.
If you need to find the BRN of any business registered with the IRD you may do so by using the eTAX service.
Simply input the full English or Chinese name of the business, as well as the location.
What’s the Difference Between CRN and BRN?
At first glance, it’s easy to mistake the two numbers, but the truth is that they perform very different functions.
The company registration number is used as a functional company ID.
It is how the government can recognize your individual company for legal and government purposes.
You will use this for banking and business operations.
The business registration number is a tax ID.
This is the number that will be used for filing taxes and tax-related paperwork.
Although the primary function of each number is different, you will need both for any business-related paperwork.
Are There Any Exceptions for CRN or BRN Requirements?
There are no exceptions for obtaining a company registration number if you are doing business in Hong Kong.
There are a couple of exceptions for obtaining business registration numbers, including the following:
Charity work. Keep in mind that for this exception your charity must be approved by the government, so be sure to file the appropriate paperwork.
Breeding and rearing livestock, fishing, agriculture, garden marketing, etc. These exceptions are contingent on these activities not falling under a company heading or are part of an overseas company that does not require registration. Always check first to ensure that your business adheres to the proper standards.
The exemptions to the BRN are contingent upon other factors, so it is always best practice to check with local authorities, even if you think that your business might fall under the exemption heading.
Where to find a CRN or BRN?
Upon incorporation, any Hong Kong company will receive 2 essential documents:
Please see below for a sample of Hong Kong company Certificate of Incorporation with the company’s CR Number:
See below for a sample of Hong Kong Business Registration Certificate with the company’s BR Number.
The Bottom Line on CRN and BRN Numbers
Hong Kong is an ideal space for starting and running a business.
While there are multiple benefits to be enjoyed and regulations aren’t as arduous as many other countries, it is important to be vigilant about following local regulations to the letter. (Or in this case, number).
There are consequences for neglecting these regulations.
If you fail to register your business for a Business Registration Certificate, you are liable to receive a fine of up to 5,000 HKD as well as up to a year in prison.
Remember that both numbers are necessary for operating a business in Hong Kong–company registration number for business ID and business registration number for a tax ID.
So do your due diligence, file all necessary paperwork to receive a company registration number as well as a business registration number, and be cognizant of all pertaining regulations.
Think you’re ready to open a business in Hong Kong? Register your company with Air Corporate today and get approved in under 48 hours.
A company chop stamp or corporate stamp is mandatory in certain jurisdictions and replaces the signature of a director or legal representative to validate and bind a document or a contract.
Applicable laws in Hong Kong on company chops/stamps changed over the years.
This article explains the function of a company stamp and its significance.
We also explain if a company chop/stamp is required in Hong Kong.
What is a company chop?
In Hong Kong, a company chop is normally a small round stamp, in blue or red ink.
The company stamp normally includes the company name in English and/or Chinese.
The company’s registration number or business registration number may also appear on the stamp.
However, this is not mandatory.
The term company chop refers to a rubber seal, stamp, or imprint.
It was a prevalent term during the 17th century.
Company chops are also recognized in other common law jurisdictions such as India, China, Australia, and Canada, to name a few.
What is the company chop stamp used for?
The function of a company chop is a mix of Chinese and Western models, and it is very common in commercial and corporate use.
The company chop/stamp is used to authenticate and validate official company documents, letters, deeds, certificates, and records.
To put it simply, a company chop in Hong Kong operates as a signature.
Due to the similar nature of a company chop and a signature, a company chop is not always a requirement as a signature has the same effect.
However, certain business transactions specifically require a company stamp.
For example, a company will be required to sign and chop the application form when applying for a bank account.
That is also the case when sponsoring an employee visa.
Company chops have greater use and official value in Mainland China.
Therefore, companies that do business with or have a subsidiary in Mainland China are recommended to use a company stamp to avoid any complications.
Legal Requirements for Company Chop Stamp
In some countries, having a company chop stamp is mandatory, and failure to comply with the legal requirements can lead to severe consequences. To obtain a company chop stamp, the company must follow the local laws and regulations, which may vary depending on the jurisdiction. Typically, the company must provide the following documents to the relevant authorities:
Business registration certificate: This document proves that the company is registered with the government and has the legal right to operate.
Identification documents: The company’s legal representative must provide a valid identification document, such as a passport or national identity card.
Application form: The company must fill out an application form, which usually includes information about the company’s name, address, and other relevant details.
Company chop design: The company must provide a design for the chop stamp, which may include the company’s name, logo, and registration number.
Once the application is submitted, the relevant authorities will review the documents and may conduct an inspection of the company’s premises before issuing the company chop stamp. The process may take several weeks or even months, depending on the jurisdiction.
Using an unauthorized company chop stamp, or using the company chop stamp for illegal purposes, can have serious legal implications. Therefore, it is crucial for companies to comply with the legal requirements for obtaining a company chop stamp. In case of any doubt, the company should seek legal advice from a qualified professional.
Different types of Company Chop Stamps
In China, company chop stamps or seals are used for a variety of purposes, including signing contracts, approving transactions, and more. They are an essential part of doing business in the country, and there are several different types of company chop stamps available. Let’s explore the different kinds of company chop stamps in detail.
A. Traditional Rubber Stamps
The traditional rubber stamp is the most common type of company chop seal, and it is widely used by small businesses and startups in China. These stamps are made of rubber, and they are usually mounted on wooden blocks. Traditional rubber stamps require a separate ink pad, and they are often used in conjunction with red ink, which is considered lucky in Chinese culture.
B. Pre-inked Stamps
Pre-inked stamps are a popular alternative to traditional rubber stamps. These stamps contain ink in their design, and they do not require a separate ink pad. Because of this, pre-inked stamps are cleaner and more convenient to use than traditional rubber stamps.
C. Self-inking Stamps
Self-inking stamps are another popular option for businesses in China. These stamps have a built-in ink pad that automatically re-inks the stamp after each use. Self-inking stamps are durable and long-lasting, making them an excellent choice for businesses that need to use chop seals frequently.
D. Electronic Stamps
Electronic stamps are a more recent addition to the world of company chop seals. These stamps use digital technology to create a seal instead of physical ink. Electronic stamps are more secure than traditional stamps, as they can be programmed to only work with specific accounts or transactions. However, they are also more expensive than traditional stamps.
Companies should carefully consider their needs and business requirements before choosing a particular type of company chop seal.
How to get a company stamp?
A company can design its company chop or company stamp based on its own standards and choices.
Air Corporate will create your company stamp when registering your company.
We can also help you create a digital version of your company chops for electronic signature.
Simply contact us if you did not incorporate with us but require a company chop/stamp.
Final words
While a common seal is not necessary nowadays, we strongly recommend that you use a company chop/stamp for your company.
Having a company chop will simply make your life easier when dealing with clients, customers, or government authorities in Hong Kong, Mainland China, or elsewhere.
For many years, I worked at big accounting and company secretary firms in Hong Kong.
I started Air Corporate to make the life of entrepreneurs and SMEs easy.
