A private limited company is a separate legal entity with its own profits, assets, and liabilities.
Shareholders’ liability is limited to any amount unpaid on their shares.
A Hong Kong private company has 1–50 shareholders and at least one natural-person director.
A Company Secretary is mandatory: if an individual, they must ordinarily reside in Hong Kong; if a body corporate, it must have a registered office or place of business in Hong Kong. Providers that carry on trust or corporate services business must hold a TCSP licence.
Hong Kong applies a two-tier profits-tax system and a territorial basis of taxation. Under the refined Foreign-Sourced Income Exemption (FSIE) regime, certain foreign-sourced passive income received in Hong Kong may be taxable unless exemption conditions (e.g., economic substance) are met.
Annual audit is required for companies that are not dormant under the Companies Ordinance (Cap. 622). Dormant companies (with no accounting transactions) are exempt from preparing financial statements and audit.
This article outlines the pros and cons of establishing a private limited company in Hong Kong, following a brief overview of its fundamental features.
What Is a Hong Kong Private Limited Company?
A private limited company, also known as a "private company limited by shares" or simply a "limited company (Ltd.)", is a separate legal entity from its shareholders.
When compared to sole proprietorships and partnerships, it has different obligations and requirements.
It is incorporated with the Hong Kong Companies Registry and governed by the Companies Ordinance (Cap. 622).
The articles must:
- restrict the transfer of shares,
- limit members to 50, and
- prohibit invitations to the public to subscribe for shares or debentures.
Being a separate legal person means the company owns property, enters contracts, and is liable for debts in its own name. Shareholders are not personally liable beyond any unpaid amount on 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: At least 1 and, by the articles, limited to 50 members (excluding certain employee or former-employee members); individuals or bodies corporate of any nationality.
- Directors: At least one natural-person director is required. Corporate directors may also be appointed (subject to additional restrictions where the company is in a group with a listed company). No residency requirement for directors.
- Company Secretary: Mandatory. If an individual, they must ordinarily reside in Hong Kong. If a body corporate, it must have its registered office or place of business in Hong Kong. Where the provider is carrying on “trust or company service business,” it must hold a TCSP licence.
- Registered Office: The company must maintain a registered office address in Hong Kong.
- Business Registration: Every company must obtain a Business Registration Certificate (BRC) under the Business Registration Ordinance (Cap. 310).
- Audit: Annual audit is required for companies that are not dormant. A company that is lawfully dormant (i.e., has no accounting transactions during the relevant period and is treated as dormant under Cap. 622) is exempt from preparing financial statements and audit.
- Speed: In straightforward cases, e-incorporation can be completed quickly via Companies Registry e-services.
Sole Proprietorship vs. Private Limited Company in Hong Kong
| Factor | Sole Proprietorship | Private Limited Company |
|---|---|---|
| Setup | Simple business registration with the Inland Revenue Department (IRD) | Formal incorporation with the Companies Registry and Business Registration Certificate (BRC) |
| Liability | Unlimited personal liability | Limited to unpaid amount on shares |
| Audit | Not required | Annual audit required (unless dormant under Cap. 622 s.447) |
| Tax Filing | Simple individual or sole proprietor filing with the IRD | Profits Tax Return (PTR) with audited financial statements |
| Credibility | Lower; often less accepted by banks and business partners | Higher; preferred by investors, banks, and corporate clients |
| Growth & Funding | Limited access to external funding or investors | Can issue shares and onboard investors |
| Closure | Notify IRD of cessation of business | Requires deregistration or liquidation process under Companies Ordinance |
The Pros of Private Limited Companies
1. Limited Liability
Shareholders’ exposure is limited to any amount unpaid on their shares, which generally protects personal assets from company debts.
2. Shareholder Protection and Investment Flexibility
The structure separates owners from the company and supports capital raising with share classes that allocate economic and control rights.
3. Easier to Raise Capital
A Private Limited Company can issue new shares and structure preferences for investors. It is typically more acceptable to banks, suppliers, and enterprise customers.
4. Perpetual Succession and Transferability
The company continues despite changes in ownership or the death of a member. Ownership can be transferred by issuing or selling shares, subject to the Articles and any Shareholders’ Agreement.
5. Attractive Tax Regime
Hong Kong taxes Hong Kong-sourced profits. Corporate profits tax is 8.25% on the first HKD 2,000,000 of assessable profits and 16.5% above that. Under the refined FSIE rules, certain foreign-sourced passive income received in Hong Kong may be taxable unless exemption conditions are met.
6. Fast E-Incorporation
For straightforward cases, incorporation can be completed quickly via Companies Registry e-services. Account opening with banks or payment institutions remains subject to their approval.
If you register your company with Air Corporate, we also guarantee you a business account in 48 hours.
7. Business Name Protection
Once a company is incorporated, an identical name cannot be registered by another company. (This does not replace trademark protection.)
The Cons of Private Limited Companies
1. Annual Audit and Ongoing Compliance Costs
Active companies must prepare audited financial statements each year, maintain statutory registers, file the Annual Return (Form NAR1) on time, and keep books and records that meet IRD requirements.
2. Public Disclosure
Key particulars such as registered office, directors, company secretary, and share capital information as of the NAR1 made-up date are filed with the Companies Registry and can be purchased for inspection. Certain personal data (e.g., directors’ usual residential addresses and full ID numbers) is protected; the Significant Controllers Register is not public.
3. Banking Is Risk-Based
Account opening is a compliance decision of banks and payment institutions. Timelines and outcomes vary.
Final Words
Private limited companies are Hong Kong’s standard because they offer limited liability, credibility, and clear governance.
Shareholders are not personally liable beyond any unpaid amount on their shares.
Incorporation and the Business Registration Certificate (BRC) are fast in straightforward cases, but you must plan for the annual audit, Profits Tax Return (PTR), and Annual Return (Form NAR1).
Air Corporate can act as your Company Secretary, handle BRC and NAR1, coordinate the audit, and prepare your PTR so compliance stays on track.
FAQs
It offers limited liability, a separate legal identity, and business continuity even if ownership changes. It’s also more credible with banks and investors.
However, it involves higher setup and compliance costs, annual audits, and public disclosure of some company details.
Private companies enjoy management flexibility, ownership control, and financial privacy since their accounts aren’t public.
But they can’t raise funds from the public and must still meet annual filing and audit obligations.
A limited company provides asset protection, credibility, and continuity.
Its drawbacks are administrative duties, fiduciary obligations for directors, and ongoing costs for audits and filings.
- Low taxes: 8.25% on the first HKD 2 million, 16.5% above; no VAT or capital-gains tax.
- Fast setup: Incorporation often completed within a day.
- Business hub: Strategic location and open economy.
- Stable system: Common-law framework and free capital flow.
Under the refined FSIE rules, some foreign-sourced income may be taxable unless exemption conditions are met.
