What is the difference between an unlimited company and a limited company? Hong Kong unlimited company registration process and fees lazybones bag
Starting a business can be divided into unlimited company or limited company, what is the difference between the two types of companies? What is the registration process for a Hong Kong company that chooses to set up an unlimited company? What are the documents to be prepared for business registration and how much does it cost to set up an unlimited company, etc. The following is a quick explanation for you.
Definition of limited company
limited companyIt means a company with limited liability. In Hong Kong, there are two types of local limited companies:
Company limited by shares: the liability of the members of a company is limited to the amount unpaid on the shares held by each member respectively.
Company limited by guarantee: the company has no share capital and the liability of the members of the company is limited to the amount that each member has separately undertaken by its articles of association to pay as an asset of the company in the event of its winding up.
Benefits of registering a limited company
The advantages of opening a limited company can be summarised as independence, transparency and greater scope for development.
Limited companies have higher start-up and operating costs and need to find professional accountants to do the accounts and auditing every year. However, the debts and liabilities are limited to the company's share capital, and even if the company is wound up, it does not affect the shareholders' personal property, which is a better protection for the shareholders.
Definition of unlimited company
An unlimited company is defined as a company with unlimited liability, whether it is a sole proprietorship or a partnership. If the company does not have sufficient funds to pay off its debts, the proprietors and partners have to assume unlimited liability to pay off the debts of the company out of their private property.
Benefits of registering an unlimited company
The advantage of unlimited company is that the start-up and operating costs are lower, you can start a company quickly, the owner can be responsible for the tax return, reducing the cost of auditing, the taxable profit of more than 2 million is only 15% tax rate is even lower than the limited company, in comparison, unlimited company is very suitable for small business.
Unlimited Company Process
The procedure for setting up an unlimited company is simpler than that for a limited company. Apply for business registration within one month from the commencement of the business, i.e.Business Registration CertificateIf you have not started your business, the business registration will not be granted, so there is no need to apply early, the following is the application method and process.
Step 1: Choose the delivery method
There are three ways to file a BR application, namely online, by post or in person, with the fastest way being in person at the Business Registration Office.
Below are the points to note for different types of applications
Online application: The whole process can be done online, but you need to enter the following informationDigital CertificatesOr, you can use SmartCert + Account Verification to verify your identity and digital signature, but the absence of a digital certificate will delay your application for business registration.
By post: Business Registration Certificate Application Forms are required to be obtained by email (taxbro@ird.gov.hk), post or fax to 2824 1482 by the above means. As the forms have separate running numbers, applicants cannot obtain them directly online.
In person: The fastest way to submit an application is in person at the Business Registration Office (BRO), where the application form can also be obtained.
Step 2: Prepare unlimited company registration documents
The documents required for the opening of an unlimited company are listed below:
- Business Registration Application Form
The following is a sample of the application form, but it cannot be used for application purposes:
Form 1 (a) - Application for Business Registration for Individuals Conducting Business in Hong Kong
Form 1(C) - Application for Business Registration of a Partnership Carrying on Business in Hong Kong
- Copies of identity documents of proprietors and partners
- Proof of address of proprietor and partners
- For proprietors or partners (all shareholders) who are not Hong Kong residents, a power of attorney for business agent is requiredForm IRBR177
Step 3: Submit and Pay Business Registration Certificate Fee
There are two types of Business Registration Certificates, one with a one-year validity period and the other with a three-year validity period. Except for local companies formed through the one-stop company registration and business registration services, their commencement dates may vary depending on the circumstances of the application for registration. For local companies incorporated in Hong Kong, the commencement date is normally the date of successful application for registration.
Latest Business Registration Fee and Levy 2024/25
The fee for registering an unlimited number of companies includes the business registration fee and the levy fee, which was increased in the latest year to
One-year licence: HK$2,200 registration fee, levy waiver
Three-year licence: registration fee HK$5,720, levy HK$150
Frequently Asked Questions
Unlimited Company Tax Returns
A newly established unlimited company will receive its first tax return from the IRD within 18 months, and the time limit for filing a return is three months. Then, for each subsequent tax year, the IRD will issue a tax return on the first working day of April, and the company has to complete and submit the return within one month.
There is no restriction on the preparer of unlimited company's financial statements, i.e. if you have the relevant knowledge and ability, you can produce your own profit and loss account and balance sheet without the cost of hiring an accountant and auditing.
Whether the tax is handled by you or you hire an accountant, it is important that company-related documents are kept in a safe place for future compilation and review, including:
- Receipts received by the Company
- Record of invoices issued by the company
- Company Account Statement
- Asset List
Unlimited companies applying for licences
Some industries, such as education and catering, will need to apply for additional relevant licences, which will be available upon the issuance of Business Registration Certificates.Government Web PageFind out if your business needs a licence and how to apply.
Do I need to apply for a bank account for an unlimited company?
Requirements after incorporation of a limited companyOpening a corporate bank accountAlthough unlimited companies are personal in nature and do not have the status of a separate legal entity, it is recommended that a company account be opened in order to have a clearer picture of the operating expenses and to avoid unnecessary misunderstanding by the banks due to large or frequent fund transfers.
Can an unlimited company be converted into a limited company?
Although there is a BR on the licence of a limited unlimited company only that the unlimited company does not have a CR, there is no way for an unlimited company to apply directly for conversion into a limited company. When there is a need to convert from an unlimited company to a limited company, it is suggested that a limited company can be opened first, and the unlimited company's business can be acquired by way of a limited company sale and purchase.
Conclusion
The type of company to set up should be carefully considered before starting a business. Unlimited companies are more suitable for low-risk small businesses by nature.
If you have any questions or need any assistance in setting up an unlimited company, please feel free to contact our team at Lafont Business Consultancy Services! Please click the Whatsapp button on the bottom right to contact us!
Extended reading: "TheHong Kong Company Lazybones】Hong Kong Company Formation Process, Fees, Time and Frequently Asked Questions in One Article》