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How to register a Sole Proprietorship in Hong Kong?

Planning to open up a new company as a sole proprietorship in Hong Kong and not sure about the process for sole proprietorship registration? As a matter of fact, Hong Kong attracts many entrepreneurs from around the world for company incorporation.

Hong Kong is considered as one of the world’s freest economies, which helps to register sole proprietorship quickly and reliably. It involves only a single step procedure for registering businesses with the Inland Revenue Department.

So, are you ready to start your business in Hong Kong? Here are some things you need to take care of while doing sole proprietorship registration in Hong Kong.

Sole Proprietorship

Some Key Facts you need to know about Sole Proprietorship

Before registering your business entity as a sole proprietorship in Hong Kong, you need to know about some key facts about registration.

1. A sole proprietorship is a type of small-scale business structure which is owned by an individual. There is no legal separation between the owner and the company.
2. The owner is primarily responsible for all the elements of the business entity and is fully accountable for all the finances of the company including loans, debts, and profits/losses of the business.
3. Sole proprietorships are required to register their business entity with the Inland Revenue Department of the Business Registration Office.
4. If somehow you have changed the particulars of your registered business entity, you are also required to notify the Inland Revenue Department of the Business Registration Office within the month of the change.
5. In order to carry more than one business entity as sole proprietorships in Hong Kong, you need to apply for the Business Registration Certificate for each company with their different business name.
6. Sole proprietorships are also required to renew their Business Registration Certificate one month before the expiry date, depending on whether your business license is valid for one year or three years.
7. A sole proprietorship is taxed at the rate of 15% on their assessable profits of the company, and it must be filed with the Inland Revenue Department on an annual basis.

Requirements for registration in Hong Kong

As a matter of fact, the sole proprietorship is indistinguishable from its owners; thus the most significant particularity of this business structure is that the owner is fully liable for all the debts, losses/ profits, and liabilities.

Hong Kong is quite reliable and straightforward as compared to the registration of other business structure. The foremost requirement for sole proprietorship registration in Hong Kong is to register their company with the Business Registration Office of the Inland Revenue Department in order to obtain the Certificate for business registration.

The registration number of the sole proprietorship is also required for the filing of the sole proprietorship in terms of Hong Kong tax, that will appear on the certificate of the business registration. Thus, you need to complete the requirements of the registration process before setting up the business entity.

The business owners must also select an appropriate business name for the entity. This is one of the most significant parts of opening up a business entity. Below are some of the facts that you have to follow while selecting the business name in Hong Kong.

  • The name of a sole proprietorship may be registered with a Chinese name, an English name or a combination of these.
  • The business name should not be offensive, nor should it contain any prescribed sensitive words including those that suggest a link with the government or of any national importance.
  • If you are selecting a Chinese name for doing sole proprietorship registration in Hong Kong, then you can include English letters in the business name, but you can’t use the English words for it.
  • Selected business names are not allowed to use the limited terms related to the public limited company, abbreviations of limited (Ltd) and limited liability partnership (LLP) in their business name.

After selecting the appropriate name for your sole proprietorship, business owners can apply for sole proprietorship registration in Hong Kong. Business owners can obtain the business registration certificate within one day after submitting the documents with the chosen business name.

Required documents for sole proprietorship registration in Hong Kong

Business owners usually needed the following documents in order to register a sole proprietorship business in Hong Kong.

  • Approval of the company’s name.
  • A duly signed and finished incorporation structure
  • For Hong Kong residents- Copy of Hong Kong identity card.
  • For Foreign investors- Copy of passport and latest overseas residential address proof of both shareholders and directors.
  • Incorporation Certificate of the company.

Post Registration formalities for sole proprietorships in Hong Kong

Once the company has been registered in Hong Kong, some other formalities need to be taken care of and these include:

Apply for a new bank account

As soon as you are done with the registration of a sole proprietorship in Hong Kong with the Inland Revenue Department, you can consider opening a Hong Kong bank account for your the sole proprietorship. However, a distinct separation between your personal and business finances is necessary.

Some of the banks in Hong Kong require the physical presence of the business owners for their due diligence procedure of a sole proprietorship for their Hong Kong bank account. However, certain banks do not need you to be present at the time of opening an account personally.

Therefore, before you select a bank, it is essential to consider whether you will be able to visit Hong Kong for the procedure of opening a bank account or not. Generally, it is better to hire a professional service firm like Startupr that will guide you in selecting an appropriate bank depending on your needs, and provide you with the required information.

Obtain a Business Registration License

After the registration of sole proprietorships in Hong Kong is completed with the Inland Revenue Department, The next thing is to get a business registration license before you start your business operations, depending on the nature of your proposed business activities.

For instance, in case the sole proprietorship is an educational institute, travel agency, restaurant, financial services provider or is in the business of imports and exports, you are supposed to obtain a business license for this entity. If you are still looking for more information on the business registration licenses, then refer to Startupr that will assist you with the business licensing requirements and procedure.

Ongoing Compliance

It is always important to understand all the compliance requirements for sole proprietorship registration in Hong Kong in order to steer away from any unforeseen problems. Below are some important basic compliances for doing business in Hong Kong that you need to follow.

Notifications for the change of business registration particulars

All newly registered sole proprietorships in Hong Kong are required to notify the Inland Revenue Department in writing of the business particulars within one month of the date of commencement of their business.

The business particulars concerned cover change of the business address, business name, nature of the company, description, and date of the beginning of the business. You must also notify the Inland Revenue Department about the cessation of your activity within one month of termination.

Renewal Business Registration Certificate

The Inland Revenue Department will issue a demand notice for the renewal of the Business Registration Certificate one month before its expiry date, depending on whether the Certificate is valid for one year or three years. Upon the payment, the demand notice will become a valid Business Registration Certificate.

If you do not receive such a demand note, you should inform the Commissioner in writing within one month of the expiry of your current Business Registration Certificate. Otherwise, a penalty fee of HKD 300 will be charged after the expiry date of the Business Registration Certificate.

Taxation

Once you are done with the other necessary compliance requirements for a sole proprietorship registration, the next step is to fill out a sole proprietorship tax on an annual basis. All taxpayers are required to submit their tax return to the Inland Revenue Department within one month from the date of notification issue.

Small business owners whose gross income fall in the category of HKD 500,000 or below are not required to attach any financial sheets along with the tax return to the Inland Revenue Department. But they are required to prepare the tax return following their prepared accounts for the filing of tax returns and also retain the documents and accounts for the inspection by the Hong Kong tax authorities.

On the other side, if the sole proprietorship businesses gross income exceeds the value of HKD 500,000, then they have to submit the following documents along with their tax return to the Inland Revenue Department:

  • A tax computation referring to the assessable amount of profits or losses.
  • Certified copy of the balance sheet and the accounting details about loss/ profit relating to the basis period.

Conclusion

So, if you have plans and are ready to start a new business in Hong Kong as a sole proprietorship, then contact us today!