Limited Company Vs BVI Company Vs Unlimited Company: Structuring Your Company in Hong Kong
10 minute read
If you’re in Hong Kong, you already know that the economy is vibrant, with plenty of opportunities to grow. If you’re new to Hong Kong, the good news is that the prestigious World Competitiveness Yearbook has recognized that it is one of the most competitive economies in the world.
For a small business, the process of registering a company in Hong Kong is simple. There are no restrictions on foreign ownership. Hong Kong’s superior infrastructure and skilled workforce make it a preferred business destination.
The question is: What sort of company should you set up— BVI company, limited company, or unlimited company? Let us take you through the types.
Overview:
- Three Popular Company Structures in Hong Kong
- Company Formation: Regulations, Rules, Policies
- Limited, Unlimited, BVI: How to Classify Your Company
- Steps For Setting Up Each Type of Company
- The Differences Between a Private Limited, BVI, and Unlimited Company
- Summing Up: Let the Experts Help You with the Next Step
- FAQS
Three Popular Company Structures in Hong Kong
When choosing between setting up a limited company, an unlimited company, or a BVI company, remember that all of them have distinct characteristics. These could be in terms of taxation, liability, and privacy, for example.
The right one for you depends on the nature of your business and your future growth plans.
Features of a Private Limited Company
A private limited company is a popular choice for most people who set up companies in Hong Kong. The structure can be tailored to your business needs. Here are the notable characteristics.
- There is limited liability. Shareholders are liable for debts up to the amount of their investments.
- A private limited company is a separate legal entity. It can own assets and enter into contracts.
- The minimum number of shareholders for a private limited company in Hong Kong is 1, and the maximum is 50.
- Private limited companies in Hong Kong need to keep proper accounting records and prepare annual financial statements.
Features of an Unlimited Company
Many solopreneurs and small teams choose to form unlimited companies. These can be sole proprietorships or unlimited partnerships. These are the main features of unlimited companies:
- Private unlimited companies can be set up with or without prescribed share capital.
- Shareholders and owners have unlimited liability for the company’s obligations. Their personal assets cannot be treated separately for this purpose.
- An unlimited company must specify its purpose, regulations, and the rights and responsibilities of members.
- It needs to maintain proper records and financial statements that comply with local regulations.
Features of a BVI Company
A BVI company is a company that is incorporated in the British Virgin Islands. This overseas territory is known for its favourable business climate. Such companies are often used for international business and investment purposes.
A company registered in the British Virgin Islands can carry out business operations internationally, including in Hong Kong. These are the key features:
- A BVI business company is a separate legal entity. The shareholder liability is limited to the amount invested in the company.
- A BVI company can engage in business by following Hong Kong’s legal framework.
- The British Virgin Islands provides high levels of confidentiality and privacy for companies and their shareholders.
- BVI companies must maintain accounting records and file returns.
- BVI companies must comply with rules governing business in both Hong Kong and the British Virgin Islands.
Company Formation: Regulations, Rules, Policies
Here are the guidelines for setting up a company in Hong Kong. Of course, there will be variations depending on the type of company. However, these points are an introduction to the process.
- Decide on the type of company that is best suited for your business.
- Choose a company name that is not already in use and is not offensive.
- Prepare the memorandum of association and articles of association. These documents have details of the company’s nature, objectives, and capital.
- The directors and shareholders of the company must be natural persons or corporate entities. The company’s registered office must be a physical Hong Kong address.
- The company must file annual returns and have its financial records checked by a qualified auditor.
Limited, Unlimited, BVI: How to Classify Your Company
Limited company or unlimited company or BVI company? The features discussed above should give you some idea of their nature. The best way to classify your company in Hong Kong depends on your needs and circumstances.
If you are thinking of setting up a small venture with a few people, a private limited company can be a good option. If you are planning a larger enterprise with many members, you could look at an unlimited company.
A BVI company is generally more tax-efficient. It also ensures a greater level of privacy. If these factors are important, it is a choice to consider.
BVI company formation is also suitable for international trade and investments. If you have a global presence, a BVI company operating in Hong Kong can be suitable.
Steps For Setting Up Each Type of Company
As we have pointed out, the procedure for setting up a company in Hong Kong is relatively hassle-free. To help you on the road to business success, here are the steps for each type.
These measures will give you a good idea of what you need to set up your company. Do keep in mind that there are many small and large details. These are best left to the experts.
Steps for Setting Up a Private Limited Company
- Choose a suitable and acceptable name.
- Appoint directors and shareholders. You should have at least one director and one shareholder. They can be the same person.
- Prepare memorandum articles of association. These documents lay out details of company activities, rules, and shareholding.
- Open a Hong Kong bank account in the company’s name.
- Appoint a company secretary who is a resident of Hong Kong.
- File the necessary documents with the Companies Registry.
Steps for Setting Up an Unlimited Company
As you will realise, there are many common steps when it comes to setting up an unlimited company.
- Choose a suitable company name.
- The company must appoint at least one director and one shareholder.
- Prepare the relevant documents that lay out the company’s purpose, activities, and shareholding pattern, if any. Internal rules and regulations must also be documented.
- Open a company bank account.
- File the necessary documents with the Companies Registry.
Steps for Setting Up a BVI Company
First, a BVI company has to be registered in the British Virgin Islands. Broadly speaking, this is what you have to do.
- Classify the company under BVI laws. Some examples are a limited partnership or a segregated portfolio company.
- Choose a suitable name, and prepare the documents needed under BVI regulations. These include articles of association and names of shareholders.
- You will need a registered address in the BVI and a British Virgin Islands bank account.
- The documents have to be submitted to the BVI commercial registry for a certificate of incorporation.
Your BVI company can then be registered in Hong Kong. The steps to follow are similar to those of other companies. Some officials like a company secretary have to be residents of Hong Kong.
Talk to our friendly experts today about how Sleek can simplify your business
The Differences Between a Private Limited, BVI, and Unlimited Company
FEATURE | UNLIMITED COMPANY | LIMITED COMPANY | BVI COMPANY |
Liability | Unlimited liability | Limited to shareholding | Limited to shareholding |
Share capital | No fixed aspect | Divided into shares | Divided into shares |
Privacy | Accessible details | Accessible details | Partial Accessibility |
Nature of activity | Subject to local regulations | Subject to local regulations | More flexibility |
Taxation | Subject to local laws | Subject to HK laws, can apply an offshore tax exemption | Subject to BVI laws |
Summing Up: Let the Experts Help You with the Next Step
Hong Kong is one of the best places to do business. The first step is to decide what sort of company you should set up. Three common choices are a limited company, an unlimited company, and a BVI company.
Your choice should be governed by the type of business, your growth plans, and the need for privacy.
It is important to get the details of registration just right. You don’t want to waste time checking documents, going back and forth, and being unsure of the procedures.
Relax. Leave it to the experts. At Sleek, we have the expertise and experience to get it done without a fuss. You take care of your business, and we’ll take care of the rest.
FAQs
First, the liability is limited to the investment in the shares. Second, the company can operate like a separate legal entity.
In an unlimited company, there is no limit to what the owners can lose in paying back the creditors. Personal assets are also liable.
A BVI company has to adhere to complex regulations. Moreover, coordination with the British Virgin Islands for compliance can be time-consuming.
Yes, the law allows 100% foreign-owned companies. The benefits are:
- A low tax system.
- Easy access to markets in China, as well as neighbouring Asian countries.
- Availability of superior infrastructure and a skilled workforce.
Here are three:
- Strategic location
- Superior infrastructure
- Business-friendly policies
