What are the advantages of using limited companies to engage in commercial activities in Hong Kong?
Limited companies are companies with limited liabilities. From a legal perspective, a limited company is a separate legal entity and thus has the capacity to institute proceedings against others or vice versa. Since the liability of shareholders is limited to the nominal value of their shareholdings, the maximum possible loss of the shareholders could only be the total sum of their investments. Generally speaking, the directors and shareholders of the companies are not personally liable for the debts of the company.

Where the investors prefer to adopt other forms, such as sole proprietor or partnership, to run their businesses, the liabilities of the investors are unlimited. The creditors can hence institute legal proceedings directly against the investors. Where the investors cannot repay the debts, the investors are forced into personal bankruptcy. Nevertheless, incorporating and running a limited company is comparatively more costly.

What are the conditions of establishing a limited company?
The new company ordinance permits the formation of company by one or more persons. Any person (natural or legal person) can at the same time be a shareholder, a director and also a secretary. If the secretary is an individual person, there are no restrictions on his nationality but he must reside in Hong Kong. There are no restrictions on the nationality and domicile of the shareholders and directors. The executive body of a company is its board of directors, responsible for the daily running of the company and implementing the decisions in the annual general meeting (AGM). The AGM is the highest body of a company. It must be held at least once a year and must not be held more than 18 months since the last AGM.

There is no upper limit of the capital of limited companies, but it must not less than 1 Hong Kong dollar.

What can I do if I want to start business quickly?
If investors wish to start business quickly and cannot spend time for establishing limited companies, they can acquire, through law firms, ready-made shelf companies that have not commenced business and thus have no liabilities or debts. The shelf companies have been registered in the Companies Registry and have acquired the Certificate of Incorporation. The fees are more or less the same as for fresh incorporation and the procedures can be completed in a few days. After the completion of the above procedures, the company must obtain a Business Registration Certificate from the Business Registration Office in order to engage in commercial activities.

General information about taxation in Hong Kong
The direct taxes of the government are profits tax, salaries tax and property tax.

Hong Kong operates a territorial basis of taxation under which only profits or income arising in Hong Kong are taxable. The current corporate profits tax rate is 16.5%. There is no tax on capital gains.

Salaries tax is imposed on income arising in Hong Kong from any office or employment. Tax payable is calculated on a sliding scale that progresses from 2% - 20%.

Property tax rate on 16% on rentals received less an allowance of 20% for repairs and maintenance. Corporations that pay profits tax on their rental income are exempt from property tax.