Business owners can change a sole trader into an LLC in Hong Kong when the first business has grown or if they decide that the particularities of the sole proprietorship no longer suit their needs.
The limited liability company (LLC) is a separate business structure from its founder/s and will need to comply with different, more complex accounting and reporting procedures compared to the simpler business form that is the sole trader.
Our Hong Kong company formation agents can help you handle all the needed procedures if you decide that a new business structure is an optimal evolution of your business.
The following video offers a description of the company conversion process in Hong Kong:
Changing the business structure in Hong Kong
The main reason to change a sole trader into a limited liability in Hong Kong is the advantage for the founder of the legal entity in terms of liability. If in the sole trader structure, the founder is fully liable for the debts and obligations of the business, he is completely separate from the legal identity of the corporation, in this case, the private limited liability company.
This can be an important issue to consider as the business grows. Another reason can be related to the image of the business: in general, a corporation will have more credibility for other business partners and for clients, compared to a very simple business form like the sole trader. Hiring employees in Hong Kong will also be more convenient when operating an LLC.
Investors who decide to go forward with this change will need to follow the steps for company registration in Hong Kong.
How to change the sole trader into a corporation
In order to change the business structure investors will need to open a Hong Kong company, in this case, a private limited liability company. This is done by choosing a unique business name and opening a bank account which will need to be separate from that of the sole trader. The new LLC needs to be registered with the Hong Kong Companies Registry.
You can contact our agents who specialize in company registration in Hong Kong for complete assistance during the legal entity change.