By Vlad Cuc, specialist in company formation matters
Partners with unified business goals in Hong Kong
The general partnership is used by two or more partners who have the same business goals and are willing to unite resources and experience for the success of the business. This type of company in Hong Kong is easy to set up and has advantages for its founders but it also brings unlimited liability. This is an important aspect when choosing the right type of entity.
Investors who want to open a company in Hong Kong can request the services offered by our agents. We can help you choose between a general partnership or a limited partnership and also explore other business options in Hong Kong.
We invite you to watch a video about the characteristics of the Hong Kong general partnership:
The advantages of the general partnership in Hong Kong
The general partnership has a simple setup process. The partnership, along with the sole proprietorship does not have to comply with the business registration requirements with which corporations have to deal. There are also no minimum share capital requirements.
The general partnership in Hong Kong must have at least 2 members and a maximum of 20 members. Because all the partners can combine their assets, the partnership will be able to raise enough capital easier than other business structures. Also, the partnership benefits from more relaxed reporting requirements and statutory requirements.
The combined resources and efforts of the partners can guarantee the success of the new business. The partnership can even grow in time and attract employees in Hong Kong.
Requirements for general partnerships in Hong Kong
The Partnership Ordinance contains the most important provisions for the incorporation, management, and dissolution of these types of legal entities in Hong Kong. All of the partners participate in the management of this business structure but they are not specifically remunerated for being part of the said partnership. They can, however, derive income in the form of a salary if they act as managers. Any new partners are added to the general partnership only upon the approval of the existing ones.
General partnerships are registered with the Business Registration Office within one month after they commence their business activities. The taxation of this business structure is based on its worldwide profits. Hong Kong imposes a standard corporate income tax rate of 16.5%.
As a general partner, the entrepreneur will also need to be concerned with his tax obligations. These are less complex than in the case of corporations registered in Hong Kong, however, one still needs to be fully compliant with the applicable taxes, as well as the deadlines for making the needed submissions with the Internal Revenue department. Our CPA in Hong Kong can help answer all of your questions.
Our Hong Kong company formation agents can help you with detailed information on general partnership taxation and the requirements for accounting and annual reporting.
Special considerations when setting up a general partnership in Hong Kong
While considering all the benefits of the general partnership and easy management options, investors must also pay close attention to a particular trait: all the partners have unlimited liability for the debts of the partnership. The founding members have no protection for the personal assets they invest in the partnership and partners can also be held liable for the wrongful acts of their co-partners. Also, the profits are shared between all partners.
The founders must be willing to cooperate, even in those situations when they might have different business goals or opinions. Any disagreement or personal disputes can result in the failure of the partnership.
The partners at our Hong Kong law firm can answer any questions regarding liability and any litigations that may arise as a result of a dispute between partners.
Deciding between the available business forms is an important task for all investors. If you are rather interested in setting up a company in Hong Kong, and not a partnership of any kind, our team can answer your questions. While more complex than the partnership, and taking longer to incorporate, the company does present a set of undeniable advantages in terms of image and liability. Our team can detail these for you if you are interested.
For more information about other business types please contact our Hong Kong company formation representatives.