By Vlad Cuc, specialist in company formation matters
The characteristics of a Hong Kong limited partnership
The limited partnership is a type of company suited for two or more business partners who want to perform the same commercial activities and agree upon dividing the degree of responsibility between them. This type of partnership offers advantages to foreign investors in terms of ease of incorporation and raising capital and the management requirements.
The main characteristic of the Hong Kong limited partnership is that its founders can choose the degree of liability they can have: either limited or unlimited. The general partner will be fully liable for the debts and obligations of the business as for the daily management of the activities. The limited partner will only be liable according to the amount he is willing to invest in the partnership.
The one that acts as the general partner has the freedom to run the business. The limited partners, who are not liable for the debts or wrongful acts of other partners, make it easy to raise capital.
This business form is easy to manage and can be preferred by those who want to act as a limited partner, unlike the general partnership where limited liability is not an option. An important advantage is that the limited partnership is not dissolved if one of the limited partners decides to exit the business.
The Limited Partnership Ordinance includes the main legal provisions that apply to these types of partnerships in Hong Kong. If you are interested in this business form, our Hong Kong company formation specialists can help you open and manage a partnership in the city. If you are interested in this business form, our Hong Kong company formation specialists can help you open and manage a partnership in the city.
Registering a limited partnership in Hong Kong
The Hong Kong limited partnership needs to be registered with the Companies Registry. Following the registration procedure, a Certificate of Registration of a Limited Partnership is issued and the partners can commence their commercial activities.
The Application for registration needs to be accompanied by a registration fee and an extra fee per each 1,000 HK$ contributed by the limited partners. The certificate is usually issued within five working days.
In terms of partner rights and obligations, the founders of a limited partnership in Hong Kong may choose to conclude a limited partnership agreement or follow the general rules set forth in the Partnership Ordinance. For example, the partners are entitled to equal shares in capital and profits, they may take part in the management of the business (limited partners may choose not to do so, however) and the introduction of any new member is made only by prior approval from the existing members.
Comparison to other business forms in Hong Kong
The set-up procedure for a limited partnership in Hong Kong is easier than for a private limited company and it does not require a minimum share capital. However, compared to the sole proprietor, this type of partnership will require more steps for incorporation and even for dissolution. Compared to the general partnership, the limited one may have larger total set-up costs.
The actual partnership can be very advantageous for the parties involved: for example, the limited partners can only contribute capital if they cannot or are unable to contribute their own expertise for running the business itself. The partnership will also have to comply with the existing requirements for taxation in Hong Kong.
Limited partners have certain advantages in terms of liability, as highlighted herein, however, they are still required to observe the rules for individual taxation. Our CPA in Hong Kong can answer all of your questions concerning tax liability, tax requirements, and the payment of taxes for the income you derive as a limited partner within a partnership registered in Hong Kong.
If you need professional assistance in choosing the most suitable business form you can contact our Hong Kong company formation representatives.