background image
1.1.2. Specific Uses of Available Legal Entities

In general, all types of business activities are permissible for all business types aside from Rep. Offices. The following outlines for what uses are specific types typically employed.

Limited Company

Private Company Limited by Shares

Most companies in Hong Kong are established as limited companies, private companies limited by shares being the most popular. They can be used for all types of business activities and are established by local and foreign investors alike. They are typically chosen over the sole proprietorship or partnership given the inherent advantages of limited liability, greater ease of raising finance, expansion, transfer of ownership, etc. They tend to be small to medium-sized companies.

Public Limited Company

Public limited companies are typically medium to large-sized companies and can exceed 50 shareholders. They may offer both shares and debentures to the public. Only a public company can be listed on a stock exchange.

Company Limited by Guarantee

Companies limited by guarantee can be used for non-profit organizations. Their use is not common in Hong Kong

Partnership

Partnerships in Hong Kong are relatively easy to establish. They are typically used for business types that traditionally use partnership, such as accounting and law firms, and are also used for limited duration projects, while other long-term businesses will likely incorporate.

Sole Proprietorship

Sole proprietorships are the simplest and easiest form of business in Hong Kong. They are typically only used for low-risk business activities given their unlimited liability nature and can work well for individuals with little need to raise financial resources.

Foreign Company Offices

Subsidiary

As independent entities incorporated in Hong Kong, subsidiaries can be used to engage in all types of business activities except for those that have limits on foreign ownership, such as broadcasting and cable. They are usually established by small to medium-sized companies and can be used to provide protection to their parent companies as the corporate liability cannot be passed on. They are also used to gain the benefits of the free trade agreement between Hong Kong and China

Branch Office

Like subsidiaries, branch office can be used to engage in the same type of business activities as subsidiaries. They are typically used by larger corporations.

Representative Office (Rep. Office)

Rep. Offices are used to engage in promotion and liaison activities, conducting market research, and coordinating activities on behalf of the parent company.

A representative office cannot engage in profit making activities and is not treated as a legal entity. It cannot sign or enter into any contracts, sign deals on behalf of the company, raise invoices or letters of credit nor engage in trading activities

Foreign/Local Joint Ventures

Joint ventures are used by companies looking to jointly employ resources to conduct business in Hong Kong. They can be used for any business type, but are needed for restricted business types such as broadcast and cable, which require minority foreign ownership.