Sole proprietorship or limited company in Hong Kong

A sole proprietorship is a business one person runs in their own name. A limited company is a separate legal person. That one difference drives the rest: who carries the debts, where you register, the tax rate on profits, and what you file each year. A sole proprietor applies to the Inland Revenue Department (IRD) for business registration within one month of starting. A company is incorporated at the Companies Registry, which issues the Business Registration Certificate at the same time. The table below sets the two side by side using official 2026–27 figures.

The two structures side by side

Liability: why most people incorporate

The Government’sSME Link note on company typesputs it plainly. A sole proprietor bears all the risks and liabilities of the business. If the business becomes insolvent, the owner is still personally liable for its debts, and that liability is unlimited. A limited company is different: in a company limited by shares, which is the form most Hong Kong companies take, each member’s liability is limited to any amount unpaid on the shares they hold. If the company is wound up because of debts, shareholders are not required to repay them from personal property.

Setting up each one

Sole proprietorship. The IRD’sbusiness registration pagesays anyone carrying on a sole proprietorship or partnership business must apply for business registration within one month of starting. A sole proprietor uses Form 1(a). There is no Companies Registry filing. The steps are inhow to register a sole proprietorship.

Limited company. Under the IRD’sone-stop service, an application to incorporate a local company is treated as a simultaneous application for business registration. On approval, the Registry issues the Certificate of Incorporation and the Business Registration Certificate together. The filing is covered inhow to incorporate a Hong Kong company.

Government fees for 2026–27

Both structures pay the business registration fee and levy. The IRD’sfee and levy tablefor certificates starting between 1 April 2026 and 31 March 2027:

• one-year certificate: HK$2,200 fee plus HK$150 levy, HK$2,350 in total;
• three-year certificate: HK$5,720 fee plus HK$450 levy, HK$6,170 in total.

The amount generally follows the commencement date of the certificate. A company also pays the Registry. Itsprice guidelists HK$1,545 to incorporate a company limited by shares through the e-Services Portal, or HK$1,720 in hard copy. Each year after that, a private company’s annual return costs HK$105 if it is delivered within 42 days after the anniversary of incorporation, and more if late. A formation or accounting firm’s own charges are on top of all of these.

Profits tax: the two-tier rates

The IRD’stwo-tier FAQsets the rates, which have applied since the 2018/19 year of assessment. A corporation pays 8.25% on the first HK$2 million of assessable profits and 16.5% on the rest. An unincorporated business, mostly sole proprietorships and partnerships, pays 7.5% and then 15%. If entities are connected, only the one nominated can use the lower tier.

A hypothetical example, using only those rates: on assessable profits of HK$2.5 million, a corporation’s tax is HK$165,000 plus HK$82,500, or HK$247,500. An unincorporated business pays HK$150,000 plus HK$75,000, or HK$225,000. The rate is not the whole picture. How you take money out of a company, and your personal tax, are questions for an accountant. More on the rules is intwo-tier profits tax.

What you file each year

A sole proprietor who owns 100% of the business reports it on Part 5 of the Tax Return – Individuals (BIR60). The IRD’sreporting pagesays that if the business’s gross income does not exceed HK$2,000,000, no financial statements need to be attached. Above that, certified accounts and a tax computation go in. A partnership files a Profits Tax Return (BIR52) instead.

A company files the Profits Tax Return for corporations (BIR51). The IRD expects audited financial statements with it in all cases except dormant companies. It also delivers an annual return to the Registry and renews its business registration.Annual return vs business registration renewalexplains why those are two different jobs.

Closing down

A sole proprietor who stops trading must notify the Business Registration Office in writing within one month of the date of cessation, using the IRD’snotification of cessation of business. A company does not end because it stops trading. A private company that qualifies can apply to the Registry for deregistration on Form NDR1, with a HK$420 fee, and it needs a Notice of No Objection from the IRD. Otherwise it is wound up. The steps are inhow to close a Hong Kong company.

If you decide to incorporate, comparecompany formation firmsin our directory. This page is not legal or tax advice, and the IRD and the Companies Registry apply the rules.