/新聞知識 News & Updates/[Benefits of opening a limited company] 8 major advantages/benefits that you must know about opening a limited company in Hong Kong
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[Benefits of opening a limited company] 8 major advantages/benefits that you must know about opening a limited company in Hong Kong

2024-08-30 | Chinglink

#BenefitsOfOpeningALimitedCompany #HongKongCompany #AssetManagement #BusinessVisa #PrivateProperty

Entrepreneurs often worry about whether to start a limited company or an unlimited company? Although the establishment fees and annual maintenance costs of opening a limited company are higher than those of an unlimited company, why open a limited company? Taking stock of the 9 major benefits of a limited company, we can help those who intend to start a business understand the costs of starting a limited company and have a better budget before starting a company.

Benefit 1: Protection of shareholders’ private property

The main advantage of opening a limited company is limited liability. The liability of shareholders is limited to their share capital. Opening a limited company can protect shareholders' private finances from being implicated in business mistakes. Let me ask, if the business fails and the fortune is lost at any time, will the entrepreneur still try emerging industries or industries with higher investment risks?

Benefit 2: More funding options

A limited company can raise funds through the issuance of share capital and at the same time protects investors due to limited liability. Banks also have different financing products for limited companies, so that the company has more sufficient funds for operating turnover. For example, the recent implementation of the 100% government-guaranteed loans for small and medium-sized enterprises and the special fund (BUD) for brand development, upgrading and transformation, and expansion of the domestic market are only limited to limited companies.

Benefit 3: Convenient asset management

Starting a limited company is a popular choice for multiple people to invest together. Because a limited company is an independent legal entity, everyone can jointly hold assets in the name of the limited company under legal protection, such as: machinery and vehicles, buying and selling buildings, collecting rent, and investing. Stocks and funds, etc.

Benefit 4: Better brand image

A limited company is governed by the Hong Kong Company Law, and the requirements for information disclosure from establishment to maintenance are higher than those of an unlimited company. For suppliers, customers, and investors, limited companies have a better image. Generally, the impression given to people is that large companies will operate as limited companies.

Benefit 5: Sustainable operation

The existence of a limited company can be permanent and will not end due to illness or death of individual shareholders. The company can also introduce powerful investors and management through share allocation, making the company's development more flexible. Most of the big companies and enterprises use this model to develop their business all over the world.

Benefit 6: Free transfer of shares

As long as the board of directors agrees, the shares of a limited company can be freely transferred. Through the transfer of shares, the business can also be indirectly resold. Investors are generally more willing to accept the transfer of a limited company than an unlimited company. Keep your mind in mind, if someone wants to transfer the company to you, you will also think about whether the company will have potential debts, right?

Benefit 7: More expense deductions

A limited company is an independent legal person, and all expenses related to generating income can be deducted from income as expenses. For example, entertainment expenses, transportation expenses and travel expenses, etc. And we can also obtain better tax treatment by holding assets, such as properties, cars, etc., as a limited company. For example, if a rental property is held by a limited company, related maintenance and decoration costs will be deducted from income as expenses, but if it is held by an individual, this cannot be done.

Benefit 8: Favorable tax planning

The salaries of directors of a limited company and their spouses can be deducted as expenses, which is beneficial to the distribution of profits of the limited company and legal transfer of part of the profits to salary tax, thereby obtaining more tax benefits. For more information on tax strategies, please contact the accounting and tax reporting specialist of Yisi Accounting.

Benefit 9: It is helpful for overseas people to apply for business visa

If you are a non-Hong Kong resident, setting up a limited company in Hong Kong will help you apply for a business visa to come to Hong Kong.

Starting a Limited Company According to statistics from the Companies Registry, approximately 10,000 companies will be registered every month in 2023, and more than 120,000 Hong Kong limited companies will be established in one year.

Before starting a business, you can consult a professional secretarial company to understand the costs of opening a limited company and the benefits of opening a company.

Chinglink provides one-stop company opening and company secretarial services. Entrepreneurs can arrange an initial free consultation first.

Follow us @chinglink.hk to help you start a business at low cost

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