Sole Proprietorship vs Partnership vs Limited Company in Hong Kong

The main options, in plain terms:

• Sole proprietorship: one individual trades in their own name. Simple and cheap to start, but you are personally liable for all business debts.
• General partnership: two or more people carry on business together. Each partner can bind the others and partners are jointly and severally liable for the debts.
• Private company limited by shares: a separate legal person. Shareholders risk only what is unpaid on their shares. It costs more to set up and has ongoing filing duties (annual return, registers, changes).
• Branch or representative office: only for an existing overseas company. A branch is not a separate legal entity; a representative office is limited to liaison or research and cannot trade for profit.

A sensible way to choose:

1. Will you take on credit, leases, staff or customer contracts that could exceed your savings? If yes, a company usually protects you better.
2. Will you bring in investors or want to sell the business later? A company's shares are far easier to transfer.
3. Do you need a bank account, contracts or tenders that expect a company? Many counterparties do.
4. Are you willing to meet the filing and record-keeping duties?

Whatever you choose, the business must hold a business registration certificate from the Inland Revenue Department. Profits tax is a separate topic.