Unlimited Company Points To Note
With the development of the Internet world, everyone can set up company and run a business. But there are many things that need to be paid attention to before company formation. Before opening a limited or unlimited company, everyone must first consider the scale of their business and how much they are invested in the business. If the business volume is large and involves many assets and debts, it is best to apply for a limited company to protect your assets; but if it is just a small business, you may consider setting up an unlimited company to save costs and management time. However, be aware that it is more difficult for an unlimited company to apply for a corporate bank account than for a limited company, and only using a private bank account to receive and pay may make it difficult for you to manage your accounts.
Do you have to open a company to do business?
According to the business registration regulations, any form of business needs to be registered within 1 month from the start of business. If you are running a business with an average monthly income of less than HK$10,000, you can be exempted from registration. If there is no registered business registration, the maximum penalty is HK$5,000 and imprisonment for 1 year. So whether you are running an online store or a KOL, as long as your average monthly income is more than HK$10,000, you need to apply for a Business Registration (BR).
- The constituents are called "Proprietors".
- Without independent legal status, the unlimited company is just an extension of the proprietor's individual.
- Unlimited companies cannot independently own assets. If they need to sign contracts with other institutions, they need to use the owner's personal name.
- If there is more than one proprietor, each proprietor is jointly and severally liable for the company's debts and contracts. For example, proprietor A used an unlimited company to borrow 1 million from the bank and then disappeared, even if proprietor B of the same company does not know is also responsible for this debt.
- If the proprietor dies or goes bankrupt, the unlimited company is also dissolved.
- When an unlimited company conducts legal proceedings, the proprietors must be jointly and severally liable.
- The proprietor cannot sign a contract with an unlimited company established by himself.
The benefits of an unlimited company
Compared with limited companies, the operating costs and tax rates of unlimited companies are relatively low. For example, unlimited companies do not need to submit annual returns to the Companies Registry, nor do they need to be audited. They only need to make regular accounts and tax returns. Due to the low cost and simple operation, it will be relatively small or novice people to set up.
An unlimited company is not a "legal person" in the definition of Hong Kong law, but an extension of the proprietor.
Like limited companies, unlimited companies have no debt ceiling.
The difference is that when the unlimited company goes bankrupt, the proprietor needs to use his personal assets to repay the debt. If the proprietor is unable to repay, there is a chance that he needs to apply for personal bankruptcy.
More importantly, as mentioned above, if an unlimited company consists of more than one proprietor, any proprietor uses the company to borrow money or sign a contract, and all members are responsible for the debt or the content of the contract.
Disadvantages of unlimited companies
Because the unlimited company is not an independent legal person, the responsible shareholders of the unlimited company need to be borne, that is to say, if the debts owed by the unlimited company need to be paid off by the shareholders, the creditors even have the right to apply to the court for seizure and sale any property in the name of the proprietor.
Who can open an unlimited company?
The qualifications and methods of applying for an unlimited company are very simple. As long as you are the holder of a "Hong Kong Resident Identity Card" or "Hong Kong Permanent Identity Card", you are already eligible to set up an unlimited company.
Procedures for opening an unlimited company
Applicants only need to go to the business registration office on the fourth floor of the tax building to apply for business registration (you can apply for one-year and three-year deadlines. Since the government sometimes waives the business registration certificate fee, the time and procedures for applying for a refund of the paid fees will be more complicated. , so we would recommend applying for a one-year term. Applicants need to bring their own ID cards, and after paying, they will have their own unlimited company.
The cost of running an unlimited company
Generally speaking, in terms of government fees, unlimited companies only need to pay a business registration fee each year. In addition, in the tax return, there is no requirement to have an audited account and submit it to the tax bureau. You only need to simply enter the account and have a profit statement to calculate the net profit and loss of the year before you can fill out the tax return (for a sole proprietorship company BIR60, partnership company fills in BIR52) together with the tax bureau.
The application procedure for an unlimited company is simple, and the cost is cheaper than that of a limited company. Therefore, some SME owners will apply for an unlimited company when their business starts, as a "trial operation". However, when the scale of the company gradually becomes larger and the risks increase, the company owner will want to convert the unlimited company into a limited company, and do not want to affect the private property because of the company's debt.
Method: Dissolve an unlimited company and open a limited company
First of all, the procedures for closing an unlimited company in the government are not complicated, and it can save the long-term expenses of the operation of the unlimited company. More importantly, there will be no administrative and accounting confusion. For example, a customer signs a contract with your limited company, but transfers the fee to your unlimited company's bank account. Another example is that the business registration fee that needs to be paid does not need to be paid twice a year. Sometimes a company forgets to pay the business registration fee of an unlimited company and is sued by the government, and needs to go to court and pay a fine.
Of course, it may take a lot of time to open a new bank account when switching, or make other changes to the contract with others, but based on the concept of "long pain is worse than short pain", we will advise customers to put the unlimited company when time permits. Closing business and opening a new limited company.
To sum up:
The establishment of an unlimited company is simple and the cost is relatively low, but the responsibility will be implicated on the shareholders. If you plan to go to the bank to borrow money to expand, you must think twice, and because the unlimited company is not a corporate body, some contracts may not recognize the unlimited company. , so it is a good start for the novice to try out the entrepreneurship and management. Feel free to call 3575 6888 for more information, or Whatsapp our sales consultant!