Q:
|
What is sole proprietorship?
|
A:
|
A sole proprietorship is run by a single individual in personal name to operate a business in Hong Kong. The proprietor may hire employees for daily business operation. Sole proprietorship is not a separate legal entity that the sole proprietor is personally entitled to all the profits and is responsible for any debts that the business incurs.
|
Q:
|
How can I set up a sole proprietorship? Do I have to obtain a business registration certificate from the Inland Revenue Department (“IRD”) and register with the Companies Registry before commencement of business?
|
A:
|
The Business Registration Ordinance (Cap. 310 of the Laws of Hong Kong) requires every person who runs a business in Hong Kong as sole proprietorship to register the business at the IRD within one month from the date of commencement of business, and to display a valid Business Registration Certificate at the place of business. Registration of a sole proprietorship is not required to notify Companies Registry.
|
Q:
|
Who can set up a sole proprietorship?
|
A:
|
Any person who carrying on sole proprietorship can apply for the business registration. However, foreigners as visitor without the valid permit (e.g. work permit) are normally not allowed to establish or join in any business as per their limit of stay in Hong Kong. IRD will require foreigners to provide further information with a view to ensuring that the particulars, including the date of commencement, stated in the relevant application form are correct.
|
Q:
|
Can I transform the sole proprietorship to a limited company?
|
A:
|
No. If you intend to carry on your business in the form of a limited company in Hong Kong, you have to deliver an application for incorporation of a limited company under the Companies Ordinance to the Companies Registry.
|
Q:
|
After setting up a sole proprietorship, what are my tax responsibilities?
|
A:
|
You are chargeable to profits tax on the assessable profits of your sole proprietorship business, and need to:
|
1.
|
keep sufficient business records for at least 7 years;
|
|
2.
|
prepare books of accounts based on accounting records;
|
|
3.
|
complete and submit a tax return for reporting business profits or losses;
|
|
4.
|
notify the IRD in writing about your liability to tax, not later than 4 months after the end of the basis period for the year of assessment concerned, unless you have already received the tax return from the Department; and
|
|
5.
|
pay the tax.
|
|
Q:
|
Do I need to notify the IRD about the change of business address or cessation of my business?
|
|
A:
|
Yes, you should notify the IRD by specified forms within one month of changes.
|
Q:
|
What are the advantages of forming a sole proprietorship from tax perspective?
|
|
A:
|
Profits from the business will be calculated at the sole proprietor's personal tax, which is a progressive rate that may be lower than the corporate (limited company) tax rate. Also, business losses can be offset against the income of other business of the proprietor.
|
FAQ
