Q:
|
What is partnership?
|
|
A:
|
A partnership ("partnership") refers a profit-making business composed of two or more partners, and generally cannot be composed of more than 20 partners. Every partner in a partnership is an agent of the firm. The business activities of any one of partner is binding on the partnership firm and other partners. They are jointly responsible for the firm’s debts, and are jointly entitled to the company's assets, profits and losses, which are also divided into proportions based on the partners' ownership.
|
Q:
|
How can I set up a partnership? 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 partners who run a business in Hong Kong as partnership 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 partnership is not required to notify Companies Registry. However, if the partnership constituted with one or more limited partner(s) with limited liabilities, it is required to make further application to Companies Registry to register as a limited partnership.
|
Q:
|
Who can set up a partnership?
|
A:
|
Any person who carrying on partnership 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 a partnership 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 to the Companies Registry under the Companies Ordinance.
|
Q:
|
After setting up a partnership, what are my tax responsibilities?
|
A:
|
You are chargeable to profits tax on the assessable profits of your partnership 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:
|
How are the responsibilities and powers of each partner distributed?
|
A:
|
The partners may conclude a partnership agreement orally or in writing to state the rights and responsibilities among the partners. If there is no partnership agreement, all partners are deemed to share and bear the same proportion of the income and expenditure of the firm, and each partner is an agent of the partnership firm that the contract signed and the liabilities incurred are legally binding on all partners, including the assumption of unlimited debt liabilities.
|
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 partnership from tax perspective?
|
A:
|
Profits from the business will be calculated at the partners’ 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 partners.
|
FAQ
