Learn about Incorporatin - Comparison of Different Business Vehicles

Unincorporated vehicles

Unincorporated vehicles (sole proprietors and partnerships) are usually easier and cheaper to form. They are not required to disclose most of the information for public inspection but the owner will be personally liable for all debts and obligations of the business.

They are not a popular form of business in Hong Kong mainly because of the risks involved and the problem of transfer of ownership and raising fund during the course of business.

Incorporated vehicles

Incorporated vehicles (limited companies) are relatively more expensive to form and operate, but the liability of owner will be limited and it is easier to expand or transfer ownership.

Incorporated vehicles is the most popular form of business in Hong Kong. There are also a lot of legal advantages of using a limited company to carry on a business.

Here is a summary and comparison of unincorporated and incorporated business :

	Unincorporated Sole Proprietors / Partnerships	Incorporated Limited Companies
No.of partners	1 for sole proprietor / 2-20 for partnerships	At least 1
Registered with Companies Registry	Not required	Required
Accounting record	Required	Required
Audit requirement	Not required	At least once per year by certified public accountant
Disclosure of company information	Not required	Financial statements(not for private companies), company directors, secretary, shareholding structure, charges, etc are required to file with the Companies Registry for public inspection
Startup costs	Lower	Higher
Running costs	Lower	Higher
Separate legal entity	No - owner personally liable for obligations and debts of business	Yes - liability of owners is limited
Fund raising methods	Usually owner personal injection or personal bank loan	By issuing new shares, exchanging shares, placing of shares, bank loan, etc
Registration procedure	Apply to business registration office within 1 month from start of business	Appoint a professional company secretarial firm or lawyer to incorporate, usually requires one to two weeks to incorporate