Learn About the Differences Between Limited and Unlimited Companies

What Are the Differences Between Limited Companies and Unlimited Companies?

Establishing an unlimited company has always been a popular choice for entrepreneurs due to its simple application process and lower costs compared to forming a Hong Kong limited company.

Limited companies have more extensive statutory requirements, such as the need to submit annual returns and conduct audits, resulting in higher annual operating costs. In contrast, the establishment and maintenance costs of unlimited companies are lower. The choice of structure should be based on business needs and risk tolerance.

Limited Company
Annual Obligations
  • Pay the business registration fee
  • Submit the Annual Return (NAR1)
  • Update business registration information (if there are changes)
  • Update company registration and company register information (if there are changes)
  • Prepare financial statements annually and submit them to auditors for review
  • Submit the Profits Tax Return
Unlimited Company
Annual Obligations
  • Pay the business registration fee
  • Update business registration information (if there are changes)
  • Submit the Profits Tax Return
Scope
Unlimited Company
Limited Company
  • Tax Rates
    Under the two-tier tax system, the first $2,000,000 of profits is taxed at 7.5%, and thereafter at 15%.
    Under the two-tier tax system, the first $2,000,000 of profits is taxed at 8.25%, and thereafter at 16.5%.
  • Eligibility
    Hong Kong residents or permanent residents of Hong Kong.

    If the applicant is not a Hong Kong resident, they must appoint a Hong Kong resident as the company agent.
    Applicable to both Hong Kong and non-Hong Kong residents.

    If the applicant is not a Hong Kong resident, the company secretary must be a Hong Kong resident or a Hong Kong-registered company.
  • Continuity
    The company must be liquidated or dissolved if the owner or partner goes bankrupt or passes away.
    It will exist permanently unless it is liquidated.
  • Debt Issues
    The owner is liable for unlimited debts of the company.
    Shareholders' personal finances are protected, and their liability is limited to the registered capital.
  • Legal Status
    Not an independent legal entity; the owner cannot contract with the company.
    An independent legal entity; shareholders can contract with the company.
  • Operating Costs
    Lower; only requires accounting and tax filing annually.
    Higher; requires both accounting and auditing annually.
  • Company Formation Costs
    Lower; government fees only include the business registration certificate fee of $2,200.
    Higher; government fees include the business registration certificate fee, company registration fees, and the cost of a company secretary.
  • Business Registration Certificate Exemption
    If eligible, an exemption can be applied to waive the business registration certificate fee.
    Regardless of whether the company is operational, the business registration certificate must be paid as long as the company has not officially applied for deregistration.