Entrepreneurs who wish to start a business have a variety of business entities to choose from, the most common company types being a sole proprietorship or private limited company. While many entrepreneurs are eager to begin their business ventures and incorporate their company, it is important to understand the various advantages and disadvantages associated with each company type. In this article, we look to provide insight regarding the advantages and disadvantages of sole proprietorships and limited companies so that entrepreneurs can understand the most appropriate company type for their business.
Majority of SMEs in Hong Kong are incorporated as a private limited company as this company type has various advantages that other company types do not have. Private limited companies are commonly utilized by companies who are engaging in trade and business.
1.1. Advantages of a Private Limited Company
Limited personal liability
Tax Benefits and Incentives
Efficiency in Incorporation
1.2. Disadvantages of a Private Limited Company
Regular audits and compliance
Director and Shareholder Disclosure
Public Disclosure Requirements
Sole proprietorships are businesses that are owned and operated by a single individual, also known as the sole proprietor. As a single individual is responsible for ownership and operations, there is no legal distinction between the individual and the business entity.
2.1. Advantages of a Sole Proprietorship
Easy to Incorporate
Efficiency in Decision Making
Entitlement to Profits
Ease of Dissolution
2.2. Disadvantages of a Sole Proprietorship
Unlimited Personal Liability
Limited Business Life
Private limited companies and sole proprietorships each carry with them their own unique set of advantages and disadvantages. However, it is important to note that one company type is not particularly “better” than the other – each company type has certain situations which make them more appropriate. As a licensed Hong Kong company secretary, the FastLane Group has extensive experience incorporating companies in Hong Kong. Please contactthe FastLane Group for assistance!
This blog originated on https://fastlanepro.hk/sole-proprietorship-or-limited-company/