Sole Proprietorship

A Sole Proprietorship is the most basic form of business structure in Hong Kong. It is owned and operated by one individual, and unlike a Limited Company, it is not a separate legal entity. This means the business and the owner are legally the same person, and the owner is personally liable for all debts and obligations of the business.
This structure is commonly chosen by freelancers, small traders, and service providers due to its ease of setup and low costs. However, with simplicity comes increased personal risk, which business owners should carefully consider before choosing this structure for Company Registration in Hong Kong.

To complete a Sole Proprietorship company registration in Hong Kong, the business owner must apply for a Business Registration Certificate through the Inland Revenue Department (IRD). The registration must be completed within one month of starting operations.

Registration can be done online through the eTAX portal or in person at the Business Registration Office. The process involves submitting a completed application form, proof of identity (such as a Hong Kong ID or passport), and information about the business, including its nature and address.
Applicants can choose to register their business under their legal name or a trade name. However, using a trade name requires ensuring that it does not conflict with any existing trademarks or restricted terms. Once approved, the IRD issues a Business Registration Certificate, which must be displayed at the place of business and renewed annually or every three years, depending on the selected duration.

The key benefit of this business structure is simplicity. Setting up a Sole Proprietorship in Hong Kong involves minimal documentation, no capital requirements, and lower administrative costs. Business owners retain full control over all decisions and profits, without the need to consult partners or shareholders.

Despite its ease, a Sole Proprietorship comes with unlimited personal liability. Since there is no legal distinction between the business and the owner, all debts, lawsuits, and obligations fall directly on the owner’s shoulders. This structure may also reduce the business’s credibility with investors or larger clients and limit the ability to raise funds or expand quickly.

For tax purposes, a Sole Proprietorship is not taxed as a separate entity. Instead, business income is assessed as part of the owner’s personal income under Profits Tax. The current Profits Tax rate for unincorporated businesses in Hong Kong is 15% on net assessable profits.

Sole Proprietors must file the Tax Return – Individuals (Form BIR60), which includes income from all sources, including business profits. Although audited accounts are not required for Sole Proprietorships, owners must keep proper business records, such as sales receipts, invoices, and expense documentation, for at least seven years.
Appointing a qualified accountant for Accounting & Audit Services is critical. Failure to comply can result in penalties and legal prosecution.

While all businesses in Hong Kong must obtain a Business Registration Certificate, certain types of businesses also require specific licenses or permits to operate legally. Examples include restaurants, import/export businesses, financial services, childcare centers, and schools.
Licenses are issued by different government departments depending on the nature of your business. To find out whether your business needs a license, use the Business Licence Information Service provided by the Hong Kong government.

Yes, foreigners can register a Sole Proprietorship in Hong Kong, but they must comply with immigration and legal requirements. Foreign individuals can own and manage a business as a Sole Proprietor, provided they have a valid Investment Visa or other visa that permits business activities.
Tourist and student visa holders are not eligible to register or operate a business. Foreign entrepreneurs must also provide a local business address and may need to engage a local agent or service provider to assist with government communications. Themis Partner assists with end-to-end immigration processing. Please refer to our visa services for more information.

The main difference between a Sole Proprietorship and a Limited Company lies in their legal status. A Limited Company is a separate legal entity that can enter into contracts, sue or be sued, and own property in its own name. In contrast, a Sole Proprietorship is inseparable from the owner, who bears all legal and financial responsibilities.

Limited Companies offer limited liability to shareholders, meaning their personal assets are protected. Sole Proprietors, on the other hand, are personally liable for all debts and obligations.
From a tax perspective, Limited Companies benefit from the two-tier tax system – 8.25% on the first HKD 2 million in profits and 16.5% thereafter. They also have higher compliance requirements, such as filing annual returns, holding annual general meetings, and preparing audited financial statements.

Yes, a Sole Proprietor in Hong Kong is personally liable for all business debts. There is no legal distinction between the individual and the business entity. This means if the business incurs debt or legal judgments, creditors can claim the owner’s personal assets such as personal savings, property, or other investments to settle those obligations.

Yes, a Sole Proprietor can legally hire employees in Hong Kong. However, they must fulfill all obligations outlined under the Employment Ordinance, including providing written employment contracts, paying statutory benefits, and contributing to the Mandatory Provident Fund (MPF) for all eligible employees.
Sole Proprietors must also register as employers with the Inland Revenue Department and issue Employer’s Returns (Form BIR56A) each year. Failure to comply with labor laws can result in penalties, fines, or lawsuits.
While legally permitted, hiring staff under a Sole Proprietorship increases administrative responsibilities and potential legal exposure. Many entrepreneurs work with HR or payroll service providers to ensure full compliance.

At Themis Partner, we specialize in company registration in Hong Kong, providing end-to-end services to help entrepreneurs and small business owners get started quickly and compliantly. Whether you are a local freelancer or an international investor, our legal experts guide you through business registration, licensing, tax filing, and ongoing compliance.
Get started today by speaking with a member of our team for a free consultation. We make business setup in Hong Kong simple, secure, and stress-free. Contact us today to begin your company registration journey with expert legal support.