Foreign business owners who want toset up a business in Hong Kong can choose to establish a branch or a subsidiary. Each of these two business forms has its own advantages and disadvantages. Our lawyers in Hong Kong can help you decide which business form suits your needs and open a subsidiary or a branch in Hong Kong.
Below you can observe the main differences between a branch and a subsidiary in a scheme created by our Hong Kong lawyers.
The most important difference between a branch and a subsidiary is the liability of the parent company abroad. While the subsidiary is separate from the parent company, the branch is fully dependent. Another option suitable for foreign companies Hong Kong is a representative office.
Find out more about the characteristics of the branch and subsidiary from this video:
Branches in Hong Kong
A branch is an extension of the parent company, this means that its name must be the same as that of the parent company and must conduct the same business activities. It is not a separate legal entity but it also has to be registered at the Company Registry.
The parent company must appoint a representative agent for the branch in Hong Kong. This type of company will have to observe the taxation rules and annual filing rules. Although the parent company is liable for any debts of the branch that may arise in Hong Kong, the branch also has certain advantages, among which:
-no lengthy company liquidation process;
-lower maintenance costs;
-lower set up costs.
Our Hong Kong lawyers can tell you more about the taxation for non-resident entities that applies for branches in Hong Kong.
Subsidiaries in Hong Kong
A subsidiary, unlike the branch, is a separate legal entity that needs to be incorporated just as any other Hong Kong company. It can be 100% foreign owned and its name does not have to be the same as the parent company’s. Also, the subsidiary can perform any business activities. This type of company will be taxed as a Hong Kong resident company.
The subsidiary must have at least one director and one shareholder and it is also necessary to open a bank account for the company. Some of the most important advantages of a subsidiary in Hong Kong are:
-no liability for the parent company;
-the subsidiary can have more credibility because it is a resident company;
-it’s accounts do not need to be filed on public record;
-the parent company will only provide subsidiary-related information to the Registrar and keep it up to date.
Our Hong Kong law firm offers special legal services for companies and individuals. If you want to expand your business activities in Hong Kong and need help in choosing the right legal entity, you can contact our Hong Kong lawyers.
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