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What is the difference between a Sole proprietorship and a Limited Company (LTD)?

The LLC is the most common type of company in Hong Kong. This status protects personal assets from debts that may be generated by the company, there is the creation of a new legal entity.

Sole proprietorship is more suited to small-scale, low-risk businesses run by a single owner. There is no creation of a legal entity, so personal assets are not protected from the company’s debts.


The advantages of the LTDare:

  • imited risks : limited to the invested capital
  • credibility: LLCs are more appreciated by investors than ownership, which is more risky.
  • change of management: the company can be sold and continue to exist
  • investment: simplified by the possibility of bringing in new shareholders

However, there are disadvantages: 

  • The creation of a company is more complex
  • Statutory compliance requirements that must be adhered to
  • A more complex liquidation procedure
  • An obligation to make certain information public by communicating it to the Companies Registrary


The Sole proprietership, on the other hand, makes it possible: 

  • A simpler creation of a company
  • Simplified decision making because the owner has sole control over his company
  • To benefit from all the profits because there is no obligation to share them.
  • Simplified cessation of activity
  • Lower operating costs because there is no statutory compliance requirements.

However, sole proprietorship has its disadvantages:

  • There is no other corporate entity, so the owner is responsible for the company’s debts. There is therefore no protection of the owner’s personal property.
  • The capital is limited to that of the owner and the profits generated.
  • The activity has a limited lifespan because it ceases to exist on the death of the owner.
  • The sale or transfer of the business can only be done by selling the assets of the business.

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