Hong Kong is one of the best business cities in Asia. It has an open economy, low tax, and ease of establishing a company. However, prior to starting a business, it is also important to have an understanding of the different types of business entities—particularly the difference between a licensed corporation and a registered business.
They both enable you to work legally in Hong Kong, but they’ve extraordinary capabilities. In this blog, we will outline the main differences, policies you need to comply with, and help you decide which structure will be first-class to your organization.
What is a Licensed Company in Hong Kong?
A certified enterprise is a business enterprise that includes on regulated financial business in Hong Kong. It has to be certified by using the Securities and Futures Commission (SFC). They are ruled via the Securities and Futures Ordinance (SFO) and have to observe stringent regulations.
Who Needs to Be Licensed?
Groups doing these activities need to get an SFC license:
- Asset management
- Securities dealing
- Corporate finance advice
- Trading futures contracts
- Utilized foreign exchange trading
Key Examples
- Hedge funds
- Stock brokerages
- Private equity companies
- Investment advisors
What is a Registered Business in Hong Kong?
A registered business is any business in Hong Kong that has undergone registration with the Companies Registry and has a Business Registration Certificate. It is mandatory for all businesses, from freelancers to corporations, except those exempted by law.
Appropriate Businesses
- Trading companies
- Retail shops
- Consulting firms
- E-commerce startups
- Service-based SMEs
It is mainly for tax and legal identification. It does not allow you to participate in regulated financial services unless you have a special license.
Key Differences at a Glance
|
Aspect |
Licensed Corporation |
Registered Business |
|
Regulatory Authority |
Securities and Futures Commission (SFC) |
Inland Revenue Department (IRD), Companies Registry |
|
Nature of Activities |
Regulated financial services (e.g., asset management, securities trading) |
General business operations (e.g., trading, consulting, services) |
|
Process |
Requires application, vetting, and SFC approval |
Submit incorporation documents and register with IRD |
|
Ongoing Compliance |
High: audit, internal controls, fit & proper tests, reporting |
Moderate: tax filings, renewals |
|
Timeline & Costs |
Longer and costlier |
Faster and more affordable |
Licensing Requirements for a Licensed Corporation
To get a license from the SFC, companies must meet these conditions:
- Fit and Proper Criteria: Directors and senior staff are required to undergo background checks for integrity and competence.
- Responsible Officers (ROs): Every regulated activity will have a minimum of two ROs.
- Financial Requirements: Shall have minimum paid-up capital and liquid assets requirements.
- Internal Controls: Required to have effective risk management systems, internal audits, and compliance procedures.
Requirements to Register a General Business
The procedure for registering a general business in Hong Kong is as follows:
- Business Registration Certificate: Should be acquired within a month of initiating business.
- Company Incorporation: To start a limited company, register it with the Companies Registry using a valid company name and Articles of Association.
- Renewal and Maintenance: Renew the Business Registration Certificate every year and submit tax returns.
Which One Do You Need?
Following is how to choose between a registered business and a licensed corporation:
- Licensed Corporation: If you want to carry out SFC-regulated financial services (for example, asset management or stockbroking), you should be a licensed corporation.
- Registered Business: For other business activities like online selling, consulting, or importing and exporting, just registering is enough.
Common Errors to Avoid
- Assuming commercial enterprise registration equals a license: Registration lets in for everyday operations but not controlled financial transactions.
- Operating without an SFC license: Without a license, imparting financial services can bring about heavy fines.
- Ignoring Responsible Officer requirements: Failure to appoint the appropriate individuals can hold up your licensing approval.
Conclusion
It is important to know the difference between a registered business and a licensed corporation in order to stay compliant with the laws of Hong Kong. For most businesses, registering a business would be enough, but any firm offering regulated financial services must get a license from the SFC.
FAQs
Q: In what ways is a licensed corporation different from a registered business?
A licensed corporation is authorized by the SFC to carry out certain financial services. A registered business is merely registered with the IRD for ordinary business operations.
Q: Do I must register my enterprise if I have already got an SFC license?
Yes. An SFC license allows you to do enterprise in regulated industries, but you still must sign up your business enterprise with the IRD.
Q: How long does it take to become a licensed corporation?
The SFC licensing process typically ranges from 2 to 6 months. It varies with the complexity and completeness of the application.
Conclusion: How FastLane HR Can Help
It is valuable to know the difference between a registered business and a licensed company so that you may comply with the rules and decide on the best structure for your Hong Kong business. It is simple to register a company for most types of businesses, yet any business hoping to deal in financial services must undergo the stricter SFC licensing process. FastLane HR is here to help.
Our experienced team provides full service for business registration and SFC licence application. We get you started with your business, keep you compliant with the regulations, and act as your company secretary and HR partner. We make the setup easy so that you can focus on growing your business with confidence.
Do you need help choosing the best configuration for you?
Contact FastLane HR today, and we will guide you through your next step in Hong Kong’s busy business landscape.