2023-07-07Hong Kong Sole Proprietorship & Partnership
(1)
It is easy and quick to start trading as a sole proprietor as there are no formalities to comply with other than notifying the Tax Authorities;
(2)
The business itself is flexible. Any decisions and changes can be made easily as there is only one person to make the relevant choices;
(3)
All the profits generated by the business will belong to the sole proprietor;
(4)
Sole proprietor own their business and so are able to sell or transfer it as they wish.
(1)
A sole proprietor has unlimited liability. This means that if the business should collapse, the sole proprietor could lose not only the cash and other assets invested in the business but all his/her personal assets as well, to meet the debts of the business;
(2)
As there is only one person with overall responsibility for the success of the business this may increase the pressure on that individual.
(1)
Partnerships face fewer statutory controls than limited companies;
(2)
There is no requirement to audit or publish accounts or to register the Partnership Agreement. No returns are required to be made by partnerships, except for income tax;
(3)
The internal structure of partnerships is very flexible. Most of the rules for the structure of partnerships can be overridden if the partners agree otherwise;
(4)
Partnerships can be simple and cheap to set up. There is no requirement to have any written documentation other than a Partnership Agreement;
(5)
Partners owe a duty of good faith to each other. Partners must also account to the partnership for any secret profits that they make from the partnership without the consent of the other partners, including any profits gained from any competing business.
(1)
Partners face unlimited liability for all the debts of the partnership. This means that the personal assets of each partner are at risk;
(2)
Partners are jointly liable for partnership debts. This means that if one partner fails to pay his share of the partnership debt, the other partners must make up the shortfall;
(3)
Any individual partner can be sued for all the debts of the partnership;
(4)
The partnership does not have its own separate legal identity from the partners. Therefore, unless otherwise agreed, the partnership will come to an end each time a partner leaves;
(5)
Expansion of further capital can only be given personally by the individual partners.