Limited by Guarantee

Advantages

Here are some advantages of registering this sort of entity in Hong Kong:
No Shareholders – the primary and foremost benefit is that companies can have guarantors, instead of having shareholders. Ultimately, making this fitting for voluntary kinds of organizations. These guarantees will donate a fixed amount of cash that you simply can use for your company’s debts just in case of insolvency.
Limited Liability – The members of this company enjoy indebtedness and maintain democratic control for all the matters.
Separate & Clear Legal Entity – The third advantage is that limited by guarantee is taken into account as a particular and separate legal entity. In short, this company isn't joint with the members; organizations can employ people, hold property, and enter into leases and other contracts with its own name. Moreover, while operating limited by guarantee, directors are often changed without producing any effects on the organization, and its activities. The rationale is since the corporation uses its name everywhere and not the director’s name.
Stable Structure – This business entity is entitled because of the far more ‘stable’ structure than a voluntary association by the funding bodies and public agencies.

Disadvantages

Even though this sort of business has some good points, they have some drawbacks that are shared below in brief:
Profits – The profits gained within the company can’t be distributed and working capital could be limited.
Standard Ongoing Requirements – If a business owner wants to possess any transformations within the registered office, company secretary, or maybe directors, then he must notify the businesses Registry. Same within the came of annual returns, and annual accounts need to be filed.
Time-Consuming Registration Procedures – so as to line up limited by guarantee, and apply to be a charity after formation, you would like to follow formal registration procedures in Hong Kong. And these registration processes are quite complicated and time-consuming.
Expensive Setup – And last but not least, limited by guarantee requires much higher costs as compared to typical Ltd. What’s more, the annual prices also are higher, especially within the case a proper audit is required.

How to find a company limited by guarantee?

Since for setting up a company limited by guarantee, you want to have 1 founder member, a company secretary, a minimum of 2 natural person directors, and a registered office address.

In fact, all company directors must not be corporate. Members meanwhile are often either corporate or individual. While there's no restriction on the nationality and resident status of either directors or shareholders.
Setting up a limited by guarantee (as a non-profit organization) in Hong Kong, usually takes a minimum of one month to be officially incorporated.

Incorporate Your Non-Profit Organisation in Hong Kong with us

In order to include your non-profit organization in Hong Kong, you would like to pay just $1294 USD for the method. We assure you to supply you with the absolute best or world-class services that will not only cause you to stand out but will take you and your business to new heights.

Moreover, let’s say in future if you would like to use your “Limited by Guarantee” Company as a Charity organization, then you'll get to apply with the Inland Revenue Department, and IRD will review individually (will not base on the approval of the Companies Registry).

How does one find out a Charity in Hong Kong?

If you would like to line a charity in Hong Kong, then you'll choose various ways. As mentioned above, to register a company limited by guarantee (a non-profit organization) in Hong Kong, therein case, you would like to think about the governing instrument. A charity must have a governing instrument that:

Prohibits the distribution of its income and property to its members;
Specifies how assets should be addressed upon dissolution (usually donated to other charities); and
Clearly indicates its objectives;
Prohibits members of its administration like directors, trustees, etc. from receiving remuneration;
Requires the keeping of sufficient and proper records operating records (e.g., donation receipts, proper accounting, etc.)

For applying to become a charity, you would like to get the assistance of professionals on document preparation. But still, the businesses Registry (CR) and Inland Revenue Department (IRD) will make decisions independently.

How to obtain Charitable Status, i.e., Tax Exemption?

Under section 88 of the Inland Revenue Ordinance (Cap 112), the charity is often entitled to tax exemption. However, only charities under the jurisdiction of Hong Kong courts qualify for the exemption.

From moving forward, you ought to know that not all limited by guarantee, non-profit-making organization or voluntary are like charity, regardless of how worthy their causes would be. Moreover, as per the Inland Revenue Ordinance, there's no provision that exempts a “voluntary” or “non-profit-making organization” from tax.

The tax exemption will only tend to charities which are established in Hong Kong or Hong Kong establishment of overseas charities like those deemed to be established in Hong Kong under section 4 of the Societies Ordinance or registered under Part XI of the businesses Ordinance (Cap 32, Old CO) or under Part 16 of the Companies Ordinance (Cap 622, New CO).

They even have to organize and submit supporting documents of tax exemption with IRD. This process may take tons of your time.