HKSTP TecONE Seminar on Company Structure from Accounting Perspective

The TecONE seminar named “Group Structure and Planning for HK Companies from Accounting Perspective” was organized by Hong Kong Science & Technology Parks Corporation (HKSTP) on 13th Jan 2016. The right organizational structure often boosts business strength and protects company against risk. This seminar aimed to share how tax benefits and incentives vary in different types of business entities, which therefore relate to tax efficiency and cost reduction with an appropriate company structure.

The guest speaker was Dr. CHENG Faat Ting Gary (Managing Director, Gary Cheng CPA Limited) and his company also located in Science Park. His topics included different types of Business Entities in Hong Kong, choosing criteria, Tax Benefits and Incentives, Risk and Liabilities, as well as, Group Structure.

In the beginning, Dr. Gary Cheng briefed four types of business entities in Hong Kong that were Sole Proprietorship, Partnership, Limited Liability Company and Foreign Oversea Company (such as BVI, Cayman Island, Samoa, etc.)

Then Dr. Gary Cheng explained some factors for choosing certain business entity included size, scope, nature and purpose of your business, business liability, capital requirement, etc. The following table summarized the choosing factors of four types of business entities. 

Some tax benefit and incentive cases for different business entities were discussed such as offshore claims for trading profits, manufacturing profits and services incomes.

After that Dr. Cheng introduced some organization structure. For Start Up stage, he suggested to use simple structure in the following diagram, so as to protect your house for loaning.

Dr. Cheng mentioned different risks and liabilities to us. Nature of Risk included Credit Risk, Liquidity Risk and Market Risk (e.g. Interest Rate Risk, Exchange Rate Risk); and Liabilities included Unlimited, Limited, Joint and Several. Then he introduced an organization chart that separated different company by function in group (e.g. Trading, Manufacturing, HR Function, IP and Housing).

For Large Structure of Globalized Corporation, he suggested to separate by business unit under different regions that could maintain the feasibility.

Lastly, Dr. Cheng suggested us to review our current operation; gather documentary evidence to support what and how your claiming; and restructure your current operations to enhance tax efficiency.

Reference:
HKSTP - http://www.hkstp.org
TecONE - http://tecone.hkstp.org/t1_web/