Establishing a Limited Company? Pay Attention to These Key Points to Avoid Pitfalls

Posted by City AI Accounting on 2024-01-20 | Featured

Establishing a Limited Company?
Pay Attention to These Key Points to Avoid Pitfalls

Today, we're sharing five accounting pitfalls to avoid when setting up a Hong Kong limited company to ensure your business doesn't encounter unnecessary troubles. Here's a summary and further explanation of the video content:

Why Shouldn't You Appoint Just Any Friend as Your Company Secretary?

When choosing a company secretary, don't underestimate the importance of this decision. Reflecting on a business owner's experience, he mentioned that his company's appointed secretary was always a friend. However, this friend had a limited understanding of the responsibilities associated with being a legal secretary, lacking awareness of when to submit specific documents and never proactively reminding the business owner of important matters. This resulted in fines for the business owner.

Therefore, when selecting a secretary, it's advisable to choose a professional and experienced secretary service. They can provide clear guidance, ensuring your company submits the necessary documents according to regulations each year, avoiding fines and legal issues. This way, you can focus on your business with peace of mind, leaving the legal details in capable hands.

City AI Accounting offers professional secretary services. To learn more about our secretary services, you can click [here].

Can a Limited Company Be Left Inactive Without Consequences?

If your limited company is in a state of inactivity, you might wonder, "Can it be left untouched indefinitely?"

The answer is no! Starting from April 1, 2023, the government has explicitly stated that regardless of the income of a limited company, it is required to submit an audit report. Additionally, limited companies generally need to submit annual returns to the government each year.

However, there is a way to avoid submitting an audit report and annual returns—by applying to become a dormant company. To understand what a dormant company is, you can click on the following link:

What Is a Dormant Company? How to Make a Company Dormant, and What Are the Benefits?

Smart Tax Filing to Avoid Improper Tax Reduction Tactics

Some business owners, due to tax pressures or other reasons, may attempt to find various improper tax reduction tactics. While this approach might alleviate some burdens in the short term, it often comes with risks and subsequent legal issues.

For example, a company might try to reduce income tax through exaggerated business expenses and unreal tax losses. When the accountant audits the entire set of financials, they might leave a "qualified opinion" in the report. Such a mark draws high attention from the tax authorities. Once discovered, the company could face substantial fines and legal liabilities.

Apply for a Dedicated Company Bank Account Early

The importance of applying for a dedicated company bank account early cannot be overstated. Using a personal account for business operations might lead to the freezing of personal bank accounts, impacting both personal life and business operations.

Establishing a limited company requires careful consideration! Choosing the right secretary, managing documents effectively, filing taxes wisely, and early opening of a dedicated company bank account—all these keys lie in prevention, ensuring unobstructed company development. Have questions? Feel free to consult City AI Accounting; we are happy to assist your business in smooth sailing.

Other Information

Amending Articles of Association: How to Modify Your Company's Articles of Association?

What Is a Dormant Company? How to Make a Company Dormant, and What Are the Benefits?

The above content is provided for reference only. If you have any inquiries about company secretarial matters or wish to consult on other accounting issues, please feel free to click the button below to contact us:

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