Benefits and Considerations of Buying a Readymade (Shelf) Company

In Hong Kong, if you are eager to start a business, buying a shelf company may be the best option for you. In this blog, OneStart introduce the benefits and considerations of shelf companies, allowing you to choose the right entrepreneurial solution for yourself.

Seller gives key of the shelf company to new owners.

What is a Readymade Company?

Due to the portrayal in movies, many people associate readymade companies (also known as shell companies) with money laundering and other illegal activities. However, the use of shelf companies is neutral and mainly caters to individuals who are eager to establish a company quickly, allowing them to skip the registration process and efficiently start their business.

A readymade company is a company that has already completed the registration process and confirmed its name. It usually has the following characteristics:

No operations
No actual business activities
No assets or liabilities
Prepared legal documents such as the registration certificate, Articles of Association, company seal, and signature chop

What are the benefits of a readymade Company?

1. Timesaving

The process of buying a readymade company is much simpler compared to starting a brand-new company. By skipping numerous complicated procedures, you can start using the company immediately, making it suitable for those who are eager to conduct business or transactions under a limited company name.

2. Brand restructuring

A readymade company is no different from a regular company, and having a complete limited company structure can create a positive impression and help establish a brand image.

3. Quick bank account opening

Opening a bank account for a new company may take up to two weeks, causing a delay in your financial transactions. However, purchasing a readymade company allows you to open a bank account and start your monetary transactions quickly almost instantly.

4. Tax planning (for overseas companies)

By purchasing a readymade company, overseas companies can quickly obtain the benefits of a local limited company, including low tax rates and tax exemptions, significantly reducing operational expenses in Hong Kong.

Can the name of a readymade company be changed?

Readymade companies have an original company name when they are established. After purchasing a shelf company, you can also change the company name. However, the new company name needs to be checked to ensure its availability.

Considerations when Buying a Company

Businessman hand holding a red badge with the word buy, Buying decision in readymade company.

1. How to determine if a readymade company is not operational?

Readymade companies purchased from reputable secretarial companies should not have any hidden debts or legal risks. For safety reasons, you can also request a proof of non-operation from the current directors, stating that the company has no operations and does not hold any assets, inventory, or properties. It should also confirm that the directors and founding members will be responsible for all debts prior to the transfer of shares and directorship.

2. Are there any hidden fees?

After purchasing a readymade company, you may need to open a bank account for official operations, which requires certain documents and payment of stamp duty for registered capital. Additionally, it is important to confirm the next maintenance deadline for the purchased company. If there will be additional maintenance fees shortly after the purchase, buyers should consider their financial capabilities before deciding to proceed with the purchase.

3. Confirm if the secretarial company holds a license for trust or corporate services provision (TCSP)

There are multiple benefits to purchasing a readymade company through a licensed secretarial company:

Regulation compliance to ensure qualified services and transactions
Simplified company transfer procedures
Smoother handling of post-transfer procedures

4. Has the commencement notice been filed?

According to regulations, any Hong Kong company that is already in operation must notify the Inland Revenue Department within one month of commencement and apply for the company's business nature. Violators may face penalties of up to HK$5,000 and one-year imprisonment.

Limited companies that have never been in operation have the business nature listed as "CORP" on their business registration certificates, indicating no specific business restrictions. Choosing a professional secretarial company can help clients submit the notification of commencement of business to inform the tax authorities about the start of company operations.

Readymade Company Purchasing Process

Select a company from the list of readymade companies provided by intermediaries.
Provide shareholder, director, and company secretary information, such as identification documents and proof of address.
Verify client identity and company information, then sign the purchase and sale documents.
Submit relevant documents and affix seals to the Companies Registry and the Inland Revenue Department.
After completing the company purchase process, clients can collect the documents and open a company bank account.
Officially commence business operations.

A company hang out shingle for sale.

Conclusion

Readymade companies have their unique advantages, especially when you are eager to start your business. Understanding the benefits and considerations of readymade companies mentioned above, if you are interested in purchasing a readymade company, OneStart, as a licensed trust or corporate services provider, can offer you readymade company establishment and comprehensive business support services. Please call 3575 6888 or WhatsApp OneStart Business Consultants for more information.

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