Related Articles:

What to do if a company is insolvent? Voluntary vs. Compulsory Liquidation

What happens if you miss the tax deadline? How can you rectify it?

Many people choose to establish an unlimited company for business operations, but when the business ends, they often overlook the necessity of deregistering the company. According to Hong Kong law, regardless of whether the company is still operating, it must fulfill its legal and tax obligations. Failing to deregister an unlimited company in a timely manner may lead to a series of financial and legal risks, even affecting future business activities. Therefore, understanding the importance and specific procedures of deregistering an unlimited company can help business owners avoid unnecessary troubles.

1. Why should a defunct unlimited company be deregistered promptly?

When an unlimited company ceases operations, many owners neglect the importance of formally deregistering the company. If the defunct unlimited company is not deregistered promptly, it may lead to a series of legal and financial risks.

Consequences of not deregistering an unlimited company:

According to the Business Registration Ordinance, even if the company has ceased operations, it is still required to pay the business registration fee annually. Failure to pay on time will result in fines, and tax returns must also be submitted on time.

To cease operations, a written notice must be sent to the Business Registration Office to cancel the business registration within one month from the cessation date. Additionally, according to Section 8 of the Business Registration Ordinance (Cap 310), Form IRC 3113 must be filled out to notify the tax authorities of the cessation. Failure to submit the notice on time may result in a fine of HKD 5,000 and imprisonment for one year.

2. Tax implications: Potential tax issues from not deregistering an unlimited company

The Hong Kong Inland Revenue Department has tax requirements for all registered companies. Even if an unlimited company has ceased operations, it still must fulfill basic tax obligations. An underegistered unlimited company may face the following issues:

Failure to file tax returns on time

According to the Inland Revenue Ordinance, regardless of whether a company is operating, it must submit tax returns to the Inland Revenue Department each year. Failure to file on time may result in the following consequences:

Issuance of a fine notice by the tax department: Even if the company has no profits, it must submit tax returns; otherwise, it may be fined.

Demand for back taxes: The tax authorities may regard the company as still operating and demand payment of unpaid profits tax.

Business registration fees and other tax implications

According to the Hong Kong Business Registration Ordinance, all companies, even if they have ceased operations, must pay the business registration fee annually. If payments are long overdue, the government may pursue the owner for the amounts owed, and additional fines may also apply.

3. Deregistration procedure for unlimited companies: Steps and considerations

Deregistration of an unlimited company in Hong Kong must follow specific legal procedures to ensure all processes are properly handled, preventing impacts on future business activities.

Steps for deregistering an unlimited company:

1. Submit the cancellation of business registration form (IRC3113)

• Before applying for deregistration, ensure the company has no outstanding taxes or unpaid business registration fees.

2. Clear all tax matters and submit the final tax return

• Ensure the company has submitted the last tax return and obtained a tax clearance certificate from the tax authorities.
• If the company has never operated, a "zero declaration" can be submitted to the tax authorities.

3. The Business Registration Office issues an approval letter

• Once the tax authorities confirm there are no outstanding taxes, the deregistration application will be approved.
• The applicant will receive an official notification of approval, certifying that the company has been legally cancelled.

Considerations for deregistering an unlimited company:

• All business transactions should cease: Before applying for deregistration, the company should stop all business activities to ensure there are no financial records.
• Clear bank accounts and debts: The company must close all bank accounts and ensure there are no outstanding debts.
• Notify partners and suppliers: If the company has contracts with third parties, they should be notified in advance and arrangements coordinated.

4. Conclusion: Deregistering an unlimited company promptly to avoid legal and financial risks

Many business owners mistakenly believe that once a company is not operating, it can be neglected. In reality, failing to formally deregister an unlimited company may lead to various legal and financial risks, including fines, tax liabilities, and damage to personal credit. By following the correct deregistration procedures, business owners can not only avoid potential risks but also ensure that future business activities in Hong Kong are not affected.

If your unlimited company has ceased operations, it is advisable to start the deregistration process early to avoid potential issues later!

OneStart Business Center offers company deregistration services, properly arranging for company closure and providing professional services such as auditing, share transfer, and liquidation arrangements. We can also act as tax representatives, offering professional advice. For more details, please call 3575 6888 or contact OneStart Business Consultants via WhatsApp.

Contact us immediately via WhatsApp:

Learn more about our related services: