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1 person Limited Company - how to get paid by your own company

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  1. #1

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    1 person Limited Company - how to get paid by your own company

    Hi people

    Question from a first time entrepreneur/freelancers. I've just set up a Limited Company in Hong Kong, solo, so I own 100% (I'm HK resident).
    I was wondering how other entrepreneurs/freelancers in Hong Kong is handling getting themself paid (we all have bills to pay).

    I see the two options
    1) pay dividend
    2) hire yourself

    From what I could read, option 2 hiring yourself, requires you set up a mandatory pension scheme, which I'm not really interested in.
    For option 1 I couldn't find much information. Maybe somebody here knows the procedure? Is it as simple as transferring the amount from your business bank account to your personal bank account? I'm guessing I would have to declare this somewhere?

    And is there a 3rd option that I might have missed?

    all the best,


  2. #2

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    For a private limited company, you would need to have the accounts audited. If there are profits, you as the director can declare dividends, through a resolution.

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  3. #3

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    The real world solution is somewhere in between taking profits or paying yourself a salary.

    1) Create a list of legitimate business / director's expenses - these could include travel costs, allowances (educational / entertainment for business) and more. Your accountant should be able to help you figure this out. Very important as these are pre-profit & tax expenses for the company.
    2) Calculate what will be a "tax free" salary for you. Usually involves playing around with a number or two in the IRD calculator. This is pre-profit & tax expense for the company.
    3) Declare a post tax dividend if there is a profit or accumulate the losses after the expenses and salary for future use.


  4. #4

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    Not taking a salary might create some issues with your bank for credit and income proof. Think long term.


  5. #5

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    Even if you had set up a sole proprietor company (which would probably have been the better option frankly) you would have had to pay MPF. You can't hire anyone without paying it pretty much. Just bite the bullet. Everyone needs a pension eventually!


  6. #6

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    Quote Originally Posted by HK_Katherine:
    Everyone needs a pension eventually!
    The only good thing about MPF is that your employer matches your contributions. For pension savings your money would be better off in almost anything else short of the Jockey Club, if I was self employed I'd do what I could to minimize my MPF contributions too!
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  7. #7

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    Thanks for the reply Shri, much appreciated.

    I'm not entirely sure how to do what you are suggesting.
    But it sounds like I should get an account and have him/her advice me (as not everything I would like goes under legitimate business expenses, new TV for example).

    You are also saying not taking a salary could also be an issue.
    Does that mean I would have to draft a contract, and set up this pension scheme, etc?


  8. #8

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    Quote Originally Posted by morty:
    Thanks for the reply Shri, much appreciated.

    I'm not entirely sure how to do what you are suggesting.
    But it sounds like I should get an account and have him/her advice me (as not everything I would like goes under legitimate business expenses, new TV for example).

    You are also saying not taking a salary could also be an issue.
    Does that mean I would have to draft a contract, and set up this pension scheme, etc?
    Not taking a salary depends purely on your personal situation. Quite often, businesses work / don't work (cross fingers and knock on wood in your case) but from where I stand, you need to show income proof in so many places - credit, mortgage etc, may not be now but down the road perhaps. Best to have something, if possible show up in your personal account monthly as salary.

    MPF is not entirely all that bad as long as you don't rely on it 100%.

    A new TV? If your business needs you to have a TV, computer, internet connection, mobile phone, take courses why not? They're company assets. Many companies own their own equipment which is given to employees. Best to seek proper advice on what expenses you can put through your company before you proceed.
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  9. #9

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    Quote Originally Posted by morty:
    Thanks for the reply Shri, much appreciated.

    I'm not entirely sure how to do what you are suggesting.
    But it sounds like I should get an account and have him/her advice me (as not everything I would like goes under legitimate business expenses, new TV for example).

    You are also saying not taking a salary could also be an issue.
    Does that mean I would have to draft a contract, and set up this pension scheme, etc?

    Just ask your bank to help you open a MPF account, it can be done with a 1 hour meeting. You don't need a contract. Just pay yourself a monthly salary as you see fit.
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  10. #10

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    Quote Originally Posted by shri:
    Not taking a salary depends purely on your personal situation. Quite often, businesses work / don't work (cross fingers and knock on wood in your case) but from where I stand, you need to show income proof in so many places - credit, mortgage etc, may not be now but down the road perhaps. Best to have something, if possible show up in your personal account monthly as salary.

    MPF is not entirely all that bad as long as you don't rely on it 100%.

    A new TV? If your business needs you to have a TV, computer, internet connection, mobile phone, take courses why not? They're company assets. Many companies own their own equipment which is given to employees. Best to seek proper advice on what expenses you can put through your company before you proceed.
    Pay yourself is crucial, otherwise, your accounts get mingled a bit too much. Best to separate your personal and your company. Business expenses, well I was told that meals should be for 2 or more people and not to write off individual meals, exceptions for when you are traveling.

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