When setting up a business entity in Hong Kong, there are several structures to choose from. One of the available structures is a limited partnership, which we will explain in this article. Partnerships are suitable for business partners looking to work on commercial activities together.

What is a Limited Partnership?

A partnership in Hong Kong is a business entity established and co-owned by two or more parties with a view to sharing profits. There are two types of partnerships in Hong Kong: General Partnership (GP) and Limited Partnership (LP). The GP is governed by the Partnership Ordinance section 38, while the LP is under the Partnership Ordinance section 37.

In a general partnership, every partner in the company is personally liable for the business’s debts and liabilities. In addition, a general partner can be held responsible for the actions of other partners in the business.

In a limited partnership, there are both general and limited partners. A limited partner’s liability is limited to the amount of their capital contribution to the partnership. They are not personally liable for any business debts or wrongful actions of other partners. However, limited partners cannot be involved in the management and decision-making process of the business. That has to be done by a general partner, who will be responsible for the day-to-day operation of the business.

As a business entity, you need to register with the Registrar of Companies in order to take the form of a limited partnership. When the entity is not registered, it becomes a general partnership by default.

Using cryptocurrency for Capital Contribution

Hong Kong law does not explicitly prohibit using cryptocurrency as a capital contribution for a Limited Partnership. However, the law also does not specifically recognize or regulate crypto as a form of capital contribution. The acceptance is largely at the discretion of the Companies Registry (CR) and subject to their review.

Case Study

Recently, HKWJ Tax Law helped a client set up a Limited Partnership (LP) in Hong Kong, and the process highlighted some challenges when using cryptocurrency as a capital contribution.

The client submitted Form 1C on 17 April 2025. Normally, it takes about 2-3 weeks for the Companies Registry (CR) to issue the certificate of incorporation. However, this case took longer because the HK$1,000 capital was contributed in cryptocurrency instead of fiat currency.

The CR officer requested more details in writing about how the value of the cryptocurrency would be maintained, given its price can change quickly. We provided the explanation, but since this was the first time the CR had seen a capital contribution made in crypto, the case had to be reviewed by their legal department. This review took an extra 10-14 days.

After the legal team approved the arrangement, we were asked to correct the form in person to match the format required by the CR. We resubmitted the form, but as of now, we are still waiting for confirmation on when the LP certificate will be issued.

This case shows that while it is possible to use cryptocurrency for capital contributions in a Hong Kong LP, it may lead to extra questions and a longer approval process.

Practical Considerations

• The CR may ask for:
  • Proof of value of the crypto at the time of contribution (e.g., exchange rate, transaction record).
  • Details on how the value will be maintained
  • Supporting documents to show the transfer and ownership of the crypto asset.
• Delays are likely – may require additional legal review.

Advantages and disadvantages of a Limited Partnership

There are several advantages to a limited partnership as set out below.

• Business liability: Limited partners are not personally liable for business debts or the actions of other partners in the business.
  
• Flexibility: Limited partners can be replaced without dissolving the partnership. Business profits can be distributed any way within the boundaries of Hong Kong laws.
  
• Investment is separate from management: As the general partner(s) and limited partner(s) in a limited partnership have different roles, greater efficiency can be achieved. General partners have the freedom to run the business, while limited partners can earn a passive return on their investment without getting involved in the business operations.
  
• Taxation: In Hong Kong, the assessable profits of a limited partnership are computed and charged in the name of the partnership as a separate legal entity. However, if a partnership is comprised of both individuals and corporations (on which a higher tax rate is applied when compared to individuals), or if some partners have losses to carry forward from prior years’ tax assessments, or the individual partners elect for personal assessment, the partnership’s assessable profits/tax loss will first be allocated to each partner based on their profit sharing ratio and tax liabilities are calculated individually.
  
• Less compliance: A limited partnership has fewer compliance requirements than companies, although it is required to hold annual general meetings and create a detailed partnership agreement.

Besides the advantages, there are some disadvantages as well, possibly making it unsuitable to choose a limited partnership in some cases.

• Personal liability of general partners: General partners in a limited partnership have unlimited personal liability. It may be difficult to find suitable partners willing to take on this risk in the business.
  
• Limitations for limited partners: Limited partners are required to be passive investors only, which may be an advantage in many cases. However, they are not allowed to be involved in the decision-making process, dissolve a partnership, or consent to the introduction of new partners.

Comparison with other business entities

The business structure you choose when setting up your company can impact the success or failure of your business. Therefore, it is important to know how a limited partnership compares to other business entities.

Here we will compare the limited partnership with the most common entity type in Hong Kong, the Limited Liability Company (LLC).

	Limited partnership	LLC
Separate legal identity	No	Yes
Business liability	Limited for limited partners, unlimited for general partners	Limited
Perpetuity and succession	Enduring structure	Enduring structure
Ease of expansion	Less easy than LLC to raise capital; Moderate business growth	The easiest entity to raise capital; Strong public perception regarding financial stability
Transfer of ownership	Difficult to transfer business ownership	Easy to transfer partial or full business ownership
Public perception	Moderate public perception	Strong public perception
Dissolution	Complex, expensive, and time-consuming	Complex, expensive, and time-consuming

Limited Liability Partnership

A Limited Liability Partnership (LLP) is a slight alternative of the LP. They are formed under the Legal Practitioners Ordinance and only available to law firms.

Within an LLP, partners benefit from restricted personal liability, protecting their assets from the partnership’s financial obligations. However, unlike traditional LPs, LLP partners can play a direct role in managing the business.

How HKWJ can help

A limited partnership is ideal if you are looking for a simple business setup with limited business risk. You could consider running a business through a limited partnership to potentially enjoy a lower tax rate in Hong Kong.

At the HKWJ Group we can help in registering and setting up your limited partnership and creating a detailed partnership agreement. Our experienced tax professionals can advise you regarding tax planning in the partnership.

In addition, we provide company secretary services and cloud accounting to keep you compliant with the legal and tax obligations.

Feel free to get in touch with us via the form below for more information about setting up your limited partnership or tax advice.