Sole prorietorship is the most simple form of business in Hong Kong. The whole business is managed and controlled by an individual (the “Proprietor”). The Proprietor is responsible for all liabilities incurred in the sole proprietorship and is required to use his or her own assets to repay the liabilities of the sole proprietorship when the assets of the sole proprietorship are not sufficient to settle its liabilites.
The Proprietor is required to report the details of the profit and loss and assessable profits/adjusted loss in the section of profits tax of their own inidvidual tax return and accompany a certified set of profit and loss account and balance sheet with their individual tax returns (excep those small corporations) when filing them to the Inland Revenue Department. Adjusted loss of the sole proprietorship may be utilised to offset the tax liabilities of the Proprietor in the other tax aspects (i.e. salaries tax or property tax or both).