Speaking of setting up a Non-Profit Organisation, the word ‘Charity’ usually pops up in the conversation. I have come across many clients who have confusion between these two terms, and are not sure where to begin. Let me explain further in this blog and answer the questions you might be having!

 

A NPO can serve different purposes, like sharing interests, arranging social gatherings, or even targeting to serve the local community.

 

What Exactly Is NPO?

My clients always come to me and ask, what is NPO, is it necessary to be a Charity?
I will usually shake my head and say Non Profit Organisation a.k.a. NPO, is generally an organisation that is created not to attain monetary achievement, which means their ultimate purpose is NOT to generate additional revenue. NPO can serve many different purposes, some for recreational like sports interest or hobby; some for socializing / networking like premium coffee tasting for a group of tasteful people to share coffee knowledge and gather together; and some for serving the community.
 
In HK, there are 2 mainstreams of NPO, let me explain to you further:-
 
A) Limited by Guarantee: It needs to be registered through HK Companies Registry & Inland Revenue Department (IRD). This type of entity is mainly for recreational purpose or socializing purpose, for example, Football or Rugby League Association. 
 
B) Charitable Organisation: It is also needed to be registered through HK Companies Registry & Inland Revenue Department, with the aim that is exclusively charitable. I can give you a very brief idea about this: we would help the client set up the Limited by Guarantee first, and then apply for the Charity status through the Inland Revenue Department. The purposes must be served under the following 4 categories:-
 
- Relief of poverty
- Advancement of education
- Advancement of religion
- Other purposes of charitable nature that serve and beneficial to the HK Community.
 

Why Would You Want to Set up a NPO?

First of all, let me put this straight, not every person would need a NPO for their business as this is not profit making. But having a NPO is more like a pet project or treating a hobby seriously, something you always wish to do but just have no idea where to start with. For instance, I am a huge football fan, having a football association would actually mean a lot for me as this is my hobby and I could formalize it and recruit members into it, and be able to arrange some friendly matches or gathering time to time.
 
In the meantime I am also a dog-lover, which means I am extremely keen on creating a Charity for helping those homeless pets. People on one side would love to reach or achieve a great result on becoming a billionaire yet at the same time that person would also want to do something that he always want to do when he was a kid. 
 
Think of having a profitable organization is like the need for reputation and achievement, while having a non-profit is to fulfill the needs for affiliation and networking. One way or another, you would want one of them or maybe both.
 
Now you see a NPO includes all sorts of organisation that does not look for monetary outcome but it could be as simple as practicing something that you are really interested in with a group of like-minded people and take it into the next stage, to spread it out; or just doing good for the community without any profits in return (of course you can still collect fees from your members just that all revenues will be used for the organisation’s expenses). 
 

FAQs on Establishing a NPO

>> Can Every Company Secretary Service Provider Help to Set up a NPO?
Yes, a normal company secretary service provider can help in forming a NPO, yet please ensure they have such experience before on dealing with different kinds of NPO setup especially with my introduction up in point 1 (types such as Limited by Guarantee and Charitable Organisation). But why would you need to look for the outsider while we, BRIDGES can assist you with the NPO setup in the most reliable way with our years of experience in handling different cases and accumulating the know-how.   
 
>> Can Every NPO Be Tax Exempted?
Not really, as setting up the Charitable Organisation needs to go through an application process of tax exemption, and after getting the approval from the IRD, the charitable status can then be granted and you can start to receive donations. 
 
>> Can Every NPO Accept Donations?
Not every NPO can accept donations, only Charitable Organisation can accept donations from the public.
 
>> What Happen If I Still Have a Bunch of Questions?
BRIDGES can provide you with a FREE professional consultation session on NPO setup, thus your queries can be addressed and cleared with our preceding case studies and experience sharing. Please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to arrange the appointment convenient for you. Or if you’d like to ask something instantly, simply drop me a private message, I will be more than happy to walk you through the process and give you my prompt answers. 
 
In the next article we will cover a common question raised among our clients - the difference between a Limited by Guarantee and a Limited by Shares, stay tuned!
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I guess many people have heard of ‘Limited by Shares’, that is a Private Limited Company, for which there would be director and shareholder in the structure. But here you may ask: “What is a ‘Limited by Guarantee’? I have never heard of that.” Actually you could be more familiar with the term: Non-Profit Organisation (NPO), which is the more common name of ‘Limited by Guarantee’, having no shareholder in the structure - only director and member instead. Let me give you a better understanding with a clear comparison chart below :

 

 

Let me clarify the last point “Contribution Type”:

For Limited by Guarantee: Every guarantor has to contribute the same and fixed amount of guarantee if the company is going to be dissolved. Just like when you are joining some sort of clubs and you have to hand in certain amount of membership fees.

For Limited by Shares: Every shareholder has to invest a certain amount of share capital. The capital amount depends on how much he/she is willing to invest or how much the amount of shares the board allows him/her to buy . Share capital has to be invested during the initial formation and it can be increased in time if the board decides to do so.

 

Popular FAQs of the TWO Entities:-

>> Can We Transform from Limited by Shares to Limited by Guarantee?

This is definitely one of the top 3 questions that my clients always ask me. Sorry the answer is no, you CANNOT switch from one entity to another since they serve 2 completely different purposes. In that case, you will need to set up a new Limited by Guarantee entity.

 

>> What Should I Do If I Want to Set up a Charity?

You will need to set up a Limited by Guarantee (NPO) first. While setting up the Limited by Guarantee, you will have to provide a proposal on the objective and a 1 year upcoming plan of this Charity, and submit to us for further review. After the Limited by Guarantee has been formed, you can file your tax exemption application, for which we will assist in applying for such tax exemption under Section 88 of the Inland Revenue Ordinance via the IRD. After the Charity status is approved, you may or may not wish to remove your company suffix ‘Limited’ - if you prefer to take this suffix away, our experienced team can handle such application to the IRD for you by taking care of all paperwork.

 

>> Do I Have to Prepare Any Annual Filing for Limited by Guarantee?

Yes, you will have to submit Annual Return to update the Government if there are any changes on director and member information, just like any other Limited by Shares. Profit Tax Return would also be needed to file along with the audited financial statement.

 

>> Please Give Me Some Interesting Examples of Limited by Guarantee & Limited by Shares?

Limited by Guarantee: Sports Association, Recreational Club, Student Union, etc.          
Limited by Shares: Trading Company, IT Consulting Agency, Property Sales Agency, etc.

 

If you have any further questions on these 2 types of incorporation, please feel free to email me, Alex from the Start-up Advisor Team, at info@bridges.hk to know more of our advice. Or, simply drop me a private message, and I will get back to you shortly as an instant help in your organisation setup plan.

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Have you ever thought about how a Company Signage could enhance your business image? Or did you know a directory signage could help facilitate your official business applications to the government authorities? After reading this blog, you may just be surprised at how this simple tool does great things for your business!

 

Strengthen Company Image

A company signage set at the entrance of a premier business centre or building in HK could be one of the KEYS to outrun your competitor. Simply just imagine if you would like to acquire a service, when you arrive the building there is nowhere showing where the office is, you will probably turn away, and one business opportunity is most likely slipping away.

Another situation is that if you are about to engage in business with another start-up company, they gave you an address so you went up for a visit and tried to look into the directory signage, you found your possible partner’s company name was just not there, would you still have confidence in doing business with this firm? Maybe you will but from our experience, we have seen many visitors came in, stood in front of the directory signage board for a while and they left without a word. A company signage not only presents the quality of the services and products that builds up your company image, but also helps you avoid all the above awkward situations, especially if you are a foreign entrepreneur and people may wonder if you really have an office location in HK. By having a signage, it shows you have the absolute right to use the local registered address, for which most of our serviced office or virtual office clients have got one already.

 

Leverage Practical Functionality

When submitting applications to government departments or financial institutions, they always require a registered corporate correspondence address that proves your business presence in HK. Thus, your company directory signage will serve as a good proof in such applications like business license application, HK working visa application, bank account opening, etc.

A survey of FedEx once found during parcels or products delivery, people may get confused or even returned from the location when the company signage is omitted at the entrance, and eventually it cannot be sure whether the products are delivered to the right address. Therefore the reason why people registered for a company signage is not for maintaining their company image only but also trying to serve the basic and practical purposes such as ensuring they can send out as well as receive their business materials accurately and efficiently; and when the authorities come to visit their serviced office / virtual office / co-working space, a proper company signage at the entrance can easily project a good presence to represent the company and people are then able to locate it quickly.

Now at BRIDGES, by using our serviced office / virtual office /co-working space services, you can get your company directory signage handily for owning a prestigious presence at the CBD - Central, Hong Kong at HK$1,500 per annum, which means it’s just HK$125 (US$17) per month only!

 

Register here to kick off your New Year with a multi-functional signage.

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