In Hong Kong, the main difference between a Limited Company and a Company Limited by Guarantee lies in their ownership structure and profit distribution.
| Limited Company (LC) | Company Limited by Guarantee (CLG) | |
| Ownership Structure | A Limited Company has shareholders who own shares in the company and typically expect a return on their investment. | A Company Limited by Guarantee does not have shareholders. It has members who provide a guarantee to contribute a specific amount in the event of the company’s winding up. |
| Profit Distribution | The profits generated by the business can be distributed to the shareholders in the form of dividends. This allows the shareholders to benefit financially from the company’s success | A Company Limited by Guarantee is typically a non-profit organization, and any surplus or profit it generates is reinvested into furthering its objectives rather than being distributed to its members. |
| Purpose and Activities | Limited Companies are usually established for commercial or profit-making purposes. They engage in business activities to generate revenue and maximize shareholder wealth. | Companies Limited by Guarantee are generally established for non-profit purposes, such as charitable, educational, or social causes. Their primary focus is on achieving specific objectives that benefit the public or a particular community. |
| Taxation | Limited Companies in Hong Kong are subject to corporate tax on their profits. They are required to file tax returns and pay taxes on their assessable profits | Companies Limited by Guarantee may enjoy tax-exempt status, depending on their activities and compliance with relevant regulations. However, tax exemption is not automatic and certain conditions must be met. |