Taiwan Business Express Portal

policy & laws

What is a company?

A company is a legal entity established for the purpose of making profits and registered under the Company Act, and the shareholders are responsible for the amount of their capital contributions (except for unlimited companies); while a business, or a trade name (business name) as it is generally referred to in the Business Registration Act, is a sole proprietorship or partnership for the purpose of making profits, and the responsible person or partners have unlimited liability.
If you want to establish a national profit business, sell your products all over Taiwan or even abroad, have many customers, have a large-scale business, and have a large number of shareholders, then it is suitable for you to set up a company.

What is a business?

If you are running a small business in your local living area, currently only have one store, or currently have a full-time job but want to start a business, do online auctioning on the side, or run a blog to occasionally take advertorials or art editing, or set up a studio, then it is suitable for you to set up a business (trade name, business name, studio).
In the sale of goods or services, a business registration unit with a monthly turnover of less than NT$200,000 may apply to the National Taxation Bureau for exemption from using a unified invoice to enjoy the benefits of easy tax filing, and the National Taxation Bureau will calculate the business tax by multiplying the identified turnover by a 1% tax rate each quarter, while a 5% tax rate will be levied for using a unified invoice; while a company is required to use a unified invoice at a 5% tax rate.

The differences between a company and a business

• The name of a business is protected only within the county or city where the business is established. A business name is only valid in the county or city where it is registered because another person may apply for the same business name in a different county or city with the same name. However, if you set up a company, the name of the company is unique in the whole country and there will not be another company with the same name as yours.
• A business does not have legal personality; however, if a company is established, it has legal personality.
• The liability of a business partner is unlimited; however, in the case of a company, the shareholders of the company are only liable for a limited portion of the debts incurred in the operation of the company in respect of the capital contribution, and the personal property of the shareholders will not be affected if the corporation is operating in debt.
• Businesses with a monthly turnover of less than NT$200,000 can apply to the tax collection unit for exemption from issuing a unified invoice (subject to the relevant regulations). It is assessment taxation, and the National Taxation Bureau will send you a tax bill every three months to pay business tax, regardless of whether the business is in surplus or loss. However, if a company is set up, regardless of the size of the turnover, the company must issue a unified invoice.
• For the business establishment, regardless of the amount of capital, there is no need to obtain the accountant’s audits and certification. When a business with a capital of less than NT$250,000 is established, the capital does not need to be deposited in a bank, and only when it exceeds NT$250,000 should a bank account be opened with a business name and after the capital is deposited, a certificate of deposit should be obtained. However, in the case of a company, the amount of capital to be registered must be verified by an accountant at the time of application for establishment registration or within 30 days of the establishment registration.

The difference between a limited company and a company limited by shares

• In order for a shareholder of a limited company to transfer their shares, they must obtain the approval of a majority of the votes of the other shareholders, and for a director to transfer their shares, they must obtain the approval of at least two-thirds of the votes of the other shareholders; whereas a company limited by shares, whether they are a promoter or a shareholder, are free to transfer their shares without restriction.
• Each shareholder of a limited company has one vote, regardless of the amount of capital contributed. The capital of a company limited by shares shall be divided into shares, and in principle, each share shall have one vote, unless voting rights are prohibited or restricted by law, or unless preferred shares without voting rights are issued.
• The disadvantage of a limited company and a close company is that they adopt a closed design and do not allow shareholders to change freely in principle. For these companies, the total amount of capital contributions and the amount of each shareholder’s contribution are written in the articles of incorporation, and changes must be approved by the other shareholders (according to the restrictions stated in the articles of incorporation). If a shareholder objects, even if the objecting shareholder holds a very small percentage of capital contribution, it is possible that the transfer of the company will be stuck.
• Generally, venture capitalists do not want to invest in a limited company that is not freely transferable, because the type of organization that is freely transferable is the type of structure that venture capitalists (investors) will want to look for.

Comparison of different business structures