What should first-time entrepreneurs be aware of?
Essential preparations and key steps for starting a company: aside from choosing a good name, the first and foremost task is to determine whether to set up a company or a sole proprietorship, depending on future plans. You must also designate a responsible person for the company—someone with full legal capacity. Note: government employees are not allowed to have side businesses.
This article clearly explains the differences between a company and a sole proprietorship, the steps involved in company registration, and answers to common questions. After reading it, you’ll be better equipped to move forward with your entrepreneurial journey.
Should I register a company or a sole proprietorship for my first business?
A common question for all entrepreneurs: what are the pros and cons of registering a company versus a sole proprietorship?
Which is more suitable or cost-effective: a company or a sole proprietorship?
Whether you set up a company or a sole proprietorship, both will have a uniform business number (UBN) and can issue invoices and provide labor and health insurance for employees.
A company name typically ends with “Ltd.,” while sole proprietorships include types such as “enterprises” or “studios.”
You must decide upfront whether to register a company or a sole proprietorship, as they cannot be converted into each other later.
Company names must be unique nationwide, while sole proprietorships must be unique within a city or county.
Benefits of registering a company or a sole proprietorship:
Company (Ltd.)
- No capital requirement (except for specific industries).
- Certain industries can only be operated under a company (e.g., residential property management).
- Invoices: 5% VAT (bi-monthly reporting).
- For government tenders or larger contracts, company status is often required.
- If you aim for national expansion or need product labeling, a company is recommended.
- “Limited” implies limited liability: liability is restricted to the amount of capital invested.
- Responsible persons and shareholders can be changed.
Sole Proprietorship
- No capital requirement (except for specific industries).
- Capital under NT$250,000 does not need to be certified.
- Suitable for small, local businesses.
- Sole proprietorships can change to partnerships (not vice versa).
- Receipts: 1% (quarterly tax bill); Invoices: 5% VAT (bi-monthly reporting).
- Only sole proprietorships can apply for exemption from using uniform invoices.
Company Establishment Prerequisites and Basic Procedures
One-Stop Online Application for Company or Business Registration
The process of applying to register a company or business can be divided into five main steps:
- “Pre-check for Company Name and Business Scope”
You can apply through the Ministry of Economic Affairs’ “Company, Business, and Limited Partnership One-Stop Online Application” system, or through the local government offices. For example, after applying via Taipei City Government, it usually takes about 4 working days to obtain the “Company Name Pre-Approval Certificate.”
Before the pre-check, it’s best to find a business address. If you don’t have a suitable one or don’t want to borrow a friend’s address, many people now choose to register at a “business center” because these are typically in prime locations and offer services like mail and parcel reception, making them a convenient option. - “Stamp Engraving & Opening a Preparatory Bank Account”
You’ll need to make company chops (large stamp) and a personal chop for the responsible person. You can choose the style and material yourself.
Bring the name approval certificate, ID documents, and the personal chop to the bank and inform them that you’re opening a preparatory account. Once the account is opened, you can deposit the capital. For limited companies, it’s recommended to consult with an accounting firm first about how to proceed. - “CPA Audit and Certification”
After obtaining the deposit certificate from the bank, find a CPA for a capital verification report. (This step is not required for business registration.) - “Apply for Company Registration”
Prepare the registration form, company charter, and other documents, and submit them to the Department of Economic Development or Commercial Division of the local government. You will receive the company’s Unified Business Number, and then you can make the official invoice stamp.
“Tax Registration”
Go to the National Taxation Bureau to apply for tax registration. Bring the previously submitted documents and the tax bureau’s application form. If you need to issue invoices, apply for an invoice purchase certificate at this time.
Once the tax bureau sends the notice to the business address, the company representative needs to bring ID and stamps to the bureau in person. After signing, the entire setup process is completed!
Starting a One-Person Company – What to Expect?
Entrepreneur FAQs
Q1: What are the costs involved in setting up a company?
Costs include rent, utilities, renovation, HR, office equipment, inventory, marketing, etc. The largest expenses are typically rent and renovations. Business centers provide a professional setup and help reduce renovation costs.
Q2: What if I don’t have an address for registration?
It’s recommended to use a “business center” for virtual address services. They offer speed, convenience, and a prestigious address, plus all necessary documentation.
Q3: How long does it take to set up a one-person company?
For non-special industries, it takes around 2 to 3 weeks, and usually no more than a month.
Q4: Does the amount of capital affect taxation?
Taxation is based on revenue and taxable income, not capital amount.
Q5: How much capital should I set?
There’s no longer a minimum capital requirement, but it’s generally advised not to go below NT$100,000. Increasing capital later incurs extra costs.
Q6: How to choose a bank for account setup?
Choose a bank close to your home or office, or one you’re familiar with. Internet banking or checks must be applied for at the same bank, so proximity can save time.
Q7: Is it mandatory to deposit capital proportionally?
Proportional deposits are standard, but one party may transfer funds on behalf of others. The key is that the capital must go into an account under the shareholder’s name.
Q8: Can a foreign company set up a company in Taiwan?
Yes, as long as the Investment Commission approves the application.
Q9: How long must the capital stay in the account before it can be used?
It must remain for at least 2 days. Once you obtain the deposit certificate, the CPA will issue the capital verification report. After that, you can use the funds.
Q10: If a company has no transactions right after setup, does it still need to file taxes?
Yes. Whether or not there are transactions, filing is mandatory. Failure to do so results in a NT$1,200 fine and a record of the violation.
