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Types of Companies in Taiwan

Types of Companies in Taiwan

Deciding on which company type is the most suitable for your business activities in Taiwan represents the main step in the process of company registration. Foreign investors must know that the process of opening a company in Taiwan can take approximately one month and it is not a very complicated procedure, but it needs to be done following specific formalities. With legal assistance from one of our experts in company formation in Taiwan you can speed up the process and make sure you don’t miss any step or document from your application.   

What particularities do the legal structures in Taiwan have?

Depending on the size of the company that you intend to set up when starting the company formation procedure in Taiwan, the authorities have given investors the possibility to choose from several legal forms. There are four main types of business structures that can be opened: the general partnership, the sole proprietorship, the private limited company and the company limited by shares (or the limited liability company).

If you are at least two shareholders, it is advisable to open a company limited by shares, in which the owners can be either natural persons or companies. This is also one of the most popular types of legal structures that you will find in Taiwan, since each owner is financially responsible only for his/her part of investment in the company. In the case of the private limited company, for its incorporation it is necessary one shareholder; it is also important to know that the shares of the company can’t be transferred to another third-party. You can request more details from our lawyers in Taiwan

Another way to open a company in Taiwan is through the general partnership, which has recently been added to the list of legal entities investors can register here. It has been made available to the foreign investors since 2015 under the Limited Partnership Act. The manager of the partnership is considered a partner in the company and bears as well his/her part of liability.

In a general partnership, the employment of foreign employees is not permitted. The sole proprietorship (or the sole trader) represents a very simple business structure, that is created for natural persons who want to work in their own name. However, it must be noted that the sole trader does not have legal personality, and there is no legal distinction between the company and the owner. If you have doubts on what type of company to employ for your enterprise, you may consult with one of our Taiwan company registration experts.  

What are the regulations for starting a company limited by shares in Taiwan? 

Foreign investors can start a company limited by shares in Taiwan by filing a foreign investment application (FIA) with the Investment Commission, which will provide the approval for starting business activities in this country. Foreign investors must be aware that the legislation that provided the legal framework on the company types available in this country was modified in 2015. If you want to set up a local company, then you may need the services of a CPA in Taiwan

Then, the law was changed by adding a new type of company limited by shares, namely the closely-held company limited by shares. When starting a company in Taiwan, investors will be liable for the payment of corporate taxes and this is why investors should verify when they need to register for the payment of the value added tax.

The closely-held company limited by shares was introduced in June 2015 by amending the Companies Act (this company type can be found under the Chapter 5 of the document); this type of company limited by shares was created with the purpose of encouraging the development of the local business environment and it is especially designed for those who want to open a startup business in this country that will operate as a small and medium-sized company. You can request more details on the advantages of this company type from our team of specialists in company registration in Taiwan.  

In order to set up a company in Taiwan as a company limited by shares, investors have to respect the following shareholding requirements – the company can be incorporated by at least two shareholders who are natural persons or by one corporate shareholder. The company requires three directors and a supervisor and one of the directors will also have the function of chairperson. 

What are the documents necessary for opening a company in Taiwan? 

As a foreign investor starting a business in a new market, the process itself can be complicated; this is why, when opening a company in Taiwan, we strongly recommend to address to our team of specialists, who can represent foreigners in all the steps that must be performed when registering any of the business forms available here. As a general rule, some of the basic aspects that should be done when starting the procedure of company formation in Taiwan are the following:   

  • prepare the company’s documents and notarize them with a public notary in Taiwan;
  • register with the local authorities and obtain the required certificates;
  • select a business address, which is necessary for all company types;
  • select an appropriate and unique company name and select the business activities that will be carried out under the preferred company type;
  • prepare the company’s seal and open a corporate bank account, in which the investors will deposit the required capital

How can one register a partnership in Taiwan? 

Investors also have the possibility of registering a partnership when opening a company in Taiwan. The partnership is a type of structure that can be registered by both locals and foreigners, but it is necessary for the company’s founders to be natural persons and this legal entity can’t be incorporated by other companies. There are no capital requirements for this company type, but its registration (in the case of foreigners) is bound by obtaining an approval for foreign investments, just like in the case of private company limited by shares. 

The partnership in Taiwan has to be registered by at least two natural persons, who will be jointly liable for the debts of their business. An advantage of this company type is that there are no restrictions with regards to the ownership of the company (when referring to the residency/nationality of the founders). 

The partnership must also have a unique name at a national level; the application for the company’s name can be completed on the online platform of the Department of Commerce of the Ministry of Economic Affairs. The application is bound by the payment of a registration fee (it can be completed as an online application, post application or in-person application) and the procedure can be completed in two days.   

How to determine what is the most suitable legal structure in Taiwan? 

It is sometimes difficult for foreign investors to decide on what is the best solution in terms of the legal structure in a place like Taiwan, which has particular legal requirements in terms of the initial capital, or taxation rules. This is why you need to determine what your priorities, objectives and financial means are before choosing the legal structure

Why invest in Taiwan?

Taiwan can be a great business destination for starting a company. Opening a company in Taiwan under one of the legal entities presented in this article can provide numerous business opportunities in a wide range of economic sectors, including in the wholesale, retail and food industries.   

Our team of consultants in company registration in Taiwan can present the main rules of law addressed to a specific business sector and can also help with advice on choosing a suitable business form, based on the capital investors have and on their business plans in this country. With regards to investments in this country, investors should know the following:   

  • the country’s gross domestic product (GDP) stands at $590 billion;
  • the country’s GDP growth rate is of 2,89% and the GDP per capita is of $24,389.68;
  • the unemployment rate stands at 3,8% and the service sector is the largest employer, accounting for 59,3% of all the country’s workforce;
  • the trade sector in Taiwan increased by 2,9% (measured in terms of sales) at the level of September 2019, on a year-to-year basis, accounting for $311 billion;
  • the food and beverages industry also expanded by 1% on a year-to-year basis in September 2019, accounting for $64,6 billion, as stated by the Department of Statistics and the Ministry of Economic Affairs

Can investors set up a representative office in Taiwan?

Yes, another way to access the Taiwanese market is by opening a representative office. The representative office is simply a means to having a business presence on the local market and not a way to develop a commercial activity. In other words, investors are not allowed to sell products or services through the representative office. 

Instead, the representative office can be used as a way to establish business contracts in Taiwan, and keeping a close connection with the company’s clients and business partners. For instance, this can be the ideal vehicle prior to engaging in actual business activities here and it is highly recommended prior to starting the process of Taiwan company formation

Given that this type of office does not engage in commercial activity, the company itself will not be liable to the payment of most of the taxes that are typically charged in Taiwan. Still, the office will have specific monthly costs, mostly related to its operating costs (rent and utilities), but also costs associated with employment – typically, the representative office has at least one employee who will be in charge with specific tasks. 

The employment taxes will be paid in Taiwan, as the employee develops his or her activity in this country; you can rely on our team of consultants in company registration in Taiwan if you need further information on how to set up a representative office and what are the documents you should prepare for its registration. 

In the case in which you represent a foreign company and you wish to expand your business activities in Taiwan for the purpose of developing a commercial activity, you can select any of the company types that were presented in this article, or you can opt to register a branch office. Below, you can find some of the main incorporation steps that you should expect upon the registration of a branch.  

What are the company formation steps for a Taiwanese branch? 

Foreign companies have the possibility of expanding their business operations in a foreign country through a branch office. The branch represents a structure that is not a legal entity, but more of an establishment of the foreign parent company for which the parent company is fully responsible. 

The procedure for opening a company in Taiwan as a branch office is prescribed by the Company Act. First, investors should know that they need to obtain an approval from the Ministry of Economic Affairs, where the foreign company will also apply for a local trading name. The institution is also in charge with the issuance of a certificate for the selected trading name. 

The branch office may also need to apply for special permits, but this depends on the scope of the business; the registration for taxation purposes is mandatory in the case of a branch office, as it will carry out taxable activities. You can request more information on the applicable company taxes from our team of consultants in company formation in Taiwan

Please mind that the registration of a branch office does not imply the need to deposit a minimum share capital; the same applies for the company types that we have presented in this article, although the company limited by shares used to be incorporated with a share capital in the past. 

However, under the latest amendments, the capital requirement was abolished, but investors will have to be aware that in certain cases a capital requirement may apply, depending on the business sector in which the company will operate and if the competent authority requires this. 

For some investors, the limited liability company is most recommendable because its formation requires a moderate capital, and by employing yourself as the manager of the company you will obtain automatically a work permit in this region. This further facilitates obtaining a residency visa and gives you the possibility to further invest in Taiwan. Don’t hesitate to contact our Taiwan company registration consultants so that you can easily start a business in this region.