Differences Between Company and Sole Proprietorship
View the decision guideBefore establishing a company, entrepreneurs must first decide on the type of business entity to adopt (sole proprietorship or company). Both companies and sole proprietorships are considered "business entities," but they differ in legal requirements, capital requirements, and other aspects. Therefore, it is essential to have a correct understanding of these differences to establish a solid foundation for registration and application, ensuring a smooth start to the entrepreneurial journey.
Start with your situation
Use ownership, liability, and future equity needs to narrow the field before checking the full comparison.
- Sole proprietorship
A direct starting point for one owner or a partnership when the owners can accept unlimited liability.
- Limited company
Available with one or more shareholders; shareholder liability is limited to the subscribed contribution.
- Company limited by shares
Compare this structure when share-based governance and more flexible equity transfers matter.
This is a quick orientation, not a case-specific conclusion. Confirm the final structure against your shareholders, industry, and tax situation.
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| Comparison | Sole proprietorship | Limited company | Company limited by shares |
|---|---|---|---|
| Naming rules | Names such as “XX Store,” “XX Eatery,” or “XX Enterprise” Must be unique within the city or county | Names ending in “Limited Company” Must be unique nationwide | Names ending in “Company Limited by Shares” Must be unique nationwide |
| Capital | No general minimum Regulated industries may have separate requirements | No general minimum; capital must be sufficient for formation costs Regulated industries may have separate requirements | No general minimum; capital must be sufficient for formation costs Regulated industries may have separate requirements |
| Proof of funds / capital verification | Proof is generally not required below NT$250,000; proof of funds is required at or above that amount | CPA capital verification required | CPA capital verification required |
| Number of owners or shareholders | One owner for a sole proprietorship Two or more partners for a partnership | One or more | Two or more shareholders Governance requirements also apply |
| Age requirements | The owner or partners must be adults | Director and responsible person must be adults; other shareholders may be minors | Directors, supervisor, and responsible person must be adults; other shareholders may be minors |
| Transfer of ownership interests | A sole proprietorship may become a partnership; a partnership may not become a sole proprietorship | Subject to statutory approval requirements | Shares are generally transferable, subject to law and the articles |
| Formation documents and governance | Original partnership agreement for a partnership | Original shareholder consent; at least one director who serves as the responsible person | Shareholders’ and board meetings; directors, chairperson, and supervisor as required by law |
| Owner or shareholder liability | Unlimited liability | Limited to the subscribed capital contribution | Limited to the subscribed shareholding |
| Travel restriction threshold for tax arrears | Tax arrears of NT$2 million or more | Tax arrears of NT$2 million or more | Tax arrears of NT$2 million or more |
| Registration evidence | Business registration approval letter | Company registration approval letter | Company registration approval letter |
| Import and export registration | Required when conducting import or export business | Required when conducting import or export business | Required when conducting import or export business |
| Individual income tax for owners or shareholders | Current-year profit is included directly in the owner’s or partners’ individual income | Distributed earnings increase shareholders’ individual income in the distribution year | Distributed earnings increase shareholders’ individual income in the distribution year |
| Uniform invoices | Generally required; qualifying small businesses may apply for exemption | Required | Required |
| Provisional income tax payment | Not applicable | Generally 50% of the prior year’s tax paid by the end of September | Generally 50% of the prior year’s tax paid by the end of September |
| Withholding filings | Required where the business is a withholding agent | Required where the company is a withholding agent | Required where the company is a withholding agent |
| Business tax rate | 5% | 5% | 5% |
| Profit-seeking enterprise income tax rate | 20% | 20% | 20% |
| Earnings distribution | Current-year earnings are attributed to the owner or partners | Distribution is resolved by June 30 of the following year; undistributed earnings are generally subject to an additional 5% tax | Distribution is resolved by June 30 of the following year; undistributed earnings are generally subject to an additional 5% tax |