1. Introduction
 
If you are a business owner planning to form a company to conduct business in Taiwan, choosing the proper corporate form is a crucial decision. This choice has significant implications because it directly affects matters such as the number and liability of capital contributors (each, hereinafter, a shareholder), the company’s ownership and management structure, and the transferability of equity. This decision is an essential and immediate step in forming your company because the Company Act (公司法) in Taiwan requires each company to specify its corporate form in its name.[1] In this essay, we provide a concise (though not exhaustive) guide to help you make an informed choice by examining some key factors that distinguish the available corporate forms.
 
2. The Starting Point
 
The Company Act provides four principal corporate forms: unlimited company (無限公司), limited company (有限公司), unlimited company with limited liability shareholders (兩合公司), and company limited by shares (股份有限公司).[2] To navigate these options effectively, we recommend starting with the following factors: (1) the number of shareholders and (2) the liability of shareholders. These two factors align directly with the statutory framework and offer a logical method for narrowing options. The table below summarizes the available corporate forms according to these factors.
 

	One (1) Shareholder	Two (2) or More Shareholders
Limited Liability	Limited company	Limited company
Share-based Limited Liability	Company limited by shares (single government shareholder or corporate shareholder only)	Company limited by shares
Unlimited Liability	None	Unlimited company
Unlimited Liability + Limited Liability	None	Unlimited company with limited liability shareholders (with at least one (1) unlimited liability shareholder + at least one (1) limited liability shareholder)

 
2.1 The Number of Shareholders
 
If your company has only one shareholder, you should consider either a “limited company” or a “company limited by shares.”[3] Under the Company Act, a limited company is a company organized by one or more shareholders whose liability is limited to their capital contribution.[4] On the other hand, a “company limited by shares” is a company organized by two or more shareholders, or by a single government or corporate shareholder, with its entire capital divided into shares, and each shareholder’s liability is limited to subscribed shares.[5] A company with only one shareholder may choose between these two corporate forms. However, the “company limited by shares” form is available only to a company with a single government shareholder or a single corporate shareholder.[6] Consequently, a sole natural person shareholder seeking to form a single-member company must choose the “limited company” form.[7]
 
In addition to the forms of “limited company” and “company limited by shares,” the forms of “unlimited company” and “unlimited company with limited liability shareholders” are also available for a company with two or more shareholders.[8] Under the Company Act, an “unlimited company” is organized by two or more shareholders who bear joint and several liability for the company’s debts.[9] An “unlimited company with limited liability shareholders” is organized by one or more unlimited liability shareholders together with one or more limited liability shareholders.[10] In an unlimited company with limited liability shareholders, unlimited liability shareholders are jointly and severally liable for the company’s debts, while limited liability shareholders are liable only up to their capital contribution.[11] When all corporate forms are available options, you may next consider the “liability of shareholders” factor.
 
2.2 The Liability of Shareholders
 
This factor addresses whether shareholders desire a liability shield to protect their personal assets from the company’s creditors. If shareholders do not wish to have personal exposure to the company’s liabilities beyond their investment, they should choose a business entity with limited liability. This choice is crucial for protecting the personal assets of shareholders and determining their liability exposure.
 
2.2.1 Limited Liability
 
If you (or your company’s shareholder(s)) desire a liability shield that reduces your personal liability exposure and protects your personal assets from covering your company’s debts, you may consider the forms of “limited company” or “company limited by shares.” This is because the liability of shareholders in these companies is capped by their investment (capital contribution) in the companies. Generally, the liability of shareholders in a limited company is limited to their capital contribution.[12] Similarly, the liability of shareholders in a company limited by shares is limited to the shares they have subscribed.[13] Moreover, you may consider the “unlimited company with limited liability shareholders” form if your company has at least one unlimited liability shareholder in addition to the limited liability shareholder(s). The liability of limited liability shareholders in an unlimited company with limited liability shareholders is also limited to the amount of their capital contributions.[14] You may cross the “unlimited company” form off your list because shareholders in an unlimited company are unlimited liability shareholders bearing joint and several liability for the company’s debts.[15] The form of “unlimited company” is not a suitable option for a business owner (or a shareholder) prioritizing liability protection.
 
2.2.2 Unlimited Liability
 
If you (or your company’s shareholder(s)) are willing to personally cover your company’s debts when your company’s assets are insufficient to settle its debts, you may consider the form of “unlimited company.” Shareholders in an unlimited company are unlimited liability shareholders who receive no protection of limited liability because they are jointly and severally liable for the company’s debts.[16] When an unlimited company has insufficient assets to repay its debts, all unlimited liability shareholders must use their personal assets to repay the company’s debts until all debts of the company are fully discharged. In addition to the “unlimited company” form, you may consider the “unlimited company with limited liability shareholders” form if your company has at least one limited liability shareholder in addition to the unlimited liability shareholder(s). Unlimited liability shareholders in an unlimited company with limited liability shareholders bear joint and several liability for the company’s debts,[17] similar to the liability of unlimited liability shareholders in an unlimited company.
 
3. Additional Factors
 
In addition to the factors of “number of shareholders” and “liability of shareholders,” each corporate form has its unique features that a business owner may consider when choosing the corporate form. In the following paragraphs, we combine the two foregoing factors together with the description of some (though not exhaustive) features of each corporate form for further reference.
 
3.1 Limited Company
 
When your company is a single-member company with one natural person shareholder seeking the protection of limited liability, the only corporate form available for your company is the form of a “limited company.”[18] In Taiwan, “limited companies” and “companies limited by shares” are more common than “unlimited companies” and “unlimited companies with limited liability shareholders.” The features of a limited company, such as limited liability protection for shareholders, the availability as a single-member company, simplified governance and management, and a flexible decision-making process, make this corporate form widely favored among small- and medium-sized enterprises (“SMEs”) and family-owned businesses. A limited company is also a popular vehicle for establishing wholly owned subsidiaries, as it can be formed by one or multiple shareholders, making the creation of a single-member company possible.[19] However, one should be aware of the requirement for a full subscription and payment of capital contribution at corporate formation,[20] as well as the restricted transferability of capital contributions (equity interests) in a limited company.[21] These features indicate the hybrid nature of a limited company and make this corporate form suitable for closely held SMEs or family-owned businesses, where shareholders maintain close relationships yet require limited liability protection.
 
3.2 Company Limited by Shares
 
In addition to the “limited company” form, the “company limited by shares” form is another option available for a single-member company with only one shareholder seeking the protection of limited liability. [22] However, only a government shareholder or a corporate shareholder may form a single-member company limited by shares.[23] If your company has a natural person shareholder, your company must have two or more shareholders (e.g., two or more natural person shareholders, or at least one natural person shareholder plus one government shareholder or one corporate shareholder) to form a company limited by shares.[24] In addition to the limited liability protection for shareholders, a company limited by shares features a flexible share-based capital structure, the free transferability of shares, and the potential for access to capital markets. The free transferability of shares facilitates liquidity and attracts investment, making it a company limited by shares’ unique advantage not found in other corporate forms. These features allow a company limited by shares to fine-tune its capital structure and raise funds in response to changing business needs and market conditions. This flexibility, however, comes with enhanced corporate governance requirements and internal and external oversight mechanisms to ensure legal compliance, regulatory supervision, and timely disclosure of material information. This corporate form is suitable for enterprises that require substantial capital or plan for a future public offering.
 
3.3 Unlimited Company
 
When your company has two or more shareholders, you will have more corporate forms to choose from. In addition to the abovementioned forms of “limited company” and “company limited by shares,” you may consider the forms of “unlimited company” and “unlimited company with limited liability shareholders.” In Taiwan, “unlimited companies” and “unlimited companies with limited liability shareholders” are less common than “limited companies” and “companies limited by shares.” The features of an unlimited company, such as unlimited liability of shareholders, close alignment of ownership and management, and a restricted entry and exit mechanism, reveal a strong and interconnected relationship among shareholders in an unlimited company. These features make an unlimited company suitable for businesses where shareholders maintain a high degree of mutual trust and a close working relationship. However, this corporate form is relatively unsuitable for high-risk business because all shareholders of an unlimited company receive no liability shield protection and may face substantial personal financial risk at any time. One should carefully consider the risk implications before choosing this corporate form.
 
3.4 Unlimited Company with Limited Liability Shareholders
 
With two or more shareholders in your company, the form of “unlimited company with limited liability shareholders” is an available option for your company in addition to the forms of “limited company,” “company limited by shares,” and “unlimited company.” The most distinct feature of an unlimited company with limited liability shareholders is the “bifurcated system of shareholder liability,” which includes both unlimited and limited liability shareholders in this kind of company. This system affects many aspects of an unlimited company with limited liability shareholders, including, without limitation, capital contributions, risk allocation, management and oversight, and the restricted transferability of capital contributions (equity interests). An unlimited company with limited liability shareholders blends “active managers” with “passive investors” in a single corporate form, allowing passive investors to participate in the company with limited risks while ensuring at least one other shareholder actively manages the company. In an unlimited company with limited liability shareholders, a passive investor participates in the company as a limited liability shareholder, avoiding management duties and excessive risk, but forfeiting participation in the company’s operations. On the other hand, an active manager participates in an unlimited company with limited liability shareholders as an unlimited liability shareholder who has broader management authority but also bears greater risks. The “bifurcated system of shareholder liability” feature, however, may disadvantage an unlimited company with limited liability shareholders in attracting new investors because new investors are forced to choose between full responsibility and full passivity.
 
4. Conclusion
 
For a business owner planning to form a company to conduct business in Taiwan, the choice of corporate form is a critical decision with lasting consequences. By starting with the number of shareholders and their desired liability, you can effectively narrow the available options and identify the most suitable option. A careful evaluation of the factors discussed herein (though not exhaustive) will help you choose a proper corporate form that aligns with your company’s strategic goals and operational realities.
 
If the sole shareholder of your single-member company is a natural person seeking the limited liability protection, your only choice is a limited company. A limited company is the only corporate form that allows a single-member company with a sole natural person shareholder. Other features of a limited company include limited liability protection for shareholders, full subscription and payment of capital at formation, simplified governance and management, a flexible decision-making process, and restricted transferability of capital contributions (equity interests). A limited company is ideal for sole proprietors, closely held SMEs, or family-owned businesses.
 
When the sole shareholder of your single-member company is a government shareholder or a corporate shareholder seeking the limited liability protection, you may consider forming a company limited by shares. Some distinct features of a company limited by shares include the limited liability protection for shareholders, the free transferability of shares, and the potential for access to capital markets. However, it is worth noting that this corporate form requires enhanced corporate governance requirements, as well as internal and external oversight mechanisms. A company limited by shares is a viable option for businesses that require substantial funding or aspire to enter the public market.
 
You may choose among four corporate forms when your company has two or more shareholders. If there are two or more shareholders in your company and all of them are willing to be held personally liable for the company’s debts, the form of “unlimited company” is an available option for your company. Some features of an unlimited company include, without limitation, unlimited liability of shareholders, close alignment of ownership and management, and a restricted entry and exit mechanism. An unlimited company is a corporate form catering to businesses built on high personal trust among closely connected shareholders. However, an unlimited company is not likely suitable for high-risk business since all shareholders in the company are exposed to significant personal financial risk at any time.
 
If your business has multiple shareholders and requires a mix of active management and passive investment, you may consider forming an unlimited company with limited liability shareholders. An unlimited company with limited liability shareholders is equipped with a “bifurcated system of shareholder liability,” a unique feature that allows the unlimited and limited liability shareholders to coexist within the company. A limited liability shareholder assumes the role of a passive investor who participates in the company without management authority and is not exposed to excessive risks. On the other hand, an unlimited liability shareholder serves as an active manager, actively managing the company while bearing unlimited liability risks. However, an unlimited company with limited liability shareholders may be less attractive to new investors because new investors must choose between full responsibility and full passivity when joining the company.