When Should a Freelancer Incorporate? The NT$2M Threshold and 3 Rules for Running a One-Person Company

TL;DR: A One-Person Company (Company of One) is a small, flexible business built for "just you" — its core idea is to question growth and design a business around your lifestyle. For freelancers, annual revenue over NT$2M is worth considering, and over NT$3M I'd say you really should incorporate. The point is tax savings — letting income be taxed after expenses, not before.

A friend recently asked me: "My workload is picking up — should I form a company?"

Running a company costs roughly NT$50K a year (registered business address, bookkeeping).

If your annual revenue isn't yet NT$2M, I think you can hold off.

But once you cross NT$3M, I'd say you really should incorporate — for tax savings (saving money).

What is a "One-Person Company"? A small, flexible business model

The title of the book is Company of One — and the original meaning isn't literally "one person."

Author Paul Jarvis defines a Company of One as:

Questioning corporate growth
Keeping operations at the smallest possible scale
Building a business around your lifestyle

It overlaps a lot with freelancing — like running a company "for yourself, alone."

Question growth means: don't expand carelessly.

But we all know — when a company "needs" to expand, there are usually plenty of "reasonable" justifications. That's exactly where the danger sits.

The road to hell is paved with good intentions. Reasonable decisions usually come with reasons that feel non-negotiable.

A lot of companies fail. One reason is "risk escalation" caused by expansion.

Risk escalation strips away the "effective flexibility" to adapt when something unexpected hits.

Compare 1 store with 10 stores — a pandemic-level shock will easily cost the latter 10x more in losses and operational headaches.

Another angle: the larger the company, the more management problems pile up.

A team of 7 sits in one office. You can feel everyone's mood shift in real time.

A team of 15 splits into different zones, different units. People get separated. Cliques form.

When you can't get information first-hand, communication breaks down. Management and decisions start to drift off-target.

I've lived this myself. Going from a 7-person team to a 15-person team, the cracks slowly show.

Three things stood out to me when I scaled from 7 to 15:

At 7, if someone was in a bad mood, the whole office could feel it. After 15, you only hear about it through a PM.
At 7, a decision made today reaches everyone the same day. After 15, the same decision needs two meetings.
At 7, the boss knows every detail of every project. After 15, the boss only sees fragments.

The bigger the company, the further the boss is from the front line. This isn't a management-skill problem — it's a structural, physical limit of organizations.

PS: If your "company" is just you and things go sideways, just go find a new job. Treat the company as a side hustle. XD

Stay small. Stay flexible. The goal is to make the company serve us.

We start companies to live better — not the other way around, killing ourselves to serve the company.

When should a freelancer incorporate? NT$2M annual revenue is the line

In Taiwan, the upsides of forming a company:

First, tax savings. This is the big one.
Second, regulatory compliance — you can issue official invoices.
Third, many organizations only do business with companies.

When's the best time to incorporate? Once annual revenue crosses NT$2M.

If your personal income is NT$1M, you pay 11% tax = NT$41,080.

If your personal income is NT$2M, you pay 20% tax = NT$193,800.

If your personal income is NT$3M, you pay 30% tax = NT$408,700.

For a sharper estimate, run the numbers through the Individual Income Tax Calculator.

Look closely and you'll notice:

From NT$1M to NT$2M, income doubles, but tax goes up 3x!
From NT$2M to NT$3M, income grows by 50%, but tax goes up another 1x!

Tax always grows faster than income, doesn't it? Hurry up and incorporate already! XD

Three rough thresholds:

Under NT$1M annual revenue: Don't bother. File as an individual.
Around NT$2M annual revenue: Start evaluating. Look at your expense structure (equipment, rent, outsourcing).
Over NT$3M annual revenue: Incorporate. The tax savings clearly outweigh the cost of running a company (~NT$50K/year).

Pros and cons of a one-person company

First, when "just you" sets up a sole-proprietorship-style company, the company is entirely yours.

Incorporating saves tax because revenue can first cover "expenses" before becoming your "personal income."

If someone pays you (the individual) NT$1M, you have NT$1M of income.

But to deliver that project you spent NT$500K on equipment — and you still get taxed on the full NT$1M.

If someone pays the company NT$1M, the company can spend NT$500K on equipment as a business expense.

After deducting operating costs, the company can pay you, say, NT$400K — meaning you only pay tax on NT$400K.

The upside of incorporating: revenue covers expenses first, then becomes income, then gets taxed.

Any downsides? Beyond the admin work, the company itself still pays tax.

A company pays 3 layers of tax:

Business tax (營業稅): 5% on issued invoices, usually passed on to customers or clients.
Profit-seeking enterprise income tax (營利事業所得稅): Filed annually based on bookkeeping. Companies under NT$30M can use the "Expanded Written Audit" (擴大書面審核, or 擴大書審 for short), which works out to about 1.2% of revenue.
Individual income tax (綜合所得稅): Drawing the company's net profit out as personal income gets taxed once. Even if it stays in the company, you still file for retained-earnings tax.

The benefit of incorporating: deduct "expenses" before "tax" — and the share you actually pay drops dramatically.

If you're a sole proprietor, you can use the company to buy real estate, rent property, buy equipment, cover transportation, even pay for client meals (entertainment).

These are all "expenses" — none count as your personal income!

But as an individual, you have to pay tax first, and only then can you spend on housing, equipment, or meals.

So if you're really pulling in NT$3M a year, go incorporate already XD!

3 rules for running a "one-person company"

The three operating rules are:

The company is just a tool — don't let incorporation go to your head.
Don't hire full-time employees lightly. Always look for alternatives first.
Use the company's expenses to build credit and assets.

The company is just a tool

For a lot of creators and freelancers, the original reason to incorporate is simple: needing to issue invoices.

But once project volume picks up, the next thought is usually: hire more people.

And that's how a freelancer's company slowly turns into a small studio.

These studios are everywhere in Taiwan.

Once we shift from freelancer to "boss," our appetite for control gets bigger.

The company is yours, the money's flowing in, headcount climbs — and the head starts to swell.

You see this pattern a lot:

As the company underperforms, the boss starts resenting all the sacrifices made for the company and the staff.
Sensing inefficiency, they start meddling with and supervising work that already has owners — convinced "I made it through this way," even though the company has long since outgrown that mode and many of those methods no longer apply.
Micromanagement kills efficiency, morale tanks, turnover spikes.

The company is yours, but it's only a tool. You don't live for the company.

Find alternatives before adding people

Gumroad founder Sahil Lavingia writes in The Minimalist Entrepreneur that when business demand grows, you should consider — in this order:

Buy a tool that solves the problem — software, equipment, licenses.
Outsource to specialists or specialized firms — accounting, legal, photography.
Hire a contractor or freelance helper.
Hire a full-time employee.

Take legal: a lawyer's retainer runs about NT$60K/year, with monthly consulting included.

If you want to skip that cost, you can pull contract templates online or ask ChatGPT.

ChatGPT and AI have basically solved every legal and planning problem I've thrown at them.

So now you can lean on subscription software for a lot of specialized headaches.

If software really isn't enough, hire a contractor for the workload, and the engagement ends when the contract does.

Why am I against hiring full-time employees? Too many reasons:

Labor and health insurance is expensive.
Salary and leave calculations need careful handling.
You need to provide an office.
Severance requires legitimate cause and is protected under the Labor Standards Act.

I won't list them all — short version: it's a lot of admin pain.

Use company expenses to build credit and assets

The reason to incorporate: tax savings.

The trick is to let the company pay for personal-use spending before company income becomes personal income.

Companies have credit, so they can borrow — and even take on bigger projects.

Some projects don't get subcontracted to individuals because they require official invoices.

Some projects look at the company's registered capital and scale, so a company with larger capital has real advantages.

That's also why some people "raise" companies in different industries.

But the real point is the company's assets.

Accounting-wise, an asset is: something the company uses to make money.

Equipment, stocks, employees, IP, products — all assets.

For creators: articles, illustrations, online courses, brand identity — all assets.

How do you build company assets and credit? By spending money.

Software companies frequently buy system modules to support different software project types.

Design firms maintain their own asset libraries. Creators buy software to manage their own knowledge.

Of course, creators can also hire others to produce content. The content itself is an asset.

And once company revenue is solid, you can think about buying property XD.

A one-person company is a means, not an end

The pros of incorporating outweigh the cons — but the company is only a tool.

Running a "one-person company" is about living better. Questioning growth is about avoiding risk escalation that strips away your flexibility to respond.

Before scaling up, look for alternatives. And most importantly:

Never outsource what you enjoy.

James Clear

FAQ

Q: At what annual revenue should a freelancer incorporate? A: Start evaluating once you cross NT$2M; strongly consider it past NT$3M. A one-person company costs roughly NT$50K/year for a registered business address and bookkeeping — once you're above that threshold, the tax savings clearly outweigh the cost.

Q: Do I have to hire an accountant for a "one-person company"? A: Recommended. Annual bookkeeping, tax filings, and profit-seeking enterprise income tax filings are tedious. An accounting firm runs about NT$20K–NT$40K/year — far less than the time you'd lose doing it yourself.

Q: Can a one-person company hire employees? A: Legally, yes — but usually I wouldn't. Full-time hires bring labor and health insurance obligations, leave calculations, and severance risk, all of which work against the "small and flexible" core of a one-person company. Substitute in this order first: tools, outsourcing, contractors.

Q: Can a company buy real estate? A: Once a sole-proprietorship company has built up credit, it can borrow to buy property — and many expenses qualify as company costs. But the use must genuinely fit company operations, not pure tax avoidance, or the National Taxation Bureau will reject the claim.

Note: The tax rates, Expanded Written Audit threshold (1.2% for revenue under NT$30M), income brackets, and incorporation cost figures in this article are based on the Taiwan National Taxation Bureau's 2023 announcements and market rates. For actual filings, refer to the latest regulations or check the Individual Income Tax Calculator directly.