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TYPES OF COMPANY IN VIETNAM? WHICH ONES WE SHOULD CHOOSE?

Because Vietnam is currently integrating with the global economy, actors must embrace opportunities and build successful production and economic activities. The considerable increase in the number of businesses registering new and re-opening operations demonstrates this. To prevent potential dangers, firms must choose the correct type of business registration based on their goals and capabilities.

Legal basis

- Law on Investment 2020.

1. Limited Liability Company (LLC)

- LLC is a legally recognized entity. As a result, the firm has its own assets, a seal, and a head office, and it can engage in legal transactions on its own behalf without relying on the status of the owner.

- Capital contributors are only responsible for the enterprise's debts and other property obligations up to the amount of capital they supplied. This, like a joint stock corporation, is a significant benefit of LLC. Segregation of personal assets gives a certain level of safety for business participants because members contributing capital to the company are only responsible to the extent of the contributed capital.

- LLC has the ability to raise funds by borrowing money and credit from individuals and businesses. LLC has the ability to issue bonds as well. Shares cannot be issued by a single member limited liability company or two or more member limited liability companies. Like a joint stock company, LLC is not permitted to issue various types of securities in the form of certificates, journal entries, or electronic data.

2. Joint Stock Corporation (JSC)

- A company whose charter capital is divided into equal portions, known as shares.

- The firm must have at least three shareholders, with no upper limit. Shareholders are solely liable for the company's debts and other property responsibilities to the extent that they provided money to the company.

- Joint stock firms have the ability to raise money by issuing a variety of securities.

3. Representative Office (RO)

RO for foreign traders are permitted to be established in Vietnam to carry out the following activities:

- Act as a liaison office and conduct market research.

- Promote and market the traders they represent's business investment prospects.

- Other activities that are legal in Vietnam.

It is important to note that a RO in Vietnam is not permitted to conduct services for profit on behalf of the RO.

4. Branch

- A branch is a subordinate entity of a company that is responsible for carrying out all or part of the company's functions, including that of an authorized representative.
- Branch legal status: A branch, like a representative office, is a dependent entity of the firm with no legal standing.

- Businesses have the ability to open branches both in the country and outside. According to administrative limits, a company can open one or more branches in a given area.

5. Comparison of business entity options for foreign investors

 

LLC

JSC RO

BO

Nature

  1. Easier way to start a business
  2. Ideal for smaller businesses
  3. Protection of personal assets
  4. Shareholder’s liability: limited to shares
  1. Ideal for medium and large businesses
  2. Allows owners to issue shares and be listed on the public stock exchange
  3. Its charter capital assigned to equal portions of shares
  1. Easy to set up
  2. Allow a business to gain a presence in the market before setting up a limited liability company
  3. Not allowed to conduct any business activities that generate income and behave like an ordinary company.
  1. Extension of parent company
  2. Can conduct commercial activities and make profits without incorporating a separate legal entity

Structure

  1. 1 shareholder (can start a single-member LLC)
  2. 2 – 50 members can own multi-member LLC
  1. 3 shareholders (minimum)
  2. No maximum number of shareholders
  1. No need for any shareholder(s)
  2. Local representatives (foreign/local) are sufficient
  1. No need for any shareholder(s)
  2. Smaller divisions are commonly found: marketing, finance, human resources, etc.

Capitalisation

  1. Capital not stipulated
  2. USD 10,000: common, sufficient capital
  1. Initial capital not further stipulated
  2. If so, VND 10B is required
No capital requirements

No capital requirements

Benefits

  1. Liability limited to charter capital
  2. Cuts down process and operation paperwork
  3. Continues to exist even in the event of the death of a shareholder/shareholders
  4. Easier to raise capital via angel investors, venture capitalists or other financial institutions
  5. Used to avoid double taxing
  6. Helps to present business as more credible due to its high transparency
  1. Shareholders are only liable for loss or debts that will not exceed the amount of investment they have contributed
  2. Shareholders are allowed to transfer their ownership of share to others without the consent of other shareholders
  3. If the capital exceeds VND 10B, a JSC can be publicly listed at Hanoi Stock Exchange (HNX) or Ho Chi Minh City Stock Exchange (HOSE)
  1. Can recruit employees to handle contracts and promote sales with local partners
  2. Can find goods and services purchase opportunities, and can conduct research and develop products
  3. License is valid for two to five years and can be renewed, allowing participation in investment activities
  4. A foreigner working at a representative office can get a work permit, a two-year multiple temporary residency visa for themselves, as well as their family in Vietnam
  5. A cost-saving investment option for foreign investors with no corporate income tax, no added-value tax, no independent audit, and no financial statement
  6. Easy to shut down

No capital requirements

The above information is about the ‘Type of company in Vietnam? Which ones we should choose?'. For more information and advice on this issue, please contact Doanh Tri Law Firm directly via:

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