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Advantages and disadvantages of Multi-member LLC in Vietnam?

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Establishing a business is one of the choices of individuals and organizations when they want to conduct business activities. However, among many options of business types, it is also a problem to be able to choose one that suits your needs. So, the owner needs to understand the advantages and disadvantages of different types when establishing. In this article, LSX legal firm would like to inform you: “Advantages and disadvantages of Multi-member Limited Liability Company (LLC) in Vietnam?

  • Law on Enterprise 2020

Multi-member Limited Liability Company (LLC)

A limited liability company with two or more members (Multi-member LLC): a type of enterprise in which the members only responsible for the debts or other financial obligations of the enterprise to the extent of the capital contributed by the members. In addition, a limited liability company with two or more members has its legal status, same to a single-member limited liability company.

A limited liability companies with two or more members have a maximum of 50 members and limited capital mobilization because this type of company cannot raise capital by issuing shares.

According to the Law on Enterprise 2020:

“Article 46. Multi-member limited liability companies

1. A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise, except for the cases specified in Clause 4 Article 47 of this Law. The member’s stake (contributed capital) may only be transferred in accordance with Articles 51, 52 and 53 of this Law.

2. A multiple-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

3. Multiple-member limited liability companies must not issue shares except for equitization.

4. Multiple-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of this Law.”

Advantages and disadvantages of Multi-member LLC

Each type of business has its own advantages and characteristics, and of course, certain limitations. Owners will rely on those pros and cons, along with their own needs and abilities, to choose the right type of business. So, a multi-member limited liability company (LLC) has its own advantages and disadvantages. Specifically:

Advantages

  • Company members only responsible for the company’s activities within the amount of capital contributed to the company, thus minimizing risks for capital contributors and at the same time separating assets between capital contributors and the company. 
  • The members are usually acquaintances and trust each other, so it is easier to manage and run the company.
  • The capital transfer regime regulated strictly. So investors can easily control the change of members and limit the penetration of strangers into the company. Also, members who want to transfer capital will have to give priority to the remaining members of the company first

Disadvantages

  • Capital cannot be raised by issuing shares, for joint-stock companies, the issue of shares is a very good channel to raise capital from the idle money of investors. However, limited liability companies with 2 or more members can not raise capital by this method.
  • Since the capital contributors are only liable for the company’s debts, they will not be as valuable as a joint-stock company when applying for a loan at a bank.

Procedures to establish a Multi-member LLC

The procedure for establishing a Limited Liability Company (LLC) has basic differences compared to a Joint Stock Company. Because the Limited Company includes two types:

  • Single-member limited liability company: only 01 capital contributor. That person is the owner of the company.
  • Limited liability companies with two or more members: from 02 (two) to 50 (fifty) contributors. They are capital contributors of the company.

Procedures for establishing a limited liability company with two or more members include:

Step 1: Prepare dossiers

An application for enterprise registration.

  • Company charter
  • Copies of legal papers of the legal representative; authorized person; members as individuals; members as organizations. In case the members are foreign organizations/investors, there must be investment registration certificates. Also, copies of legal documents must be consular legalized.
  • List of members.
  • Authorization document: In case the owner does not directly carry out the procedure.

Step 2: Submit dossiers

Submit the application at the Business Registration Office of the Department of Planning and Investment at the province level where you plan to locate the head office of your Company.

Currently, there are two forms to submit an application:

  • Register directly: apply at the “one-stop” department of the Business Registration Office. However, in Hanoi, this method is no longer applied.
  • Online business registration: submit your application on the National Business Registration Portal (Address: https://dangkykinhdoanh.gov.vn). After the online application is valid, you will have to go directly to the “one-stop” department to return the scanned copy (hard copy) when submitting it online. 

Once you have submitted your application, you will receive a receipt for your application. The usual processing time for applications will be 3 working days.

Step 3: Receive result

According to the schedule on the appointment, you return to the “one-stop” department of the Business Registration Office to receive the results. There are two possible scenarios:

  • Dossiers valid: You will receive a Certificate of Business Registration as a result and a notification to the tax authorities.
  • Dossiers invalid: The Business Registration Office will have a document instructing you to amend the dossiers in accordance with the provisions of the law. After the amendments and supplements to your application according to this guide, then resubmit your application as in Step 2.

Step 4: Post-establishment procedures.

Receiving a Business Registration Certificate is just the first step in putting your company into operation. After that, you have to do the following series of procedures:

  • Notice the use of the company’s seal sample.
  • Bank account notice (if your company registers a bank account).
  • Tax procedures such as license declaration and payment of license fees, Tax on corporate headquarters inspection,…
  • Trademark protection (if you need it).

After carrying out these procedures, your Company can go into operation.

When establishing a company, people must carry out the procedure following the law at the competent business registration authority (under the Law on Enterprise 2020). The process of establishing a business includes many different steps and phases. If you are not familiar with the law, this process may take a lot of time.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself, We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.

Related article

Advantages of Single-member LLC?

The owner only takes liability for the debts of the company to the extent of his/her capital contribution (similar to a joint-stock company and a partnership). When problems affect the company such as bankruptcy, debt, etc., the law limits the owner’s risk.
The company’s members are usually family members, there is mutual trust in contributing capital and doing business together. Besides, the small organizational structure will make the company’s operating model not too complicated.

Why establishing a company?

Decent: The business that is registered is a manifestation of the legitimacy of the operation. This is the basis for building trust with partners.
Confident: When entering into a contract as a legal entity, owners can proactively present their licenses/certificates when required.
Process: The company will have a strict structure and management. This ensures the best interests when operating, expanding, and mobilizing.

Requirements for business establishment?

Firstly, Business type
Secondly, Business name
Thirdly, Headquarter address
Fourthly, Business line
Next, Charter capital and the corresponding tax
Then, the Legal representative
Lastly, Application for business registration

Contact LSX

Finally, hope this article is useful for you to answer the question about “Advantages and disadvantages of Multi-member LLC in Vietnam?”. If you need any further information, please contact  LSX Law firm+84846175333 or Email: [email protected]

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