The increasing need to establish a business means that choosing the right type of business now becoming a problem for entrepreneurs. The limited liability type of company, particularly, Single-member limited liability company attracts attention from many businesses. So, what are the advantages and disadvantages of a Single-member limited liability (LLC) company when established? LSX legal firm will give you the answer through the following article.
Legal ground
- Law on Enterprise 2020
- Decree 78/2015/ND-CP
- Decree 108/2018/ND-CP
Single-member LLC
Single-member limited liability company: a company with only one member (owner) as an organization or an individual. The characteristics of this type of business can be seen clearly from the name. The law also clearly stipulates that, with this type of business, the owner of the company has limited liability for the company’s debts and property obligations to the extent of the company’s charter capital.
“Article 74. SINGLE-MEMBER LIMITED LIABILITY COMPANIES
1. A single-member limited liability company is an enterprise owned by a single organization or individual ((hereinafter referred to as “owner”). The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.
2. A single-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.
3. A single-member limited liability company must not issue shares except for equitization.
4. Single-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.”
Not like a Sole proprietorship, a Single-member limited liability company has legal status from the date of issuance of the business registration certificate although they all established by only one founder.
Besides, the law limits the ability to mobilize capital of a Single-member LLC more than a joint-stock company. Because Single-member limited liability companies can not issue shares to raise capital.
Advantages and disadvantages of Single-member LLC
Each type of business has its own characteristics and certain limitations. Owners will base on those pros and cons, along with their own needs and abilities, to choose the appropriate type of business to establish. Here are the advantages and disadvantages of a Single-member LLC:
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.
Example: Mr. A contributes 1 billion of the total 9 billion assets he owns to establish a Single-member limited liability company. If the company goes bankrupt, Mr. A only liable to creditors up to the amount of 1 billion, without affecting his assets of 8 billion, even if his debt larger than 1 billion.
- 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.
Disadvantages of Single-member LLC:
- Under Article 87 of the Law on Enterprise 2020, a company may not decrease its charter capital if it has not operated for at least 02 consecutive years from the enterprise registration date.
- Difficult to raise capital, when wanting to increase or decrease charter capital, it can only be done by the owner contributing additional capital or receiving capital from new members ((In this case, the business must change to a limited liability company with 2 or more members).
- Must not raise capital by issuing shares. For joint-stock companies, the issue of shares contributes to raising capital from investors. However, this mobilization channel is limited to Single-member limited liability companies.
Procedures to establish Single-member LLC
Step 1: Prepare application for business registration
An enterprise registration dossier for a single-member limited liability company include:
- An application for enterprise registration.
- Company charter.
- Copies of legal papers of the legal representative, authorized person, owner as an individual, owner as an organization (except for state-owned organization).
- The original certificate of business household registration and a valid copy of the tax registration certificate in case of conversion from a household business.
- 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. However, this method is relatively complicated, requiring you to have skills and knowledge about registering a business account.
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.
LSX legal firm’s service on company establishment
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.
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Related questions
Business establishment dossiers
To establish a company, the business has to prepare a valid set of documents:
– Firstly, the Business registration application form.
– Secondly, the Company charter
– Thirdly, List of founding members/shareholders (According to the form issued by the Ministry of Planning and Investment).
– Lastly, the business owner’s identity papers.
Method to submit the application
In the entire Department of Planning and Investment of provinces and cities nationwide, there are currently 02 (two) methods of business registration documents, including:
– Submit business registration applications directly at the One-Stop Department of the Department of Planning and Investment where the company located.
– submit online: https://dangkykinhdoanh.gov.vn
The information technology industry has conditional business lines, so enterprises can only perform those businesses when they fully satisfy the conditions of the law. Therefore, businesses need to apply for a certificate issued by a competent authority to perform those businesses.
Patent registration or other useful methods: In addition to the legal procedures, information technology companies will likely have a lot of patents or intellectual property that need to be recognized.
Contact LSX
Finally, hope this article is useful for you to answer the question about “Advantages and disadvantages of Single-member LLC in Vietnam?”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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