Today’s growing economy has fueled the proliferation of real businesses. Many people choose for themselves the type that suits their abilities and conditions. So about the matter “Businesses without legal status in Vietnam” Let’s find out with LSX in the article below.
Legal grounds
- Enterprise Law 2020
What is legal personality?
Clause 1, Article 74 of the 2015 Civil Code provides for specific legal entities as follows:
– An organization is recognized as a legal entity when it fully meets the following conditions:
• Established under the provisions of this Code and other relevant laws;
• Having an organizational structure as prescribed in Article 83 of this Code;
• Having assets independent of other individuals or legal entities and taking responsibility for their own property;
• Independently participate in legal relations on their own behalf.
– All individuals and legal entities have the right to establish a legal entity, unless otherwise provided for by law.
Thus, an organization is considered to have legal status when it meets the above 4 provisions. In case an organization does not meet any one of the four conditions above, it is not considered a legal entity.
What is a sole proprietorship?
Private enterprise is one of the types of enterprises specified in the Law on Enterprises that are allowed to operate in our country together with limited liability companies, partnerships, joint stock companies, etc.
In Article 188 of the Enterprise Law 2020, a private enterprise is an enterprise owned by an individual and is solely responsible with all his assets for all activities of the enterprise. Thus, the private enterprise’s assets are not separate from the enterprise’s assets, the liability of the private business owner is unlimited.
Businesses without legal status in Vietnam
The Enterprise Law 2020 stipulates that there are 05 types of enterprises, including:
• Limited liability company with 2 or more members;
• One member limited liability company;
• Joint Stock Company;
• Partnerships;
• Private enterprise.
Accordingly, for two-member limited liability companies, one-member limited liability companies, and joint-stock companies, these types of businesses all meet all the conditions in Article 74 of the 2015 Civil Code, so of course. 2-member limited liability companies, 1-member limited liability companies and joint stock companies have legal status.
The case for a partnership company
Clause 1, Article 177 of the Enterprise Law 2020 stipulates that a partnership must have at least 02 members who are the common owners of the company and jointly conduct business under a common name (called general partners). In addition to general partners, the company may have additional capital contributors. As follows:
• General partners must be individuals, responsible with all their assets for the obligations of the company;
• Capital contributors are organizations and individuals and are only responsible for the company’s debts within the amount of capital committed to contribute to the company.
Although general partners do not have assets independent of individuals, a partnership exists with capital contributors, who are members whose assets are independent of the company. Therefore, a partnership is a legal entity.
The case for private enterprises
Clause 1, Article 188 of the Enterprise Law 2020 provides for specific private enterprises as follows:
– A sole proprietorship is an enterprise owned by an individual and is solely responsible for all his/her assets for all activities of the enterprise.
– Private enterprises are not allowed to issue securities of any kind.
– Each individual is only entitled to establish a private enterprise. The owner of a private enterprise cannot concurrently be the owner of a business household or a general partner of a partnership.
– A private enterprise is not entitled to contribute capital to the establishment or purchase shares or contributed capital in a partnership, limited liability company or joint-stock company.
Accordingly, a private enterprise is an enterprise owned by an individual and is solely responsible for all his/her assets for all activities of the enterprise. The regulation that private enterprises must be responsible for themselves with all their assets makes the assets of the business no longer independent from the assets of the individual. A sole proprietorship is an enterprise but has no legal status.
How are assets and civil capacity of legal entities regulated?
Article 81 of the 2015 Civil Code provides for the property of a juridical person as follows: “Property of a juridical person includes contributed capital of the owner, founder, members of the juridical person and other assets to which the juridical person is entitled establish ownership rights in accordance with this Code and other relevant laws.”
Besides, Article 86 of the 2015 Civil Code stipulates the capacity of legal entities in civil law as follows:
• Legal capacity of a juridical person is the capacity of a juridical person to have civil rights and obligations. The civil legal capacity of a juridical person is not restricted, unless otherwise provided for by this Code or other relevant laws.
• The civil legal capacity of a juridical person arises from the time it is established or permitted to be established by a competent state agency; if the juridical person must register its operation, the civil legal capacity of the juridical person shall arise from the time of recording in the register.
• The civil legal capacity of a juridical person terminates from the time of termination of the juridical person.
Article 87 of the 2015 Civil Code provides for the civil liability of legal entities as follows:
• A legal person must take civil responsibility for the performance of civil rights and obligations established and performed by its representative in the name of the legal person.
A legal person shall bear civil liability for obligations established and performed by a founder or a founder’s representative in order to establish and register a legal entity, unless otherwise agreed upon or otherwise provided by law.
• A legal person is liable for civil liability with its property; shall not be liable on behalf of a person of the legal entity for civil obligations established or performed by a person of the legal entity not in the name of the legal person, unless otherwise provided for by law.
• The person of the juridical person shall not take civil liability on behalf of the juridical person for civil obligations established and performed by the juridical person, unless otherwise provided for by law.
Pros and cons of setting up a sole proprietorship
- Advantages
Since there is only one owner, the owner of a private enterprise has full authority to decide all matters related to the business;
• Private enterprises are also less bound by legal regulations due to unlimited liability regime such as guarantee for business partners as well as credit institutions to cooperate with enterprises;
• The enterprise’s organizational structure is simple and compact.
- Disadvantages
• The owner of a private business is always at high risk because he has unlimited liability with his or her assets in the course of business operations of the business;
• No capital contribution, immediately meeting the need for large capital for business;
• Private enterprises are not allowed to issue any kind of securities, thus limiting their ability to raise capital;
• Being owned by an individual, decisions are often arbitrary and lack of objectivity when making decisions;
• Not to contribute capital to establish or buy shares in other types of enterprises;
• Only allowed to establish one private enterprise.
Services of LSX
Prestigious professional services: Firstly, the team of consultants and consultants for many years in the field of civil status, and customer support.
On-time: Certainly, with the motto “Get your lawyer right at your fingertips”, we ensure the service always performs on time. The rights and interests of customers always come first.
Cost: Besides, LSX’s service costs are highly competitive; depending on the nature of the particular case. So, we want our guests to have the best possible service experience. Therefore, costs which guaranteed to be the most suitable and economical for customers.
Confidentiality of client information: Finally, all brand information of client LSX will be 100% confidential.
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Contact LSX
Finally, hope this article is useful for you to answer the question about “Businesses without legal status in Vietnam” If you need any further information, please contact LSX Law firm: at +84846175333 or Email: [email protected]
Please see more
- Rights and obligations of overseas Vietnamese foreign-invested enterprises using land in Vietnam
- The differences between a cooperative and an enterprise in Vietnam.
- Types of enterprises subject to audit in Vietnam
Frequently asked questions
Business households do not fully meet the above conditions, therefore, business households do not have legal status, do not have their own seal, are not allowed to open branches or representative offices, and cannot exercise the rights that other business households have. business is doing.
Ward People’s Committee is defined as a local state administrative agency (not a legal entity, has no independent property, is not responsible with its own property).
Pursuant to Clause 2, Article 4 of Circular 05/2021/TT-BNV: “The Department of Home Affairs has legal status, its own seal and account; it abides by the leadership and management in terms of organization and payroll. and the work of the district-level People’s Committee, and at the same time obey the direction, inspection and professional guidance of the Department of Home Affairs.” Thus, the Department of Home Affairs has legal status, its own seal and account.
Conclusion: So the above is Businesses without legal status in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
