Limited liability company in Vietnam: What are the pros and cons?

by QuynhHuong

Aside from Joint-stock companies, Limited liability companies (LLC) are also popular to many investors. Yet, if you are thinking about set up one, let us give you a brief on LLC in Vietnam and what are the pros and cons.

  • 2020 Enterprise Law

What is a Limited liability company?

There are two types of LLC in Vietnam:

  • Single-member LLC
  • Multiple-member LLC.

Hence the name, single-member LLC is an enterprise owned by an organization or individual. The company owner is responsible for the company’s debts and other property obligations to the extent of the company’s charter capital.

On the other hand, multiple-member LLC has its member to be from 02 to 50. The members are responsible for the debts and other property obligations of the enterprise to the extent of the capital contributed to the enterprise.

Pros of Limited liability company

Single-member LLC

Firstly, the single-member LLC will stay under the control of an organization or individual who will have the full right to decide on all issues related to the company’s operations; and does not need to seek opinions or suggestions from the other subjects; which makes the management of the company is also simpler.

Secondly, the owner of a single-member LLC is only responsible for the company’s activities within the amount of capital they contribute to the company; so it poses little risk to the owner. This is also an outstanding advantage when compared to private enterprises.

Multiple-member LLC

When talking about the liability, the company is only responsible for debts within the amount of capital they contribute to the company; then it poses little risk to capital contributors.

Moreover, the number of members is neither too little nor too much; and the members are usually acquaintances and trust each other. Therefore the management and administration of the company are easier and not too complicated like a joint-stock company. The capital transfer regime remains under restriction; which gives investors the ability to control the change of members, limiting the penetration of strangers.

Cons of Limited liability company

Single-member LLC

Since there is no right to issue shares, the company is limited in raising capital. In case, the company wants to raise capital from other individuals or organizations, it must convert to the form of a company. This will lower the company’s ability to develop breakthroughs due to the lack of large capital to be able to implement breakthrough and daring business plans.

Because single-member LLC is personal ownership; then, when raising additional capital contributions from other individuals or organizations; it will have to carry out procedures to convert the type of business into a multiple-member or joint-stock company.

Multiple-member LLC

In the case of multiple-member LLC, it is not easy to capital mobilization due to its limitation in shares; which affects the business size and ability to expand. Nonetheless, this type of LLC could not go over 50 members; and in many cases, they will lose their opportunities from other investors.

Every type of company will have its own pros and cons. The thing is you need to understand it thoroughly and find the one that suits your business goal. Thank you for paying attention to the “Limited liability company in Vietnam: What are the pros and cons?” article. If you have any questions, please contact Lawyer X for quick and best legal services: 0833102102.

Can foreign investors open an LLC in Vietnam?

Yes, they can. In Vietnam, a foreigner may choose to establish any type of business such as sole proprietorship, limited liability company, corporation shares, partnerships.

Can foreign investors establish a company with 100% foreign investment capital in Vietnam?

Yes, they can. According to the provision of law, foreign investors can establish a company with 100% foreign investment capital in Vietnam. Still, it will vary depending on the business line.

What type of business is the most common to foreign investors?

The two most common types of enterprises are limited liability companies and joint-stock companies.

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