Because of the growing need to start a business, entrepreneurs face difficulty deciding what type of business to start. Many businesses have interests in limited liability companies, particularly single-member limited liability companies. However, not everyone clearly understands the type of single-member limited liability company. Besides, many people wonder about the organizational structure of this business type. So, in this article LSX legal firm would like to provide you with: “Organizational structure of a single-member LLC in Vietnam”
- Law on Enterprise 2020
- Decree 01/2021/ND-CP
Single-member Limited Liability Company (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 means 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, Single-member limited liability companies can not issue shares to raise capital.
Organizational structure of a single-member LLC
A single-member LLC owned by an individual
A single-member limited liability company owned by an individual has a company president; Director or General Manager.
The owner of a single-member limited liability company can concurrently hold the position of the Chairman of the Company, having the highest authority to manage all production and business activities of the Company.
Besides, the owner may hire a Director or at the same time act as the Director, the legal representative of the Company.
A single-member LLC owned by an organization
The organizational model of a single-member limited liability company owned by the organization will be managed and operated by the organization under one of the following two models:
Model 1: Company President, Director or General Director;
Model 2: Board of members, Director or General Director.
The organizational structure, working regime, standards, conditions, dismissal, rights, obligations, and responsibilities of the Board of Controllers and the Controllers shall comply with the provisions of Article 65 of the Law on Enterprises 2020.
The company must have at least one legal representative who holds one of the titles of Chairman of the Board of Members, President of the Company, Director, or General Director. Unless otherwise provided by the company’s charter, the chairman of the Board of Members or the company’s president shall present as the legal representative of the company.
Responsibilities of members of the Board of Members, the company’s President, the Director/General Director, other executives and Controllers
The members of the Board of Members, the company’s President, the Director/General Director, other executives, and Controllers have the following responsibilities:
- Firstly, comply with regulations of law, the company’s charter, and decisions of the company’s owner in the performance of their rights and obligations.
- Secondly, perform their rights and obligations in an honest and prudent manner to serve the best and lawful interests of the company and its owner.
- Thirdly, be loyal to the interests of the company and its owner; do not abuse their power and position or use the enterprise’s information, secrets, business opportunities, and assets for personal gain or serve any other organization’s or individual’s interests.
- Fourthly, promptly and fully notify the company of the enterprises that they own or have shares/stakes or that their related persons own, jointly own or have separate controlling shares/stakes. The notifications shall be retained at the company’s headquarters.
- Also, other responsibilities prescribed by this Law and the company’s charter.
Increasing, decreasing charter capital
According to Article 87 of the Law on Enterprise 2020:
- A single-member limited liability company may increase its charter capital when its owner contributes capital or raises capital from other persons. The owner shall decide on the specific increase and the method.
- In case of raising capital from other persons, the company shall be converted into a multiple-member limited liability company or joint stock company. To be specific:
a) In case of conversion into a multiple-member limited liability company, a notification of change in enterprise registration information shall be submitted within 10 days from the day on which the change in charter capital is complete;
b) In case of conversion into a joint stock company, follow the instructions in Article 202 of this Law;
- A single-member limited liability company may decrease its charter capital in the following cases:
a) Part of the contributed capital is returned to the company’s owner after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital;
b) Charter capital is not fully and punctually contributed by the owner as prescribed in Article 75 of this law.
Procedures to establish Single-member LLC
Step 1: Prepare application for business registration
An enterprise registration dossier for a single-member limited liability company includes:
- 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.
Legal service of LSX Legal Firm
LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:
- Legal advice related to new regulations;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
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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.
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The ability to raise capital is limited because this type of business is not allowed to issue shares. Therefore, to raise capital, businesses can only choose to contribute capital or receive capital from others.
The company owner is only entitled to withdraw capital by transferring part or all of the charter capital to other organizations or individuals. In case the owner transfers part of the capital or receives capital from a new member, it must change the type of enterprise.
Within 03 working days from the date of receipt of a valid application, the application-receiving agency will consider and handle the request.
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.
Finally, hope this article is useful for you to answer the question about “Organizational structure of a single-member LLC in Vietnam”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: email@example.com