What is the most suitable type of company to establish in Vietnam?
Many people have the desire to set up a company to do business. However, among many types of companies, it is still difficult to choose a type of company that is suitable for business needs and conditions. In this article, LSX legal firm provides information to answer the question: “What is the most suitable types of company to establish in Vietnam?”
Legal ground
- Law on Enterprise 2020
Features of Limited Company and Sole Proprietorship
Single-member Limited Liability Company
- Member: 1 owner (Individual or Organization)
- Capital: Have the right to change the charter capital. The assets of the owner and the company are separate.
- Capital mobilization: Not entitled to issue shares.
- Legal status: Having legal status from the date of issuance of the Business Registration Certificate.
- Liability: Limited liability to the extent of capital contributed to the company (contributed capital and commitment to contribute)
- Organizational structure: two kinds of model (Company President, Director or General Director and Controller / Board of members, Director or General Director and Controllers).
Multi-member Limited Liability Company
- Member: Minimum 2 members, maximum 50 members
- Capital: Members are responsible for debts and other property obligations of the enterprise to the extent of the amount of capital contributed to the enterprise. Within 90 days from the date of issuance of the Certificate of Business Registration or a shorter period specified in the company charter. The members who have not contributed or have not fully contributed the committed capital must be responsible in correspond to the committed capital contribution for the financial obligations of the company arising during this time.
- Capital mobilization: Has the right to issue bonds.
- Legal status: Having legal status from the date of issuance of the Business Registration Certificate.
- Liability: Members are responsible for debts and other property obligations of the company to the extent of the capital contributed to the company.
- Organizational structure: Board of members, Chairman of the board of members, Director or General Director, Supervisory Board (if the company has 11 or more members)
Sole Proprietorship
- Member: 1 individual
- Capital: The owner has the right to increase or decrease his/her investment capital depending on the business operations of the company. The assets of the company do not separate from the assets of the owner.
- Capital mobilization: No right to issue securities.
- Legal status: No legal status.
- Liability: unlimited liability
- Organizational structure: managed by the owner or hired managers.
Advantages/Disadvantages of Limited Company And Sole Proprietorship
Limited Company
Advantages:
- The number of members is not much, so the management and operation is not too complicated
- Due to the strict regulation of the transfer of contributed capital, investors can control the change of company members with ease.
- Lastly, members are only liable for debts and charters to the extent of the company’s capital
Disadvantages:
- Because this type of company does not have the right to issue shares, the company’s capital mobilization is limited.
Single-member Limited Company
Advantages:
- Firstly, having legal status
- Secondly, because there is a separation between the assets of the company and the owner, the company owner does not need to carry out procedures to transfer ownership of his assets to the company.
- Thirdly, the owner is responsible to the extent of his/her contributed capital, this limits the risk for company owners.
- Fourthly, the limited company has the right to contribute capital to establish or buy shares, contributed capital in partnerships and joint-stock companies.
Disadvantages:
- Managing a single-member limited liability company will be more difficult than managing a sole proprietorship.
- The company must not reduce its charter capital during its operation.
- Moreover, capital cannot be raised by issuing shares.
Sole Proprietorship
Advantages:
- The owner of the business is free to use the after-tax profit (because this business is established and operated by only one individual to decide the business direction).
- Besides, the business owner has full control over all business activities of the business.
- On the other hand, the personal income tax of the business owner is the tax that the business must pay.
- The business owner has to take unlimited liability for the business operations, so it will be easier to gain the trust of customers and partners.
Disadvantages:
- If the owner leases the business to others, he/she still has to be responsible for all business activities of that company.
- Even if the company declares bankruptcy, the business owner is still responsible for debts caused by the company’s operations.
LSX legal firm’s service on establish a company
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.
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
At present, Vietnam’s law on enterprise does not stipulate the required level of charter capital that a company needs to register when it is established (except for the case of a company operating in industries with prescribed capital and deposit). Therefore, the company can freely choose the level of charter capital.
At the province level: Business Registration Office under the Department of Planning and Investment.
At the district level: Department of Finance – Planning under the People’s Committee of the district.
Contact LSX
Finally, hope this article is useful for you to answer the question about “What is the most suitable type of company to establish in Vietnam?”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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