Forms of business in Vietnam

Are you planning to establish a company in Vietnam?

Have you decided what form of business you want to establish in Vietnam?

Are you still confused about the types of businesses established in Vietnam?

Choosing the right form of investment is one of the most important things for investors when coming to Vietnam. To choose the right type, investors have considered the advantages and disadvantages of each types of business in Vietnam. 

According to Vietnam Enterprise Law, investors can choose to register one of the following business forms:  Limited Liability Companies (LLC), Joint Stock Companies (JSC), Partnerships Business Cooperation Contract (BCC), Public Private Partnership (PPP). Therefore, this article will discuss this issue and help investors better understand investment forms in Vietnam.

1. Limited liability companies (LLC)

A Limited Liability Company (LLC) is an incorporated company with limited liability and the investor does not intend to become a publicly traded company.

Normally, foreign investors who want to establish a Limited Liability Company in Vietnam will consider ‘100% Foreign-Owned Enterprise‘.

An LLC may take the form of either an LLC with two or more members (“Multiple Member LLC”) or an LLC with one member (“Single Member LLC”).
An LLC has the status of a recognized legal entity and a member of a LLC is responsible for the debts and liabilities of the enterprise to the extent of the amount of capital that the member has contributed or committed to contribute to the enterprise. An LLC does not issue shares.

  • Multiple member LLC is an enterprise that has more than one but no more than fifty members, which may be organizations, individuals, or a combination of both.
  • Single member LLC is owned by one organization or individual member (“Company Owner”) who is liable for the debts and other liabilities of the company to the extent of the amount of the charter capital of the company. A single member LLC may increase its charter capital by way of additional investment from the Company Owner or by obtaining capital contributions from other persons.

General features of limited liability company:

  • The company has legal status from the date of issuance of the business registration certificate;
  • Founders can be an individuals or organizations;
  • Members are responsible for debts and other property obligations to the extent of the capital contributed to the enterprise;
  • A limited liability company is not entitled to issue shares to raise capital.
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Advantages and disadvantages of limited liability companies

2. Joint stock companies (JSC)

This company has at least three shareholders liable for its debts only to the extent of their share value. Shareholders are responsible for the debts and obligations of the enterprise within the amount of their contributed capital.
Joint stock companies have the right to issue securities to raise capital and can be listed on the Stock Exchange.
A JSC is suitable for large-scale businesses that want to access more funding sources and expand their market presence.

A joint stock company can be desribed as follows:

  • Charter capital is divided into equal parts called shares;
  • Shareholders are only liable for debts and other property obligations of the enterprise to the extent of the amount of capital they have contributed to the enterprise;
  • Shareholders have the right to freely transfer their shares to others, except in cases where shareholders own voting preference shares;
  • Shareholders can be organizations or individuals. The minimum number of shareholders is three and there is no limit to the maximum number.
  • A joint stock company has legal status from the date of issuance of the business registration certificate. Joint-stock companies have the right to issue stocks to the public in accordance with the law on securities.
  • Charter capital of a joint-stock company is the total par value of shares of all kinds sold. Charter capital of a joint-stock company at the time of business registration is the total par value of shares of all kinds which have been registered for purchase and recorded in the company’s charter. Shareholders must pay in full for the number of shares registered for purchase within 90 days from the date of issuance of the Certificate of Business Registration.
  • A joint stock company must have a General Meeting of Shareholders, a Board of Directors, a Supervisory Board and a Director or General Director. In case a joint-stock company has less than 11 shareholders and the shareholders are organizations holding less than 50% of the total shares of the company, it is not required to have a Supervisory Board.

3. Partnership

A partnership has legal status from the date of issuance of the Certificate of Business Registration. A partnership must have two general parners and may also have limited partners (literally, “capital contributing members”).
Capital-contributing members have the right to share profits according to the ratio specified in the company’s charter, and do not participate in company management and business activities on behalf of the company. General partners have equal rights when it comes to make decision on management issues.

Although this type of business enjoys high trust from customers and partners, because of the high risk for general partners, there are not many partnerships in Vietnam.

4. Business Cooperation Contract (BCC)

A business cooperation contract is a contractual relationship similar to a partnership, which does not create a new legal entity but is allowed to participate in business activities for a specific project in Vietnam. This is changing as Limited Liability Companies and Joint Stock Companies are being allowed to enter these fields.

5. Public Private Partnership (PPP)

Investment in the form of public-private partnership is defined as a form of investment made on the basis of a contract (“PPP Project Contract”) between a competent state agency and an investor or enterprise project aimed at implementing, managing and operating an infrastructure project or providing a public service.

In addition to the regulated business forms, investors can refer to other types as follows: Representative offices, Branch offices, contractual projects and franchise agreements.

When using GTax’s services, Consultants will help you consider the advantages and disadvantages of each option and advise you on the best solution for your needs. 

Compiled by  GTax Accounting Service

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