The best type of business in Vietnam

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

Choosing the best form of business entity depends on your goals, budget, risk appetite, and industry.

There are two main ways for foreigners to invest in Vietnam: directly and indirectly.

Direct investment: means you establish a new company in Vietnam, either as a 100% foreign-owned company or a joint venture with a Vietnamese partner. To do this, you must obtain a business and investment license from the authorities.

Indirect investment: means you buy shares of an existing company in Vietnam. This way, you can get a position in the company’s management board, depending on the agreement between you and the Vietnamese company.

The most common forms of business organization for foreigners in Vietnam are:

1. Limited liability company (LLC):

A company with one or more members who are only responsible for debts within the scope of their capital contributions. An LLC can be a single-member LLC or a multi-member LLC. LLC is suitable for small and medium-sized businesses that want flexibility and autonomy in management.

• Easy to set up 
• Flexible management structure
• Limited liability protection – No minimum capital requirement

• Foreign ownership restrictions in certain industries 
• Limited ability to raise capital
• Potential for disputes among members

2. Joint stock company (JSC):

This company has at least three shareholders who are only responsible for debts within the value of their shares. Joint stock companies can issue stocks and bonds to mobilize capital from the public. Joint stock companies are suitable for large-scale businesses that want to access more capital and expand their presence in the market.

• Ability to raise capital through public offerings 
• No foreign ownership restrictions
• Limited liability protection

• More complex and costly to set up than LLC 
• Strict regulations on corporate governance
• Potential for disputes among shareholders

3. Representative office (RO):

This is not a legal entity but an office representing the interests of foreign companies in Vietnam. RO can carry out non-commercial activities such as market research, promotion, communication, etc., but cannot carry out direct business transactions or generate income in Vietnam. RO is suitable for businesses that want to explore market potential and establish relationships before officially establishing a company.

• Easy to set up 
• Low cost
• Allows for market research and promotion

• Cannot engage in profit-generating activities 
• Limited scope of activities
• No liability protection

4. Partnership:

This firm has at least two partners who share profits and losses according to their agreement. A partnership can be a general partnership or a limited partnership. A general partnership has unlimited liability to all partners. In contrast, a limited partnership has at least one general partner with full liability and one or more limited partners with limited liability. Partnerships are suitable for businesses that want to leverage the skills and expertise of different partners.

• Easy to set up 
• Flexible management structure
• Shared liability among partners

• Unlimited liability for general partners 
• Limited ability to raise capital
• Potential for disputes among partners

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