Types Of Company In Vietnam In 2023
Are you an entrepreneur who is seeking to enter the rapidly expanding market of Vietnam?
Vietnam is one of the most rapidly growing countries worldwide presenting entrepreneurs with access to a thriving domestic marketplace, a
burgeoning middle class, well-developed infrastructural facilities, taxation incentives, and several free trade arrangements. If you are an investor looking to register your business in Vietnam, one of the most crucial things you must do is select the business structure. You can lay the foundation for your activities as well as establish the monetary and legal boundaries of your corporation’s operations by choosing among the different types of company in Vietnam.
Considering several elements like limited liability protection, management control, etc can assist you in selecting a suitable form of structure for your business.
In this article, we aim to provide comprehensive coverage of the different types of company in Vietnam. By exploring their features, advantages, and disadvantages, we will help you gain a deeper understanding of each structure’s suitability for your needs. This valuable insight will assist you in making an informed decision about which business structure is most appropriate for your venture in Vietnam.
Different Types of Company in Vietnam
Selecting a business structure is crucial if you intend to register your business in Vietnam. There are numerous types of business entities in Vietnam including sole proprietorships, joint stock corporations, branch offices, and more. Each business structure has its advantages and disadvantages, which we will be covering in the following section.
1. Sole Proprietorship
A sole proprietorship is one of the most popular types of company in Vietnam which is owned and managed by a single person. In such types of business entities in Vietnam, the person is individually accountable for the obligations of the business. The single proprietor has complete control over all business decisions for the organization, including the absolute authority to determine how to use revenues after paying taxes and meeting other legal financial requirements.
Features
- Managed and owned by a single owner
- The proprietor is entirely responsible for all firm debts.
Advantages
- It is easy to incorporate a sole proprietorship.
- The company’s owner actively participates in business administration and operations and has complete decision-making authority.
- Less stringent legal restrictions apply to sole proprietorships.
Disadvantages
- The owner is personally and indefinitely liable for the firm’s obligations.
- Access to capital is constrained because they cannot issue any form of securities.
2. Limited Liability Company (LLC)
An LLC is among the most common types of company in Vietnam for entrepreneurs due to its adaptability and limited liability protection. Any business or person can create a limited liability company by investing funds in the business. There are 2 forms of LLCs, they are single-member LLCs and LLCs with two or more members.
The following varieties of Limited Liability Corporations are available for investors from abroad to set up in Vietnam:
- Completely Foreign-Owned Corporation
- A foreign-invested Joint Venture Corporation amongst overseas investors and a minimum of one local investor.
A. Single-member LLC
In Vietnam, a single-member limited liability corporation can be operated by a single person. The owner will be held accountable for the liabilities and monetary obligations of the business up to the amount of the organization’s charter capital. Such types of business entities in Vietnam have complete legal standing.
Advantages of Single-member LLC
- Given that there is just one proprietor, the proprietor of the business has the authority to decide all matters about the governance and operation of the business.
- The risk to the business’s founder is limited to the amount of funds invested in the business.
Disadvantages of Single-member LLC
- Such types of business entities in Vietnam cannot issue stocks; as a result, it needs to acquire money from their proprietor or by transferring a portion of their capital to another person or entity.
B. LLC with 2 or more members
An LLC with 2 or more members is a business with at least 2, but no more than fifty, members, who may be companies, people, or a mixture of both. Members of such types of companies are jointly and severally liable for the financial liabilities along with other obligations of the organization up to the amount of their capital contributions. They possess legal standing from the day of the issuance of the Enterprise Registration Certificate.
Advantages of LLC with 2 or more members
- The member’s liability is restricted to the amount of money they have invested.
- Since the majority of people involved are trusted shareholders, supervision and operation of the firm are not overly difficult.
- Fewer requirements for compliance
- In such types of business entities in Vietnam, individuals may distribute earnings equitably and flexibly depending on their capital contribution ratio and their ownership stake in the business.
Disadvantages of LLC with 2 or more members
- This kind of business is unable to publicly raise funds from the public by issuing stocks to the general public.
3. Joint Stock Company
Joint-Stock Companies (JSCs) are appropriate for firms with expansion aspirations and a high capital requirement. Such types of company in Vietnam has charter capital that is divided into equal portions known as shares. Such types of business entities in Vietnam must have at least 3 stockholders and there isn’t any upper restriction on the total number of stockholders. Joint stock firms are permitted to issue stocks to generate funds, but they must adhere to the legal requirements.
Advantages
- JSCs can raise money by offering stocks to a variety of investors. It, therefore, makes it simpler to collect money for objectives like business growth, investments, or other endeavors.
- A JSC’s stocks are freely tradable and transferable, giving investors the flexibility to exit or sell their stake if they so choose.
Disadvantages
- JSCs must adhere to stricter compliance obligations.
- Compared to other types of business entities in Vietnam, forming a JSC typically entails higher establishment expenditures.
4. Partnership
A partnership is a type of commercial organization where two or more people agree to pool funds and split gains and liabilities. General partnerships and limited partnerships are the two primary varieties of partnerships in Vietnam.
In a general partnership, every member shares equal financial and managerial responsibilities for the company. As opposed to this, limited partnerships permit both general and limited partners. While limited partners’ responsibility is restricted to their capital investments, general partners’ culpability is indefinite.
Advantages
- With fewer legal procedures and lower establishment fees, forming a partnership is generally simple and uncomplicated.
- The duties, workload, and hazards related to the company venture might be shared by partners.
- Vietnam does not impose corporate income tax on partnerships. However, partners disclose their gains and losses in their respective personal tax filings.
Disadvantages
- There may occasionally be arguments or disputes as a result of the fact that all partners can make decisions.
- It might be difficult to dissolve a partnership when there isn’t an explicit dissolution clause in the partnership agreement.
5. Branch Office
A foreign company is allowed to open a branch office in Vietnam to carry out business operations. A branch is a section of the company that is reliant on the main organization and is required to carry out some or all of its duties. The branch’s operations must align with those of the company. It is not a distinct legal entity and as such the parent organization is legally responsible for all responsibilities and liabilities of the branch.
Features
- A branch office in Vietnam is not regarded as an independent legal organization, but instead as a division of the main corporation.
- Such types of company in Vietnam is completely under the management of the parent firm.
- Incorporating a branch permits overseas parent organizations to be physically present in Vietnam.
Advantages
- A branch office is permitted to make money and take part in profitable operations.
- Brach makes it simpler to coordinate with regional partners.
- The parent business retains oversight over the branch office’s activities and decision-making, guaranteeing uniformity in supervision and regulations.
- It might be less expensive and require fewer administrative procedures to open a branch office.
Disadvantages
- It might take a lot of time as well as effort to comply with the administrative burden, which necessitates continual compliance activities.
- The branch office’s actions and commitments are entirely the responsibility of the parent firm.
6. Representative Office
A Representative Office (RO) is a structure that provides overseas businesses with a popular entrance option to the Vietnamese marketplace. A RO is one of the types of company in Vietnam which is a part of the company that is obligated to represent and safeguard the interests of the company when permitted to do so. Such types of business entities in Vietnam can perform market research, serve as a liaison office for their parent firm, and publicize the initiatives of their holding organization without engaging in any revenue-generating activities.
Features
- Cannot engage in money-generating operations
- Can only do market research, or promote the activities of the holding organization.
Advantages
- With the aid of a representative office, overseas businesses can set up operations in Vietnam without the requirement of local collaborators.
- They offer an affordable option to research the market and develop contacts for parent organizations.
Conclusion
Vietnam offers a wide variety of corporate forms to accommodate various entrepreneurial endeavors. You have a variety of options when it comes to business structures, including sole proprietorship, partnership firms, limited liability corporations, and joint stock corporations. Considerations including liability, taxation, managerial control, and legal obligations should all be carefully considered when assessing your unique demands. By carefully taking into account each of these elements, you can select a business structure that closely corresponds with your company’s objectives and can support your efforts in building a successful firm.
The professionals at Odint Consulting have years of expertise in helping clients set up their businesses. We can assist you with all the requirements for establishing your business in Vietnam, as well as with helping you select the best business structure. Contact us today.
FAQ’s
There are numerous benefits of opening a sole proprietorship such as:
- The incorporation of a sole proprietorship is simple.
- The business’s owner exercises full decision-making authority and actively engages in business administration and operations.
- The legal limitations that apply to sole proprietorships are less severe.
Single-member LLCs and LLCs with two or more members are the two forms of LLCs in Vietnam.
- Without the need for local partners, foreign companies can launch operations in Vietnam with the help of a representative office.
- They provide a cost-effective way to do market research and make connections with parent companies.
- They can only carry out market research or advertise the holding company’s activity.
No, representative offices aren’t permitted to employ locals. Only foreign workers with valid work permits may be employed by them.
- In Vietnam, a branch office is seen as a division of the parent company rather than a separate legal entity.
- In Vietnam, these business models are entirely managed by the parent corporation.
- Creating a branch enables foreign parent companies to have a physical presence in Vietnam.
