Which type of enterprise shall be chosen when establishing an enterprise in Vietnam?

Which type of enterprise shall be chosen when establishing an enterprise in Vietnam?​

1. Sole proprietorship in Vietnam

According to Article 183 of the Law on Enterprises 2014, the sole proprietorship has the following characteristics:

- It is a business owned by an individual who is fully responsible with their entire assets for all operations of the enterprise;

- The sole proprietorship is not permitted to issue any type of securities;

- Each individual is only allowed to establish one sole proprietorship. The owner of a sole proprietorship may not concurrently be the owner of a household business or a member of a partnership company;

- The sole proprietorship is not allowed to contribute capital to establish or purchase shares or capital contributions in a partnership company, a limited liability company, or a joint-stock company.

2. Limited liability company (LLC) in Vietnam

The LLC includes single-member LLCs and multi-member LLCs with the following characteristics:

- Members can be organizations or individuals;

- Members are responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise;

- It has legal status from the date of issuance of the Enterprise Registration Certificate;

- It is not permitted to issue shares.

Regarding the number of members, a single-member LLC is owned by an organization or an individual. The owner has the right to transfer part or all of the company’s charter capital to another organization or individual. For multi-member LLCs, the number of members must not exceed 50. Members can only transfer their capital contributions according to Articles 52, 53, and 54 of the Law on Enterprises 2014.

3. Partnership company in Vietnam

According to Article 172 of the Law on Enterprises 2014, a partnership company is an enterprise in which:

- There must be at least two members who are co-owners of the company, jointly conducting business under a common name known as general partners. In addition to general partners, the company may also have limited partners;

- General partners must be individuals and are responsible with their entire assets for the company’s obligations;

- Limited partners are only liable for the debts of the company within the amount of capital contributed to the company;

- The partnership company has legal status from the date of issuance of the Enterprise Registration Certificate;

- The partnership company is not permitted to issue any type of securities.

4. Joint-stock company (JSC) in Vietnam

Article 110 of the Law on Enterprises 2014 stipulates that a JSC is an enterprise in which:

- The charter capital is divided into equal parts known as shares;

- Shareholders can be organizations or individuals; the minimum number of shareholders is 3 and there is no limitation on the maximum number;

- Shareholders are only liable for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise;

- Shareholders have the right to freely transfer their shares to others, except in cases stipulated in Clause 3 of Article 119 and Clause 1 of Article 126 of the Law on Enterprises;

- The JSC has legal status from the date of issuance of the Enterprise Registration Certificate;

- The JSC has the right to issue various types of shares to raise capital.

Sole proprietorships, LLCs, partnership companies, and joint-stock companies all share common characteristics as types of enterprises governed by the Law on Enterprises 2014. However, each type of enterprise has distinct features. Investors should consider the nature, scale of business, and the scope of rights and responsibilities of each type of enterprise when choosing the form of establishment.

Thuy Tram

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE