27/09/2024 14:26

Comparison of sole proprietorships and single-member limited liability companies in Vietnam

What are the similarities and differences between sole proprietorships and single-member limited liability companies in Vietnam? - Mr. Anh Tu (Quang Ngai).

Hello, Lawnet would like to respond as follows:

Definition of sole proprietorships and single-member limited liability companies in Vietnam

According to Clause 1, Article 188 of the Vietnamese Enterprise Law 2020, a sole proprietorship is a business owned by an individual who is solely responsible for all activities of the enterprise with their entire assets.

Meanwhile, a single-member limited liability companies is defined in Clause 1, Article 74 of the Vietnamese Enterprise Law 2020 as follows:

A single-member limited liability company is an enterprise owned by an organization or individual (hereinafter referred to as the company owner). The company owner is liable for the company's debts and other property obligations within the charter capital of the company.

Similarities and differences between sole proprietorships and single-member limited liability companies in Vietnam

From the above definitions, the similarities and differences between these two types of enterprises can be summarized as follows:

Similarities:

- Both are types of enterprises established by an individual owner.

- Both are not allowed to issue shares.

- In case of transferring a part of the capital or receiving capital contributions, the type of enterprise must be changed.

- In case of transferring all the capital, the procedure for changing the owner must be performed as prescribed.

Differences:

Criteria	Single-member limited liability companies	Sole proprietorships
Ownership	Individual or organization. (Clause 1, Article 74 Vietnamese Enterprise Law 2020)	Individual. An individual owner may not simultaneously be the household business owner or a member of a partnership. (Clause 1, Clause 3, Article 188 Vietnamese Enterprise Law 2020)
Owner's Asset Liability	Liable for the company's debts and other property obligations within the charter capital of the company. (Clause 1, Article 74 Vietnamese Enterprise Law 2020)	Liable with their entire assets for all activities of the enterprise. (Clause 1, Article 188 Vietnamese Enterprise Law 2020)
Capital Contribution	The company owner commits to contribute and records in the company charter. The company owner must fully and correctly contribute the committed assets within 90 days from the date of being granted the Business Registration Certificate. (Article 75 Vietnamese Enterprise Law 2020)	Registered by the business owner himself. Assets used in business activities of the sole proprietorship owner do not need to be transferred in ownership to the enterprise. (Article 189 Vietnamese Enterprise Law 2020)
Change in Charter Capital	- If increasing charter capital by mobilizing additional capital from others, the company must manage according to the type of multi-member limited liability company or joint-stock company. May increase charter capital by mobilizing additional capital from the owner and other individual or organizational investors. - A single-member limited liability companies can reduce charter capital in the following cases: + Refund part of the contributed capital to the company owner if the company has continuously operated for over 2 years from the date of business registration and ensures full payment of debts and other property obligations after refunding. + Charter capital is not fully and timely paid by the company owner. (Article 87 Vietnamese Enterprise Law 2020)	During operation, the sole proprietorship owner may increase or decrease their investment capital in the business activities and must fully record it in the accounting books. In case of reducing investment capital below the registered capital, the sole proprietorship owner only reduces capital after registering with the Business Registration Authority. (Clause 3, Article 189 Vietnamese Enterprise Law 2020)
Bond Issuance Rights	May issue bonds. Single-member limited liability companies are restricted from issuing shares (Clause 3, Clause 4, Article 74 Vietnamese Enterprise Law 2020)	Not allowed to issue any type of securities. (Clause 2, Article 188 Vietnamese Enterprise Law 2020)
Legal Status	Has legal personality (Clause 2, Article 74 Vietnamese Enterprise Law 2020)	Does not have legal personality
Organizational Structure	- Single-member limited liability companies have a Company President, Director, or General Director and are owned by an individual. - Single-member limited liability companies owned by organizations are managed according to one of the following models: + Company President, Director, or General Director; + Members' Council, Director, or General Director. (Article 79 Vietnamese Enterprise Law 2020)	Can directly or hire others as Director or General Director to manage. The sole proprietorships owner is the legal representative. (Article 190 Vietnamese Enterprise Law 2020)
Capital Contribution Transfer Rights	The company owner has full rights to transfer all or part of the company's charter capital. (Article 76 Vietnamese Enterprise Law 2020)	The owner is not entitled to contribute capital to establish or purchase shares or contributed capital in a partnership, limited liability company, or joint-stock company, but can only sell or lease the sole proprietorships to other individuals or organizations. (Clause 4, Article 188 Vietnamese Enterprise Law 2020, Article 191, 192 Vietnamese Enterprise Law 2020)

- This English translation is for reference purposes only and not a definitive translation of the original Vietnamese texts;
- Articles may be compiled from a variety of sources;
- Applicable Terms may have expired at the time you are reading;
- If you have any questions about the copyright of the article, please contact us via email banquyen@lawnet.vn

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