Types of business in Vietnam

Have you ever wondered what are all the types of business in Vietnam? Let’s find out now!

According to the Enterprise Law 2020, Vietnam’s main types of business include limited liability companies (LLC), joint stock companies (JSC), partnerships, private enterprises, and family businesses.

Each business type has advantages and disadvantages that suit different individuals or organizations.

Limited liability company (LLC)

A limited liability company in Vietnam includes a single-member limited liability company and a multiple-member limited liability company.

Single-member limited liability company

• A single-member LLC is an enterprise owned by an organization or individual. The company owner is responsible for the company’s debts and other property obligations to the extent of the company’s charter capital.
• For this type of business in Vietnam, the owner must contribute in full as committed when registering for the business establishment within 90 days from the date of being granted the Certificate of Business Registration.

Advantages of a single-member LLC

• Less risk for the owner.
• This is the simplest business structure.
• The owner has full power to decide on all issues related to the business’s operations.
• Can issue bonds to raise capital.

Disadvantages of a single-member LLC

• The capital raising of a limited liability company is limited because there is only one member, and it is not allowed to issue shares.
• The owner’s salary can not be included in the business’s expenses.

Multiple-member limited liability company

• A multiple-member LLC is an enterprise with between 2 and 50 members who are organizations or individuals.

Advantages of a multiple-member LLC

• Less risk to capital contributors.
• Since the number of members is limited, the management and administration of the company are often not too complicated.
• The capital transfer regime is strictly regulated.
• A multiple-member LLC can issue bonds to raise capital.

Disadvantages of a multiple-member LLC

• A multiple-member LLC is more strictly regulated by law than a private company or partnership.
• This form of business in Vietnam cannot issue shares.

Joint stock company (JSC)

• Charter capital is divided into equal parts called shares.
• Shareholders can be organizations or individuals. The minimum number of shareholders is 3, and there is no limit to the maximum number.
• Shareholders are only responsible for the company’s debts and other property obligations to the extent of the amount of capital contributed.
• Shareholders can transfer their shares.
• A joint-stock company can issue shares, bonds and other securities.

Advantages of a JSC

• The risk level for the shareholders is limited.
• The capital structure of a JSC is very flexible.
• The ability to raise capital of a JSC is very high through the issuance of shares, which is a unique characteristic of a JSC.
• The transfer of capital in a JSC is relatively easy.

Disadvantages of a JSC

• The management and operation of a JSC can be complicated due to the large number of shareholders.

Partnership

• A partnership company is set up by at least two partners and may also have additional capital contributors.
• General partners are liable for all company obligations with their own property.
• Capital contributors are organizations or individuals who are only responsible for the company’s debts within the amount of capital they have contributed.

Advantages of a partnership company

• This type of business in Vietnam may be easier to get a loan from banks due to the unlimited liability regime of general partners.
• Compact organizational structure, easy to manage. Suitable for small and medium businesses in Vietnam.

Disadvantages of a partnership company

• Because of the unlimited liability regime, the risk level of the partners is very high.
• General partners are not allowed to own private businesses.
• Partnerships may not issue securities of any kind.

Private enterprise

• A private enterprise is owned by an individual who is solely responsible for all business activities with their whole assets.
• The owner of a private enterprise must be an individual.

Advantages of a private enterprise

• The owner has full authority regarding all business activities.
• Private enterprises are less bound by law, and it is easier to control risks because there is only one person acting as the enterprise’s legal representative.

Disadvantages of a private enterprise

• The risk level of the private business owner is high.
• Less preferred than LLC because of the disadvantage of unlimited liability.

Family business in Vietnam

• A family business in Vietnam is also called “Hộ kinh doanh”.
• A Vietnamese family business is registered and established by an individual or members of a household and is responsible with all his/her assets for the household’s business activities.
• Only Vietnamese can establish a family business.

Advantages of a private enterprise

• Lower tax compared to other types of business in Vietnam.
• Easier to run due to fewer regulations on accounting and tax.

Disadvantages of a private enterprise

• According to the provisions of the Enterprise Law 2020, Vietnamese law does not have specific regulations on the transferring of a family business, making it tricky to buy, especially if you are a foreigner.
• A family business owner has unlimited liability.

Other types of business in Vietnam

• Representative office: A representative office is a type of business entity that is established by a foreign company in another country. You can learn more about a representative office in Vietnam through our guide here.
• Joint venture: A joint venture in Vietnam is a business entity that is formed by two or more parties, usually between a foreign company and a Vietnamese company. The parties agree to share the joint venture’s ownership, management, and profits.
• Public-private partnership (PPP): This form of business in Vietnam is made on the basis of a contract between a state agency and the private sector for implementation, management and operation of infrastructure development projects and public service provision.

FAQ

• What type of business in Vietnam should you choose?

The answer depends on each company founder’s needs. However, for business lines without special conditions, startups often choose these 3 types of business in Vietnam: joint-stock companies and single-member or multiple-member LLCs.

• Does the limited liability company in Vietnam have the right to issue bonds to raise capital?

According to the provisions of Articles 46 and 74 of the Enterprise Law 2020, single-member LLCs and multiple-member LLCs are both allowed to issue bonds to raise capital.

• What type of business can issue shares?

Only a joint-stock company can issue shares to raise capital.