Vietnam company types: LLC, JSC and partnership

Vietnam company types come down to five forms under the Law on Enterprises, and the right one depends on how many owners you have and how much risk each will carry. The National Assembly passed the law on 26 November 2014. It took effect on 1 July 2015, so it is the rulebook for anyone setting up a company today. This guide compares the forms in plain terms.

The five forms are the two-or-more-member limited liability company, the one-member limited liability company, the joint stock company, the partnership and the private enterprise. Article 1 of the law lists the limited liability company, the joint stock company, the partnership and the private enterprise, and the law splits the limited liability company into two types.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Article 1.

Limited liability company with two or more members

This is the form most small and mid-sized firms pick. Its members can be organisations or individuals, and there can be no more than 50 of them. Each member is liable for the company's debts only up to the capital that member put in. The company's own assets answer for the rest.

The company becomes a legal entity on the day it receives its enterprise registration certificate. It may not issue shares. A member can sell a stake, but only under the transfer rules in the law, so a sale is not as free as with a joint stock company.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Article 47.

Limited liability company with one member

A one-member company has a single owner. That owner can be an organisation or one individual. The owner is liable only up to the capital put into the company. A founder who wants full control and limited risk often chooses this form.

Like the larger LLC, it gains legal entity status when it is registered, and it may not issue shares. One practical point is that the owner should keep personal money and company money apart. The owner's protection is tied to the capital put into the company, so careful books matter.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Article 73.

Joint stock company

A joint stock company splits its charter capital into equal parts called shares. It needs at least three shareholders, and the law sets no top limit. Shareholders can be organisations or individuals. Each one is liable only up to the capital invested in the shares.

Shareholders may freely transfer their shares to others, with a few exceptions set in the law. The company can also issue several kinds of shares to raise money. That makes this form the usual choice for firms that plan to bring in many investors or grow quickly.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Article 110.

Partnership

A partnership must have at least two general partners. They own the company together and trade under a shared name. General partners must be individuals. Each one answers for the company's debts with all of their own assets, not only with what they invested.

The company may also have capital-contributing members. Those members carry debts only up to the capital they put in. A partnership has legal entity status from the date of registration. It may not issue any kind of security, so it cannot raise money through shares or bonds.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Article 172.

Private enterprise

A private enterprise is owned by one individual. That owner is fully liable, with all personal assets, for everything the business does. This is the riskiest form for the owner, so think twice before choosing it.

The law adds firm limits. A private enterprise may not issue any kind of security. One person may set up only one private enterprise, and its owner cannot also be a household business owner or a partner in a partnership. A private enterprise also may not put money into a partnership, an LLC or a joint stock company as a founder or shareholder.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Articles 183 and 184.

How to choose

Start with the number of owners. A single owner who wants limited risk should look at the one-member LLC. Two to 50 owners who know each other usually fit the two-or-more-member LLC. Three or more owners who want easy share transfers and outside investors should look at the joint stock company.

Choose a partnership only when the founders are individuals who accept unlimited personal liability. Choose a private enterprise only for a very small, single-owner business. Whichever form you pick, check the registration steps with the business registration office and ask a licensed lawyer about your own case. This guide is general information, not legal advice.

Source: Law on Enterprises, Law No. 68/2014/QH13, National Assembly, passed 26 November 2014, in force from 1 July 2015, Articles 47, 73, 110, 172 and 183. Full text: https://datafiles.chinhphu.vn/cpp/files/vbpq/2014/12/68.signed.pdf.