COMPARISON OF TYPE OF ENTERPRISE
Legal basic:
- The Enterprise Law 2020 takes effect from January 1, 2021;
- Decree No. 01/2021/ND-CP issued on January 4, 2021 on Enterprise Registration;
This information table will provide the characteristics of the types of businesses in Vietnam. Clients should compare and choose the most suitable type for your business plan.
|
CRITERIA |
SINGLE-MEMBER LIMITED LIABILITY COMPANY | TWO-MEMBER LIMITED LIABILITY COMPANY
|
PARTNERSHIP
|
JOINT STOCK COMPANY
|
SOLE PROPRIETORSHIP
|
| A. LEGAL CHARACTERISTICS | |||||
| 1. Number of owners | Member can be organizations and individuals.
The quantity of member is only one |
Members can be organizations and individuals.
Quantity: An enterprise can have from 02 to 50 members that are organizations or individuals. |
At least 02 individual general members that are joint owners of the company.
It can have limited partners (capital-contributing members) in addition to general members . Unlimited quantity of members. |
– At least 03 members and no maximum limit.
– Shareholders can be individuals or organizations |
iT is owned by one individual, and each individual is allowed to own only one sole proprietorship
The owner of a sole proprietorship not concurrently is the owner of a business household or a general member of a partnership. |
| 2. Liability for debt and asset | Within the amount of charter capital | Within the amount of charter capital | – General members are responsible for the company’s obligations with his whole assets;
A limited member is responsible for the company’s obligation within the capital that he promised to contribute in to the company. |
Only responsible for the amount of capital contributed to the company | A single individual whose liability for its entire operation is equal to his/her total assets. |
| 3. Legal status (from the date of issuance of enterprise registration certificate) | Juridical Entity | Juridical Entity | Juridical Entity | Juridical Entity | None |
| 4. Regulations on the right to issue securities | Not allowed to issue shares.
Allowed to issue non-convertible bonds, without warrants (Article 9 Decree 153/2020/ND-CP) |
Not allowed to issue shares.
Allowed to issue non-convertible bonds, without warrants (Article 9 Decree 153/2020/ND-CP) |
Not allowed to issue any securities (shares, bonds…). | Allowed to issue shares to call for capital | Not allowed to issue any securities. |
| B. ESTABLISHMENT CAPITAL CONTRIBUTION | |||||
| 1. Formation | – Having separation between owner’s assets and company assets.
– Having separation among personal and family expenses from expenses of chairman of the board of members , director, and general director |
– The members fund capital to establish the enterprise.
– After contributing capital, the members are granted capital contribution certificates |
General members and limited members shall contribute in full and on time the amount of capital as committed | The founding shareholders shall subscribe for at least 20% of the total ordinary shares upon enterprise registration
(Article 120 Law on enterprise 2020) |
Investment capital of a sole proprietorship shall be registered by the owner.
|
| 2. Duration of capital contribution | Within 90 days from the issuance date of the Certificate of Enterprise Registration, regardless of the time it takes to transport and import assets to contribute capital, and to carry out administrative procedures to transfer property ownership.
(Article 75 Law on enterprise 2020) |
Within 90 days from the issuance date of the Certificate of Enterprise Registration regardless of the time it takes to transport and import assets to contribute capital, and to carry out administrative procedures to transfer property ownership.
|
The Enterprise Law 2020 does not regulate. The duration of contributing capital shall be determined by the general members and the limited members in the Charter | Shareholders shall fully pay for the subscribed shares within 90 days from issuance date of the Certificate of Enterprise Registration unless shorter time limit specified by the company’s charter or the shares subscription contract.
(Article 113 Law on enterprise 2020) |
Not allowed to contributing capital or buy shares or contribute capital in a partnership, a limited liability company or a joint-stock company. |
| 3. Handling of non-compliance of capital contritution | Register to adjust charter capital equal to the actual capital contributed, 30 days from the due date of capital contribution | – Register to adjust charter capital and capital ratio, within 30 days from the due date of capital contribution.
– The members who fail to contribute or fully contribute capital shall be responsible for the financial obligations incurred by the company during the period before the company registers the changes. proportion to their promised contributions. |
– A general member who fails to contribute capital fully and punctually as promised and thus causes damage to the company shall pay a compensation.
– In case a limited member fails to contribute capital fully and punctually as promised, the contributed capital amount shall be considered as a debt of the member to the company, in which case the limited member can be excluded from the company under a decision of the Board of Member . |
– The shareholder that fails to pay for the subscribed shares is no longer a shareholder of the company and not transfer the right to purchase the shares to another person.
– Within 30 days from the due date for paying for the subscribed shares , the company shall register the change in charter capital to actual face value of the shares paid and founding shareholders. (Article 113 Law on enterprise 2020) |
– The owner is obliged to register the exact amount of investment capital |
| 4. Increasing, decreasing charter capital | – Decreasing charter capital
A part of the contributed capital can be returned to the company’s owner after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital; – Increasing charter capital When its owner contributes more capital or raises capital from other persons. (Leading to change the enterprise type ).
|
– Decreasing charter capital
A company can return a part of the contributed capital to its members in proportion in the company after the company has operated for at least 02 consecutive years from the enterprise registration date and the company is able to fully pay its debts and other liabilities after the return of capital; + The company buys back the members’ stakes as prescribed in Article 51 Law on Enterprise 2020 + Charter capital is not fully and punctually contributed by the members as prescribed in Article 47 Law on Enterprise – Increasing charter capital The company may increase its charter capital by: + Increasing the capital contributed by the members. + Receiving additional capital contributions from new members. |
No regulation | – Decreasing charter capital:
A company can decrease its charter capital by buying back shares of its shareholders, within 10 days from the date of completion of payment for the shares – Increasing charter capital A company can increase its charter capital by increasing the quantity of shares to be offered for sale. |
Allowed to increase or decrease charter capital as the owner’s decision |
| 5. Capital transfer | Company owner is entitled to transfer a part or the whole charter capital to other persons or organizations (If partial transfer will lead to the conversion of the enterprise’s type to a 02 member LLC or a joint stock company ). | A member of a 2-member limited liability company is entitled to transfer a part or the whole capital to other persons or organizations | – A general member is not allowed to transfer part or all of his/her stake in the company to other individual unless it is approved by the other general members .
– A limited member is allowed to transfer a part or the whole of his/her stake in the company to other organization or individual |
Within 03 years from the issuance date of the certificate of enterprise registration, the ordinary shares of founding shareholders may be transferred to other founding shareholders and may only be transferred to a person that is not a founding shareholder if the transfer is accepted by the GMS. | Leasing out a sole proprietorship: The sole proprietorship’s owner is entitled to lease out the entire sole proprietorship .
Selling a sole proprietorship: The owner is still responsible for its debts and liabilities that occurred before the date of transfer, unless otherwise agreed upon by the owner, the buyer and the creditors. |
| C. ORGANIZATIONAL STRUCTURE | |||||
| 1. Board of Members or General Meeting of Shareholders (GMS) or Board of Directors | – Organizational structure: Depending on the individual company or organization by the owner that the organizational structure may be the chairman of the company or Board of Members (with 3-7 members), Director or General Director | – Organizational structure: Board of Members, Chairman of the Board of Members, Director or General Director
– At least one member meeting shall be held per year. – It is the supreme governing body of the company |
– Board of Members consists of all members and has the right to decide all business
– A general members ha s the right to request a meeting of the Board of members . |
Organizational structure:
– GMS – Board of Directors – Director or General Director ———– – The GMS is the supreme body of a joint stock company. The annual GMS shall be convened within 04 months from the end of each fiscal year. – GMS shall be convened annually and whenever necessary – Board of Directors has full authority to decide on issues that are not within the competence of the GMS. There are 03 to 11 members or according to the charter, a term not exceeding 05 years |
– The owner of a sole proprietorship has all discretion for all business activities of sole proprietorship
|
| 2. Director/ General Director | – The Board of Members or the President of the company appoints or hires the Director or General Director, term is up to 05 years | Not being the one who is not allowed to manage or do business specified in Clause 2 Article 17.
|
– The director is a general member if there is no other regulation in its charter .
– General members have the right to represent the company legally and manage daily business activities of the company |
– The Board of Directors appoints one of its members or hires the Director or General Director, term is up to 05 years | – The owner may by himself or hire another person to manage the sole proprietorship . In case of hiring someone to be the director of the sole proprietorship , the owner still have to take responsibility for all business.
– Owner is the plaintiff, defendant or person with related interests and obligations before arbitration or court in disputes related to the sole proprietorship . – The owner is the legal representative of the sole proprietorship . |
| 6. Supervisor and Superviosry Board | Appointed by the owner, its term is not exceeding 5 years | – Supervisory Board shall have 1 – 5 supervisors . Its term shall not exceed 05 years and can be re-appointed without limit
– In case Supervisory Board has only 01 supervisor , he/she shall be the chief supervisor and have to be satisf ied the corresponding conditions of a chief supervisor. |
No regulation | – In case the joint stock company has less than 11 shareholders and the shareholders that are organizations hold less than 50% of the company’s total shares, the Supervisory Board is not mandatory;
– The Supervisory Board shall have 3 – 5 supervisor . – More than ½ of the supervisors reside in Vietnam.
|
No regulation |
The above is basic information of types of business to choose when establishing a business. If you have any questions related to establishing your company, please contact businesslicense.vn