Form of doing business in Vietnam

Choosing a suitable investment form is one of the most important tasks of investors coming to Vietnam. To make the right decision, the investors have to concern between the advantages and disadvantages of each form. Therefore, Luat Phuc Cau will unravel these investment issues as the following.

There are 5 forms of investment for foreign: Limited Liability Company (Multiple Members or One Member), Joint Share Company, Partnership Company, Business Cooperation, Public-Private Partnership. Here we discuss and provide a good understanding for each form.

1.Limited Liability Company (LLC)

There are 2 types of LLC: One Member and Multiple Member. Each has the status of a recognized legal entity and the member is responsible for the debts and liabilities of the enterprise within the amount of capital that the member has contributed or committed to contributing to the enterprise. But the difference is One Member LLC just has one member which is an organization or individual while Multiple Member is an enterprise that has more than one but no more than fifty members. Besides, LLC is not permitted to issue shares but can increase its charter capital by way of additional investment from the Company Owner/Member or by obtaining capital contributions from another person who will become a member of the company after this procedure.

2.Joint Stock Company

A Joint Stock Company is an enterprise whose charter capital is divided into shares held by 3 or more organizations or individuals or a combination of both. JSC has legal status as a legal person, it means that shareholders are responsible for the debts and liabilities of the enterprise within the amount of their contributed capital.

There are many types of shares such as common shares, preferred shares… but the common share is basically required. Another point making JSC different from LLC is JSC has the right to issue securities in order to raise capital and it may list on the Securities Exchange. Easy to mobilize funds is the reason why big brands often choose this form when establishing an enterprise in Vietnam.

Shareholders have the right to freely transfer their shares to others but it also makes it the Board Director easy to lose control of the company because of the differentiation of groups of shareholders that oppose each other in terms of interests makes the management and administration of the company more complicated.

3.Partnership Company

A form of enterprise set up by at least two partners and has a status of a legal person – a PC is akin to a limited liability partnership in other jurisdictions. A “partner” of a partnership can be a general partner or a limited partner. General partners are liable for all obligations of the PC with their own property, while limited partners’ liability is equal to their capital contribution.

The general partners often are those who are expert in a particular field and they need to mobilize fund to do business. The limited partners often are those who just want to invest and enjoy the profit. General partners would be more careful of their decisions because of the unlimited property liability

4.Business Cooperation Contract

“Business Cooperation Contract” means a contract between investors for business cooperation and distribution of profits or products without the establishment of a business entity.

Each party has their strengths and weaknesses, that’s why they collab and complement each other in work. We can see it as a project due to no legal entity established, it’s just an agreement between two parties.

5.Public-Private Partnership

A Public-Private Partnership (PPP) is a partnership between the public sector and the private sector for the purpose of delivering a project or service traditionally provided by the public sector. … PPP can increase the quality, efficiency, and competitiveness of public services.

Apart from the forms of business provided under the Investment Law 2020 and Enterprise Law 2020, other means of establishing a commercial presence in Vietnam may include Representative Offices, Branch Offices, contracted projects, and franchising arrangements.

By experience, capacity, and professional skill, Luat Phuc Cau shall deserve to be a trustworthy partner and be the leading choice for you.

Please don’t hesitate to contact us if you require any further information!

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