The Ins and Outs of a Limited Liability Company in Vietnam

Establishing a business in Vietnam can be a promising venture, particularly with the flexibility and protection offered by limited liability companies (LLCs). With its dynamic economy and favorable business environment, understanding the fundamentals of LLCs in Vietnam is crucial for entrepreneurs and investors alike. This article offers a concise overview of the ins and outs of forming and operating an LLC in Vietnam, highlighting key considerations for those seeking to embark on business endeavors in this vibrant Southeast Asian nation. 

What does a limited liability company in Vietnam entail? 

LLCs, short for Limited Liability Companies, are a preferred legal entity for launching businesses in Vietnam due to their asset protection features. Shareholders’ liability is limited to the value of their shares, safeguarding private assets. Beyond this, LLCs offer advantages such as transparency in operations, a swift incorporation process with reduced paperwork, and low operating costs, making them an optimal choice for investment while carrying the smallest amount of risk. 

The business structure of a limited liability company in Vietnam 

In Vietnam, forming a limited liability company requires a thorough understanding of its legal framework and constraints. Such companies in the country are categorized into two types based on membership: single-member LLCs, which can only have one member upon formation to remain single-member; otherwise, they become multi-member LLCs; and multi-member LLCs, which are then required to meet a certain threshold of members as per incorporation regulations. 

A single-member limited liability company in Vietnam 

A single-member limited liability company is characterized by having only one owner who is fully liable for the company’s debts up to the extent of their invested capital. This owner holds exclusive rights to key decision-making processes, including drafting and amending the company’s charter, determining annual business plans, appointing executives, and approving major contracts and investments. Additionally, the owner has the authority to adjust charter capital, establish subsidiaries, and oversee company performance and financial matters, including profit allocation and dissolution procedures. 

If the owner is not the director, this role is tasked with executing the owner’s decisions, managing day-to-day operations, implementing business and investment plans, and issuing company regulations. The director also has the responsibility of appointing and terminating executives, entering contracts, and submitting financial reports to the owner or relevant governing bodies. Their authority is defined by the company’s charter and employment contract. 

Should a single-member LLC decide to transition into a multi-member structure, it must adhere to Vietnamese legal procedures. For foreign-invested companies, this process involves changing the Investment Registration Certificate (IRC) and Enterprise Registration Certificate (ERC). The conversion process mandates specific steps and timelines as prescribed by Vietnamese law: first changing the IRC within 15 days of receiving complete documentation, followed by the ERC within 3 days of receiving complete and valid paperwork. The actual timeline could be prolonged if the state agency considers it is necessary to supplement additional documents or explanations. 

A multi-member limited liability company in Vietnam 

In a multi-member LLC, members have rights such as attending board meetings, voting based on investment, and receiving proportional shares and profits. They can also make additional capital contributions and request that the company repurchase their stake under certain conditions. The Board of Members holds authority over crucial decisions like business plans, capital adjustments, contract approvals, and personnel appointments, along with responsibilities including ratifying financial statements and deciding on company reorganization or dissolution. 

The director, whether a board member or not, manages daily operations, executes board resolutions, and implements business and investment plans. They appoint and dismiss executives, enter contracts, propose organizational structures, and present financial statements to the board. Operating within the company’s charter and employment contract, they handle recruitment and other operational tasks. 

In essence, a multi-member LLC offers members specific rights and decision-making avenues, with the Board of Members overseeing strategic decisions and the director managing daily operations within the company’s framework. 

The primary aspects of a limited liability company in Vietnam 

A Limited Liability Company (LLC) in Vietnam operates on the basis of members’ capital contributions, where each member’s liability is limited to the extent of their contribution to the company’s charter capital. In the case of a one-member LLC, the sole member bears full responsibility for the company’s debts and obligations. Unlike joint-stock companies, LLCs in Vietnam are not authorized to issue shares or bonds, though amendments to the Law on Enterprise in 2020 allow for bond issuance under certain conditions. 

The corporate structure of a multi-member LLC in Vietnam typically includes a Member’s Council, chaired by a selected member who may also serve as the director or general director. A director or general director manages daily operations and holds liability for their actions before the member’s council. Depending on its nature, a multi-member LLC may require a supervisory board, especially if it is a state enterprise or subsidiary. For one-member LLCs, structures may vary but typically involve either a company president or director or a member’s council and director. 

For LLCs in Vietnam, capital contribution is a crucial aspect of registration, and a business license may be required depending on the chosen sector. The license application follows the issuance of an investment registration certificate (IRC) and an enterprise registration certificate (ERC), with capital contributions to be completed within 90 days after receiving the ERC. Compliance with these regulations is essential for the legal operation of an LLC in Vietnam. 

Establishing a limited liability company owned by foreign investor(s) in Vietnam involves a streamlined process:  

1. Apply for Investment Registration Certificate (IRC); 
2. Apply for Enterprise Registration Certificate (ERC); 
3. Register initial tax information; 
4. Open company bank accounts including capital bank accounts & current bank accounts; and 
5. Apply for an investment online account. 

Following these steps ensures compliance and sets the foundation for a successful LLC (owned by foreign investors) in Vietnam. 

Perks of a limited liability company in Vietnam 

In Vietnam, LLCs offer key benefits such as limited liability, flexible ownership structures, and lower tax rates. Members’ personal assets are safeguarded, ownership is easily adjustable, and tax obligations are reduced, enhancing profitability. Additionally, LLCs can attract investors through share issuance, facilitating capital raising, while simplified compliance requirements streamline operations, allowing focus on core business activities. 

Premia TNC’s assistance 

Reach out to Premia TNC for assistance from our dedicated team of expert consultants, providing services completely free of charge, offering competitive pricing, seamless processes, and an unwavering commitment to delivering the highest quality service tailored to meet your specific needs and expectations. 

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