Which Legal Entity Suits Your Business in Vietnam? – Part II

Business in Vietnam

You are excited to set up your own business in Vietnam! But you are not sure which type of business structure / legal entity to choose. Last time, we already discussed the limited liability company (LLC), the joint stock company (JSC) and the representative office (RO). In this article, we will discuss some other common business structures / legal entities in Vietnam: the partnership, the private enterprise, the business household, and the branch. Choose the one that is most suitable for your business, and let us help you set it up for you!

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THE PARTNERSHIP

A partnership is a company with at least two so-called “general partners”, who are co-owners and who run the company together under a common name. Apart from general partners, there may also be so-called “contributing partners” or “silent partners”. General partners are individuals who are responsible for the company’s debts and other obligations with all of their property. Contributing partners are only liable for the company’s debts and other obligations up to the value they contribute to the company.

General partners are entitled to receive distributed profits in proportion to the capital contribution of the partnership or as may be agreed in the company charter. Contributing partners are entitled to receive annually distributed profits in proportion to the ratio of capital contribution to the partnership. A partnership has a board of partners including a chairperson and a director.

  • Vietnamese name: công ty hợp danh.
  • One advantage: four (or six) hands are sometimes better than two.
  • One disadvantage: there is no liability protection for the general partners’ private assets.
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THE PRIVATE ENTERPRISE

The private enterprise is a company that is owned by one individual who is responsible for the company’s operation with all of his or her property. Each individual may establish only one private enterprise. He or she cannot concurrently be the owner of a household business (see below), or a partner in a partnership (see above).

All the capital and assets of a private enterprise must be recorded in the company’s accounting books and financial statements. These may be increased or decreased and registered during the operation of the company. The owner of the private enterprise has absolute discretion as to the company’s business operation, and the use of profits after tax. The owner may directly manage the company him- or herself, or hire a director to do so. In this last case, however, the owner remains legally responsible for the entire operation of the company.

  • Vietnamese name: doanh nghiệp tư nhân.
  • One advantage: you are solely in charge of your own business.
  • One disadvantage: apart from unlimited liability, it is difficult for a private enterprise to raise money.

THE BUSINESS HOUSEHOLD

A so-called business household can only be owned by a Vietnamese individual or a group of Vietnamese individuals. The business household is only allowed to have one (1) registered business location, and it cannot employ more than ten (10) people. The owner(s) is/are responsible for the company’s operation with all of their property. Individuals establishing and contributing capital to a business household may not concurrently be the owner of a private enterprise, or be a general partner in a partnership.

  • Vietnamese name: hộ kinh doanh.
  • One advantage: registration is often not required.
  • One disadvantage: it is only an option for small scale businesses, and it is not open to foreign investment.
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THE BRANCH

A branch is a dependent unit of another company, and it is obliged to perform a part or all of that company’s functions, including representation. The registered business lines of a branch must be consistent with those of the company. A company may establish several branches in Vietnam, but not more than one (1) with the same name in the same province or centrally-run city.

A foreign company may establish a branch in Vietnam if it is established, registered or recognized in a country with which Vietnam has entered into a treaty. The foreign company must have been operating for at least five (5) years since its establishment or registration. There must be a head of the branch. But otherwise the company is free to manage the operations as it sees fit.

  • Vietnamese name: chi nhánh.
  • One advantage: in contrast with a “rep. office” (see our previous article), a branch is allowed to conduct profit-making activities in Vietnam.
  • One disadvantage: it is only suitable for certain sectors, such as banking and legal services.
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Look at this

AT BIZLEN™

We can advise you about the possibilities and restrictions of your business plans. And we can guide you through each step of the process to realizing them. Our Bizlen™ Team is specialized in business set up in Vietnam. This means that we can assist you with all the items that are mentioned in this article, Finding investors, Selling your business, obtaining necessary licences, legal support and many more.

The Bizlen™ Team will go the extra mile in supporting your business get set up and running. Further more we provide consulting even after your business is established, Making sure everything runs smoothly. We will always be here to help!

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#Business in Vietnam #Open a business in Vietnam

If your interested to know more about what Business you can open in Vietnam take a look at this article about foreign investment and what businesses / industries are prohibited in vietnams.

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E-mail: bizlen.team@gmail.com

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Being Partners with Bizlen Leasing, Landbiz and QT Design & Build, we can explore investment opportunities in real estate. Together with our trusted legal partners, we can advise and support you with your business and legal proceedings. For example, we can support you with company set – up, business licensing, contract drafting and reviewing, and legal research. But we can also help you to find residential properties, commercial spaces, and offices Da Nang and Hoi An.

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Previous: How to Choose Your Business Structure in Vietnam – Part I


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