guide to limited liability company in vietnam

Limited Liability Company in Vietnam in a Nutshell

  • InCorp Editorial Team
  • 31 December 2018
  • 6 minute reading time

Vietnam’s dynamic environment for businesses is reflected in the growing wealth, increasing middle-income group, larger young population, greater mobility, and urbanization, as well as the shifting consumer attitudes.

Entrepreneurs usually prefer to take advantage of the new business environment to achieve new business breakthroughs and horizons. Starting a business in Vietnam is definitely one of the ways how to make it.

Whether you are a small business owner or a big company, deciding to start a limited liability company in Vietnam is a big step. That’s why here in this article you will find helpful tips and information about how to start a limited liability company in Vietnam.

What is a Limited Liability Company

Limited Liability Company is also known as LLC. In most cases, forming a limited liability company is the simplest way to start your business in Vietnam, and at the same time serve to protect your personal assets. In other words, the shareholder’s liability in this type of company is only limited to their shares, but not their personal assets.

Reasons to Start a Limited Liability Company in Vietnam

Decreasing Operational Costs

Vietnam possesses a young workforce and talents with lower wages compared to other countries such as China — about half of the wages in China. It is also why Vietnamese goods are also much cheaper than other countries in the world.

Easy Market Penetration

Vietnamese goods’ quality is getting better to be able to compete in the market, but there are still many products and services lacking. With the goods and services that Vietnam has not met the demand yet, with proper market research and study, investors can tap into these sectors and likely to succeed. That’s why many sectors in Vietnam have become increasingly attractive to foreign investors.

Benefits of Starting an LLC in Vietnam

  1. It helps to protect members against lawsuits. For example, if a company faces financial challenges, the personal assets of its members will not be taken by banks, government, and creditors.
  2. It cuts down process and operation paperwork significantly as compared to larger corporations and other entity types in Vietnam.
  3. A limited liability company will continue to exist even in the event of the death of a shareholder/shareholders.
  4. It has a high opportunity and potential for expansion because it is easier for this form of entity to raise capital via angel investors, venture capitalists or other financial institutions.
  5. It is used to avoid double taxing to your company.
  6. It helps to present your business as more credible in Vietnam due to its high transparency.

Business Structure of an LLC

Before you think of incorporation of a limited liability company, you must make sure you have a clear idea of its legal structure.

There are two types of LLC in Vietnam based on a number of its members. However, the minimum and maximum numbers of its members remain always the same. At least one member is required to form a single-member LLC and not more than 50 members can join a multi-member LLC.

Single-Member LLC

It is self-explanatory that a single-member LLC has only one member (who is also the company owner). This member is liable for all company ’s liabilities and debts — only to the extent of the capital he or she invests.

It is possible for the owner to appoint representatives to create a board of members and choose a president.

A general director will then be appointed by the president and the board of members. The job of a general director is to oversee the company’s daily operation, and the performance of the director and the board of members will also be supervised. They can perform other tasks that are assigned by the owner as well.

As for charter capital, the company owner must contribute fully to the capital investment. This form of LLC is not able to decrease its charter capital — it can only increase the investments from the owner or others.

If individuals other than the owner put in the capital, the single-member LLC will then become a multiple-member LLC. Once the change occurs, the multiple-member LLC must be registered within ten working days.

Multi-Member LLC

Two or more (up to 50 people) members form a multi-member LLC. As members of the multi-member LLC, they are given member rights including attending the board of members’ meeting, voting rights that are in proportion to their capital investment, provided shares and profits that are in proportion to their capital investment, and given priority for an extra capital contribution.

Other than the mentioned rights, members are also allowed to dispose, sell or transfer their capital share back to the multi-member LLC under Indonesia’s Enterprise Law.

Similar to a single-member LLC, the board of members has to choose a general director. And this general director can be either a company’s member or another party. The job of a general director in a multi-member LLC is to represent the company legally and at the same time oversee daily operations.

Different to a single-member LLC, the board of members has the final say on decisions. Depending on the ratio of the invested amount, members are appointed accordingly.

A Control Committee is required as well once the board of members has more than eleven members. The function of a control committee is to oversee the board of members’ activities.

Process of Registering a Limited Liability Company

With the assistance from Cekindo, starting an LLC in Vietnam will be a much simpler process compared to doing it yourself. There are some legal obligations you must meet and specific procedures you have to go through.

Firstly, your LLC need to be approved by the Department of Planning and Investment (you will get an IRC, or Investment Registration Certificate upon approval).

Secondly, you will also need to obtain the ERC, or Enterprise Registration Certificate. The entire process often takes about 45 days. Here are more details regarding the process:

  1. Contact Cekindo to arrange an appointment at the Department of Planning and Investment
  2. Get foreign legal documents that are certified
  3. Translate documents to Indonesian
  4. Get certified copies of identity cards or passports
  5. Lease an office and sign a contract
  6. Obtain IRC and ERC through the application at Cekindo
  7. Get tax registration certificate
  8. Open a bank account
  9. Publish your business at the National Business Registration Portal

Register LLC with Cekindo

If you’d like to taste the fruits of your successful business in Vietnam, now is the right time to establish your limited liability company in Vietnam. Cekindo is an international company with an experienced team of advisors who will assist you during your market penetration in Vietnam. We provide one-stop market entry solutions that cover advisory, consulting, assistance during a company registration and handling the process on your behalf.

For a free quotation or more information in regards to starting a limited liability company in Vietnam, contact us now.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

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