5 Types of Companies in Vietnam – Quick and Easy Comparison

Vietnam is a rapidly growing economy with a diverse system of enterprise classification. Different types of companies in Vietnam have different features, advantages, and disadvantages.

Check out this article by Thao & Co. to learn all about Vietnam’s enterprise classification and pick the best for your business.

Types of companies in Vietnam: How many are there?

Currently, Vietnam recognizes 5 types of enterprises. They are:

1. ● Sole proprietorship
2. ● Partnership
3. ● Single-member limited liability company
4. ● Two-member limited liability company
5. ● Joint-stock company

Each type of enterprise has distinct features concerning business operations, capital contributions, and legal responsibilities of owner(s).

Hence, when setting up a business in Vietnam, it is crucial to understand how different types of companies operate.

Choosing the right type of enterprise can help you minimize the risk of legal and financial complications in the future.

Advantages and disadvantages of all types of companies in Vietnam

Not sure which type of enterprise to register your business in Vietnam? Here’s a breakdown of the 5 types of companies in Vietnam, complete with the advantages and disadvantages of each type.

Sole proprietorships

A sole proprietorship is an enterprise owned by a single individual. The owner of a sole proprietorship is liable for all activities of the enterprise and there’s no separation between their assets and assets of the enterprise. Each individual may establish only one sole proprietorship.

Advantages:

1. ▪ Flexibility and autonomy: The owner has full rights to decide all business activities.
2. ▪ Less paperwork: The enterprise is subject to less extensive regulatory compliance compared to other types of enterprise.
3. ▪ Full ownership of profits: The owner receives 100% profits from business activities.

Disadvantages:

1. ▪ No legal entity status: The business is not considered a legal entity separated from the owner.
2. ▪ No liability protection: All debts and any litigation go to the owner.
3. ▪ Limited to only available capital and financial resources.
4. ▪ The owner of a sole proprietorship must not concurrently own a household business.

Partnerships

A partnership must have at least 2 partners who are joint owners of the company and operate under one shared name. The owners are referred to as general partners. General partners are liable for the obligations of the partnership with their entire assets.

Besides the general partners, a partnership may also have multiple limited partners. Limited partners are only liable for the debts of the partnership within the capital amounts they have contributed.

Advantages:

1. ▪ Leverage the capabilities of all partners
2. ▪ Easier access to capital and fostering trust with potential partners and clients
3. ▪ No restrictions on the number of limited partners, unlike sole proprietorships

Disadvantages:

1. ▪ General partners face significant legal risks and personal liability.
2. ▪ Limited partners do not have control over business operations.
3. ▪ Decision-making can be slower and more complex.
4. ▪ Partnerships cannot issue any type of securities.

Single-member limited liability companies

A single-member limited liability company is owned by either an organization or individual. The owner is liable for all debts and asset obligations within the company’s charter capital.

Advantages:

1. ▪ Has a separate legal entity status
2. ▪ Straightforward organization structure
3. ▪ The owner has full authority over all business decisions.
4. ▪ Low legal risk compared to other structures.

Disadvantages:

1. ▪ Limited capital options since a single-member limited liability company cannot issue shares and is only allowed to issue bonds.
2. ▪ The owner’s salary cannot be recorded as a company expense.

Two-member limited liability companies

A two-member limited liability company can have between 2 to 50 members. All members are liable for the company’s debts and asset obligation, but only within the capital amounts they contributed.

Advantages:

1. ▪ Have legal entity status and limited liability
2. ▪ A small number of members allows for easier management and decision-making.
3. ▪ Closed capital transfer helps protect the company from external influence.

Disadvantages:

1. ▪ More legal obligations compared to other types of enterprise
2. ▪ Cannot issue shares, only bonds.

Joint-stock companies

A joint-stock company is a business structure where the charter capital is divided into equal portions called shares. Shareholders own these shares and are only responsible for the company’s debts or obligations up to the amount they’ve contributed.

To form a joint-stock company, at least 3 shareholders are required, though there’s no upper limit on the number. A joint-stock company has legal entity status and can issue shares in accordance with the law.

Advantages:

1. ▪ Easier access to capital in the form of shares, bonds, and other types of securities
2. ▪ No limit on the number of shareholders
3. ▪ Simple capital transfer procedure

Disadvantages:

1. ▪ Complex management and operation due to a large number of shareholders
2. ▪ Founding shareholders might lose control if their shareholdings are diluted or sold.
3. ▪ Joint-stock companies must comply with numerous legal requirements.

A comparison of types of companies in Vietnam (with real examples)

Thao & Co. compares different types of companies in Vietnam to help you choose the right structure for your business.

🔽Download Thao & Co.’s guide on types of companies in Vietnam

The structure of your company plays a crucial role in shaping its business decisions, especially when it comes to issuing bonds, shares, and other securities for expansion. Let’s look at two prominent examples in Vietnam:

Vinamilk Joint-Stock Company

1. ● Organization structure: Vinamilk operates with a General Meeting of Shareholders, a Board of Directors, and a General Director. Key decisions are made by the General Meeting and the Board, while daily operations are overseen by the General Director. 

1. ● Securities issuance:  As a joint-stock company, Vinamilk can issue shares to fuel growth and explore new markets, giving it greater flexibility for expansion.

Saigon Pharmaceutical One Member Limited Company (Sapharco)

1. ● Organization structure:  Sapharco is structured with a Board of Members and a General Director. The Board handles major decisions, while the General Director is in charge of day-to-day management.

1. ● Securities issuance: Unlike joint-stock companies, limited-liability companies like Sapharco cannot issue shares. Their funding comes from charter capital, which is set by the company owner.

What are the common types of companies in Vietnam?

In Vietnam, the most popular business structure is the Limited-Liability Company (LLC). It’s a top choice for many due to several key advantages:

Reduced financial risks for owners and capital contributors

With an LLC, members are only liable for the company’s debts and asset obligations up to the capital amounts they contributed.

This separates personal and business finances, thus mitigating financial risks for capital contributors.

Simplified control over capital sources and capital transfers

LLCs offer straightforward procedures for capital contributions, without requiring large capital contributions. However, when a member wishes to transfer their capital, all other members must agree to the transfer.

Current members are also given priority to purchase any transferred shares, providing more control over ownership and preventing outsiders from taking over the company.

Flexibility in choosing business sectors

Another major benefit is the freedom to operate in any business sector, as long as it is not restricted or prohibited by law.

Key takeaways

We hope this article has helped you get a better understanding of the types of companies in Vietnam. Your choice of company structure will significantly impact your future business operations, goals, expansions, and long-term success.

Choosing the right type of enterprise and completing the required legal procedures can be challenging, especially for foreign investors when expanding their business into Vietnam.

As a local agency with proficient English, Thao & Co. can be your partner in conquering the Vietnam market. Our services include:

1. 🔹 Legal consultation and guidance on selecting the best company structure
2. 🔹 Document preparation and submission
3. 🔹 Notarized translation services
4. 🔹 Investment registration and other legal documentation support
5. 🔹 Comprehensive support from start to finish

For more information or to get started, simply fill out our Contact form. Thao & Co. will promptly reach out to provide you with a personalized consultation to help you succeed in Vietnam.

Get in touch:

Address: Floor 3, 86 Dien Bien Phu Street, Da Kao Ward, District 1, Ho Chi Minh City, Vietnam (Google Maps)

Phone: (+84) 28 6682 6636

Email: [email protected]