0
Choosing a business type is not just an administrative procedure but a strategic decision that directly affects the liability regime, the ability to raise capital and the management structure of the company in the long term. In Vietnam, there are four common types of businesses regulated by the Enterprise Law 2020
Limited Liability Company (LLC): Includes single-member LLCs and LLCs with two or more members. The most prominent feature of this type is the limited liability regime. Accordingly, the owner or capital contributors are only responsible for the debts and other financial obligations of the company within the scope of the committed capital contribution. This creates a solid layer of protection for the owner's personal assets, helping to minimize risks when the business fails. However, the disadvantage is that the ability to raise capital is limited, because LLCs are not allowed to issue shares.
Joint Stock Company: This is a type of enterprise whose charter capital is divided into equal parts called shares, and shareholders can be organizations or individuals. Joint Stock Company also has a regime
Limited liability. The outstanding advantage of this type is that there is no limit on the number of shareholders, allowing the company to flexibly raise capital by issuing shares.
Private Enterprise (PE): Is a business model owned by an individual who is responsible for all business activities with all of his/her assets. A PE does not have legal status, meaning there is no separation of assets between the business owner and the company. Although the establishment procedure is simple, the financial risk is very high.
Partnership: Consists of at least two individual partners, who are responsible for all of their assets for the company's obligations. Capital contributors (if any) are only responsible within the scope of their capital contribution.
Carefully considering these pros and cons will help you choose the model that fits your goals, vision, and risk tolerance.
Charter capital is the total value of assets that company members commit to contribute or have contributed upon establishment, clearly stated in the company's Charter. This is not only a number for registration but also demonstrates the financial capacity and reputation of the business to partners and customers.
Regulations on capital: The Enterprise Law 2020 does not stipulate a minimum or maximum charter capital, except for some specific business lines that require legal capital. Legal capital is the minimum capital that an enterprise must have to conduct business in certain industries, for example: security services (VND 2 billion), auditing services (VND 5 billion), or real estate business (VND 20 billion).
Capital declaration strategy: Declaring charter capital too low can make partners lack trust, while declaring too high increases the responsibility and risk of capital contributors. Furthermore, the act of falsely declaring charter capital, not contributing enough registered capital, is strictly prohibited by law.
A company name is not only a brand identity element but must also comply with strict legal regulations. According to the Enterprise Law 2020, the Vietnamese name of an enterprise must include two elements: the type of enterprise and the proper name.
Naming principles: Proper names must be written in letters of the Vietnamese alphabet, and may be accompanied by letters F, J, Z, W, numbers and symbols.
Prohibitions:
Duplication or confusion: Proper names must not be duplicated or confused with the names of other businesses registered nationwide.
Use of prohibited words: It is prohibited to use the names of state agencies, units of the people's armed forces, and names of socio-political organizations as proper names of enterprises, except in cases where there is approval from such agencies or organizations.
The head office address is the contact and transaction location of the enterprise, must be clear and legal.
Regulations on legal address:
Enterprises are not allowed to have their headquarters in apartment buildings built for residential purposes.
However, it is still possible to locate in mixed-use apartments (both for residence and business) and the apartment is located in an area permitted for business.
When registering, you need to provide documents proving that the apartment building has mixed purposes and does not affect the lives of residents.
Enterprises have the right to freely conduct business in industries not prohibited by law.
Registration principles: Business lines must be registered according to the Vietnam Economic Sector System (including 5 coding levels from A to U).
Industry classification:
Conditional business lines: These are business lines that the law requires to meet certain conditions regarding sub-licenses, practice certificates, legal capital, etc. For example: accounting, auditing, security services.
Unconditional business lines: These are lines of business that do not require any special conditions when registering.
Note: You should fully register all business lines you intend to do now and in the future to facilitate future expansion.
The legal representative is an individual representing the enterprise to exercise the rights and obligations arising from transactions.
Position: Depending on the type of enterprise, the legal representative can be the Director, General Director, or Chairman of the Board of Directors/Board of Members.
Terms and Responsibilities:
The legal representative must be an individual who is 18 years of age or older, has full civil act capacity and is not prohibited from managing an enterprise.
They are required to reside in Vietnam. In case of absence from Vietnam for more than 30 days, it is necessary to authorize in writing another person to perform the task.
Their responsibility is to exercise assigned rights and obligations honestly, carefully and put the legitimate interests of the enterprise first.
After being granted a Certificate of Business Registration, you need to carry out the following series of procedures so that the company can operate legally and effectively.
Announcement on the National Information Portal: According to the provisions of the Law on Enterprises 2020, enterprises must announce the registration content on the National Information Portal on Business Registration within 30 days from the date of being granted the certificate.
Hanging company nameplate: The company name must be displayed at the head office. Failure to display the signplate may result in administrative penalties or tax code lockout.
Opening a bank account: This is essential for conducting transactions and managing the company's finances.
Declaration and payment of business license fee: Newly established enterprises must submit a declaration and business license fee. This fee will be exempted in some cases and depends on the registered charter capital.
Register and activate digital signature: Digital signature is a mandatory tool to perform electronic transactions such as declaration, tax payment, customs and social insurance.
Organizing the accounting department: Enterprises must organize the accounting department to prepare books and financial reports.
Register to purchase and issue electronic invoices: According to Decree 123/2020/ND-CP, 100% of businesses must use electronic invoices. Therefore, you need to register and carry out procedures for issuing electronic invoices to ensure the validity of transactions.
Establishing a company is a complex journey, requiring careful preparation from the legal foundation to detailed procedures. By clearly understanding the nature, carefully considering core factors such as business type, charter capital and complying with legal regulations on name, address, and industry, you will build a solid foundation for the development of the company. Moreover, completing all the work after establishment, from information disclosure, tax registration, to organizing the accounting system, will help the business operate smoothly, effectively and ensure sustainable compliance with the law.
