How to Set Up a Limited Liability Company in Vietnam | LTS LAW

A limited liability company (LLC) is a popular form of investment for foreign investors looking to access the Vietnamese market. Since the Government of Vietnam has gradually issued more and more policies to attract investments from foreign investors, whether you are a small business owner or a large company, setting up a limited liability company in Vietnam could be an essential and profitable step. Let’s find out the requirements and procedures for setting up a limited liability company in Vietnam with LTS LAW through the following article!

Establishing a limited liability company in Vietnam
Establishing a limited liability company in Vietnam

Tóm tắt nội dung

What is a limited liability company?

A limited liability company (company limited) is an enterprise with legal status; a limited liability company’s maximum number of capital-contributing members does not exceed 50 members. Capital-contributing members can be individuals or organizations owning part or whole of the company’s charter capital.

Depending on the number of owners or capital-contributing members in a limited liability company, it can be divided into two (2) types: (i) one-member limited liability company and (ii)  two or more-member limited liability company. This gives foreign investors more options in organizing and managing their company, and investors are free to choose a company type that best suits their needs.

In terms of investor nationality, there are three (3) types: (i) local-owned limited liability company, (ii) wholly foreign-owned limited liability company, and (iii) joint-venture limited liability company between domestic and foreign investors.

Why should you set up a limited liability company in Vietnam?

Setting up a limited liability company in Vietnam is a popular choice for many foreign investors. So why do many foreign investors choose to invest in the form of limited liability companies instead of other types of legal entities?

Easy market access

The limited liability company is the most popular type of investment for foreign investors because of the limited liability regime and simple management organization structure. This type also gives investors various options to raise additional capital to finance their investment projects. Investors can quickly exit their investments by transferring their contributed capital to others or dissolving their company. Therefore, it has gradually become a popular vehicle for investors to access the Vietnamese market.

Setting up a limited liability company is a form of investment that makes it easy to access the Vietnamese market.
Setting up a limited liability company is a form of investment that makes it easy to access the Vietnamese market.

The protection of the limited liability regime

Foreign investors who set up a limited liability company are not liable for the company’s debts and other property obligations. All liabilities will be borne by the company only, and the owner’s liability is limited to their share of contributed capital.

Convenience in profit distribution

The owners or capital-contributing members of a limited liability company can distribute after-tax profits equally and flexibly based on their capital contribution ratio.

Various types of companies

Limited liability companies have two types: (i) one-member limited liability companies and (ii) two or more-member limited liability companies.

Easily adding more members

A limited liability company can add more company members to raise its charter capital if the existing members approve new members through the company’s members’ council. The maximum number of members in a limited liability company is not more than 50 members.

Capital Raising

A limited liability company can raise additional capital in many ways, such as raising additional capital contributions from existing or new members, borrowing money under loan agreements, or bond issuance.

Simple setup procedures

Establishing a limited liability company in Vietnam significantly reduces the process and paperwork compared to other types of legal entities in Vietnam, i.e. a joint stock company. Therefore, foreign investors do not take too much time and effort to start a business in Vietnam as a limited liability company.

Types of limited liability companies in Vietnam

There are two forms of limited liability company in Vietnam: one-member limited liability company and two or more-member limited liability company.

Types of limited liability companies in Vietnam
Types of limited liability companies in Vietnam

One-Member Limited Liability Company

One-member limited liability company is a company owned by an individual or organization (referred to as a company owner). The company owner is responsible for the debts and obligations to the extent of the company’s charter capital.

Features of a one-member limited liability company:

  • A one-member limited liability company has legal status from the date of issuance of the enterprise certificate registration;
  • A one-member limited liability company is not allowed to issue shares;
  • During the company formation, charter capital of a limited liability company is the total value of assets that the company owner undertakes to contribute to the company and is recorded in the company’s charter and its enterprise registration certificate;
  • The owner is required to contributes capital as committed within 90 days from the date of the enterprise registration certificate;
  • Suppose the charter capital is not fully contributed by the deadline. In that case, the company must register for a decrease in charter capital within 30 days from the deadline.

Two or more-member limited liability Company

A two or more-member limited liability company is a company established and operating under the 2020 Enterprise Law. Accordingly, company members can be individuals or organizations with the number of company members not exceeding 50. Company members are responsible for the company’s debts, and other property obligations to the extent of the amount of capital contributed to the company.

A two or more-member limited liability company shall have legal status from the date of the enterprise certificate registration.

Features of Limited Liability Companies in Vietnam

Company Member Responsibilities

A limited liability company in Vietnam is established based on the capital contribution of its members. Total assets contributed is the company’s charter capital, recorded in the enterprise certificate registration and the company’s charter.

The company members are responsible for the company’s debts, and other property obligations to the extent of the amount of capital contributed to the company.

Right to issue shares and bonds

Unlike joint stock companies, limited liability companies (regardless of a one-member limited liability company or a two or more-member limited liability company) are not allowed to issue shares.

The 2014 Enterprise Law does not contain any provisions allowing limited liability companies to exercise the right to issue bonds. However, the 2020 Enterprise Law (effective from 2021), in Articles 46 and 74, stipulates that a limited liability company in Vietnam can issue bonds provided it complies with Vietnamese law.

Organizational management structure

Onemember Limited Liability Company

A one-member limited liability company owned by an individual may have an organizational management structure as follows:

  • A company owner;
  • A company president who is also the company owner;
  • Directors (they can be hired or the company president can concurrently be the Director).

Two or more-member limited liability companies

A two or more-member limited liability company in Vietnam is usually built with the following organizational management structure:

  • Members’ council: it is the highest decision-making body of the company, inlcluding all capital-contributing members of the company;
  • Chairman of the members’ council: the chairman is appointed by the member’s council;
  • Director or general director: they manage the company’s day-to-day operations and are responsible for exercising their rights and duties before the members’ council.

What are the requirements to establish a limited liability company in Vietnam?

To set up a limited liability company in Vietnam, foreign investors must meet the following requirements:

Company name

It is very important to choose an appropriate name for a limited liability company, which must be approved by the registrar of companies (i.e. the Business Registration Office of the Department of Planning and Investment). Company names must meet the following conditions:

  • Company name in Vietnamese must include two parts: company type and private
  • A company name must not be the same or confused with the name of state agencies, social organizations, or existing companies.
  • Company names must not include symbols or words contrary to Vietnamese good customs and traditions.
  • A company name in the foreign language of a limited liability company must comply with Article 39, the 2020 Enterprise

For example, Công ty TNHH Tư vấn Doanh nghiệp LTS (name in Vietnamese); LTS Corporate Advisory LLC (name in English)

Application dossier for registration of a limited liability company

One of the essential steps for foreign investors to establish a limited liability company in Vietnam is to apply for an enterprise registration certificate after obtaining an investment registration certificate.

According to the law, a set of application documents for setting up a limited liability company in Vietnam includes the following:

  • Application form for registration of a limited liability company:

For a one-member limited liability company: according to the form in Appendix I-2 of Circular 01/2021;

For a two or more-member limited liability company: according to the form in Appendix I-3 of Circular 01/2021;

  • Charter of the company;
  • A valid copy of one of the personal identification papers: ID card/citizen ID card/ passport of company members, the legal representative of the company;
  • A copy of the establishment decision, incorporation certificate, or another equivalent document (for foreign corporate members). If the members are foreign companies, the document must be legalized by the embassy/ consulate of Vietnam in the given foreign country.
  • List of capital-contributing members (in the case of a two or more-member limited liability company);
  • A copy of an investment registration certificate (if foreign investors are involved);
  • A letter of authorization for an authorized representative to submit the application dossier.

Making capital contribution and applying for sub-licenses

Within 90 days of issuing the enterprise registration certificate, the limited liability company’s members must make their capital contributions as committed, as stated in the company’s enterprise registration certificate.

Specific business areas in Vietnam require a sub-license before legally carrying out the businesses. Therefore, if your business falls in one of these areas, you must apply for a sub-license.

Notes on setting up a limited liability company in Vietnam for foreign investors

  • Tax issues: Like other types of companies, limited liability companies in Vietnam are also subject to taxes, including license tax, corporate income tax, VAT, and many other taxes,…
  • Timeline to complete the company registration procedure: The process of registering a limited liability company in Vietnam with foreign investors involved can take about three (3) weeks, subject to the complicatedness of the specific investment projects.
Registration Steps Estimated Time
Applying for an investment registration certificate 15 days
Applying for an enterprise registration certificate 3 working days
Applying for sub-licenses (where applicable)

LTS LAW - The leading prestigious company establishment service for foreign investors in Vietnam

A limited liability company is one of the most popular business forms for foreign investors when expanding into the Vietnamese market. Hopefully, the above article will give you more helpful information to prepare for establishing a limited liability company in Vietnam.

Setting up a limited liability company in Vietnam has gradually become more accessible, and the registration procedure has also been shortened and simplified. However, preparing complete and accurate legal documents is still something many foreign clients often worry about. Understanding the difficulty of many clients, LTS LAW provides its clients with the service of establishing limited liability companies for foreign investors in Vietnam.

Service of setting up a  limited liability company for foreign investors in Vietnam
Service of setting up a  limited liability company for foreign investors in Vietnam

LTS LAW is proud to be one of the leading companies in the legal-corporate consulting industry in the Vietnam market. Our lawyers and specialists have many years of experience consulting and supporting foreign clients and FDI companies in Vietnam. We are committed to our clients by providing legal, practical, and highly professional solutions.

Please contact LTS LAW immediately for the most detailed advice:

LTS LAW LLC

Address: Room 602, Floor 6, 520 CMT8, Ward 11, District 3, HCMC, Vietnam

Email: contact@lts.com.vn

Hotline: (+84) 902 798 066

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