Opening a Limited Liability Company [LLC] in Vietnam is a strategic move for entrepreneurs seeking to tap into the dynamic Southeast Asian market. The process involves navigating legal requirements, cultural nuances, and operational challenges. How to open a limited liability company Vietnam? This comprehensive guide of AZTAX will walk you through the essential steps, ensuring a smooth and successful establishment of your LLC in Vietnam.
Among the various business structures in Vietnam, the limited liability company [LLC] stands out as it enables both local and foreign investors to own and conduct business in accordance with Vietnam’s Law on Enterprise.
1.1 Concept of limited liability company
An LLC is established through capital contributions from each member, with a restriction on the number of members not exceeding 50 in Vietnam. Notably, the financial responsibility of an LLC member is tied to their capital contribution rather than personal assets.
For foreign investors venturing into specific business sectors in Vietnam, the LLC offers two options:
- 100% Foreign-Owned Enterprise: All members must be foreigners.
- Partially Foreign-Owned Enterprise [Joint Venture]: Members include foreign investors alongside at least one Vietnamese member.
Under the Law on Enterprise in Vietnam, there are two types of LLCs: one-member LLC and multi-member LLC. In the subsequent sections, we will delve into the distinctive features of each.
1.2 Key features of a Limited Liability Company in Vietnam
Member’s liability
In Vietnam, a limited liability company is established through the capital contributions of its members, with capital contribution representing the aggregate assets contributed to form the company’s charter capital.
Consequently, the members of a limited liability company bear responsibility solely for the company’s liabilities and financial obligations in proportion to their respective capital contributions to the company’s charter.
Similarly, in the case of a one-member or single-member limited liability company, where there is only one member who also serves as the company owner, this individual assumes full responsibility for all relevant debts and obligations of the company, commensurate with their capital contribution to the company.
Right to issue shares and bonds
In contrast to a joint-stock company in Vietnam, a limited liability company, whether a one-member LLC or an LLC with two or more members, is expressly prohibited from issuing shares. The Law on Enterprise 2014 does not provide any provision granting the right for bond issuance to a Vietnam limited liability company.
However, a significant shift occurs with the amended Law on Enterprise 2020, slated to be effective in 2021. According to Articles 46 and 74 of the amended law, a Vietnam LLC gains the authority to issue bonds, contingent upon compliance with Vietnamese laws.
Corporate structure
A multi-member limited liability company in Vietnam, typically comprised of two or more members, is organized with the following key components:
- Member’s Council:
- This body holds the highest decision-making authority within the company.
- Mandatory annual meetings are required for the Member’s Council.
- Chairperson of the Member’s Council:
- An essential role within the LLC structure, the Chairperson of the Member’s Council is selected from the members and can concurrently serve as the company’s director or general director.
- The chairperson’s tenure is limited to a maximum of 5 years.
- Director/ Director General:
- Responsible for the day-to-day management of the company’s operations.
- Assumes liability for exercising rights granted by the Member’s Council.
- Supervisory Board:
- Mandatory for multi-member LLCs in Vietnam categorized as state enterprises or subsidiaries of state enterprises under Article 54 of the Law on Enterprise 2020.
- Formation of the Supervisory Board is discretionary for other circumstances and LLC types.
In the case of a one-member limited liability company, two structural models are possible:
- Company President and Director/ Director General: Applied to one-member LLCs with both individual and organizational owners.
- Member’s Council and Director/ Director General: Exclusively available for one-member LLCs with organizational owners.
Roles and duties of each component remain analogous to those outlined for multi-member LLCs.
2. How to open a limited liability company in vietnam
While Vietnam remains an enticing destination for foreign investors, the process of establishing a company here requires navigating a complex legal terrain. In this article, we explore the setup procedures for companies aiming to initiate operations in Vietnam. Rest assured, you need not be unduly anxious. AZTAX is here to expertly guide you through every step of the company establishment process in Vietnam.
Outlined below are essential steps for establishing an LLC, although these may vary based on the specific business sector:
- Step 1: Investment Registration Certificate [IRC]:
- Issued by the Ministry of Planning and Investment [MPI].
- Mandatory for registering a foreign-owned company.
- Step 2: Enterprise Registration Certificate [ERC]:
- Also issued by the MPI.
- Required for companies registered in Vietnam.
- Step 3: Company Seal Creation:
- Develop the official company seal.
- Step 4: Tax Registration:
- Register for taxes through an online system post obtaining an e-signature.
- Facilitates online tax payments.
- Step 5: Licensing [if applicable]:
- Depending on the business sector and conditional areas, companies may need specific licenses.
- Step 6: LLC Bank Account Opening:
- Establish a bank account for the LLC.
- Announcement of LLC Establishment and Registration on the National
- Step 7: Business Portal:
- Publicize the establishment of the LLC.
- Complete registration on the national business portal.
3. Legal requirements for opening an LLC in Vietnam
When setting up a limited liability company [LLC] in Vietnam, it is crucial to adhere to specific requirements, including:
Naming Requirements for a Vietnam LLC: Choosing an appropriate name for your LLC is a critical step, and certain criteria must be met:
- The Vietnamese name of the LLC must consist of two parts: the company type, expressed as “công ty trách nhiệm hữu hạn” or its abbreviation “công ty TNHH,” and a proper name in the Vietnamese alphabet, with the inclusion of the letters F, J, Z, W, numbers, and symbols.
- The LLC name should not replicate or resemble existing names, infringe upon state agency or social organization names without consent, or incorporate symbols or words conflicting with Vietnamese culture and customs.
- The foreign name of the LLC must adhere to regulations outlined in Article 39 of the Law on Enterprise 2020.
Documents Required for Vietnam LLC Registration: Securing an Enterprise Registration Certificate is a pivotal step in initiating an LLC in Vietnam. Essential documents for the application include:
- LLC registration application
- Company charter
- List of LLC members
- Copies of identification documents [passports, ID cards for individual members]
- Copies of establishment decisions, business registration certificates, or equivalent documents [for organizational members]; identification documents of authorized representatives
- Copies of legalized registration documents [for foreign organizations]
- Investment Registration Certificate [for foreign investors]
Capital Contribution and Business License Application:
- An LLC in Vietnam may require a business license based on the chosen business sector. This license, if needed, is obtained after successful issuance of the IRC and ERC applications.
- Regardless of business line conditions, the LLC must fulfill its capital contribution as specified in the company registration process within 90 days after receiving the Enterprise Registration Certificate.
4. Other necessary considerations while setting up Vietnam LLCs
Taxation Considerations for Limited Liability Companies [LLCs] in Vietnam
Similar to other business entities, a limited liability company [LLC] in Vietnam is subject to fundamental tax obligations, encompassing corporate income tax, business license tax, and various others.
For instance, an LLC is typically taxed at a standard Corporate Income Tax [CIT] rate of 20%. It’s essential to note that companies involved in specific industries such as oil or gas exploitation may face higher CIT rates under Vietnamese laws.
Encouragingly, the Vietnamese government provides tax incentives for investment projects undertaken by LLCs, subject to meeting specific conditions. Notably, there is no withholding tax imposed on profits received by foreign corporate shareholders.
Registration Timeline for Limited Liability Companies [LLCs] in Vietnam
The entire process of registering an LLC in Vietnam generally spans not less than one month. Specifically, foreign investors can expect approximately 15 days to secure the Investment Registration Certificate and an additional 3 working days for the Enterprise Registration Certificate application.
However, for LLCs planning to operate in “conditional” business sectors as regulated by Vietnamese laws, the registration process may extend due to additional licensing procedures required for approval.
5. Conclusion
A limited liability company in Vietnam can be structured as either a wholly foreign-owned entity or a partially foreign-owned entity. This represents one of the most favored business structures among foreign investors seeking to enter the Vietnamese market.
We trust that you find valuable insights into how to open a limited liability company in Vietnam and the necessary preparations for initiating this business type. If you still have questions about establishing a limited liability company in Vietnam, you can contact AZTAX using the information below for more detailed advice.