Business expansion to or investment in Southeast Asian countries would be an excellent decision. Foreign investors looking to invest in ASEAN countries should consider Vietnam as their first place to start and run a business.
What Business Structures are available to Register in Vietnam?
The most common business structures available in Vietnam are:
|o Limited Liability Company (LLC)||o Branch Office|
|o Joint Stock Company||o Representative Office|
In order to register a business in Vietnam, foreign entrepreneurs can choose from several types of legal entities available. The most common and preferred ones are:
Limited Liability Company (LLC)
Foreign investors who want to start a 100% foreign-invested enterprise in Vietnam can choose to establish a Limited Liability Company. An LLC is the ideal business establishment for small and medium-sized enterprises (SMEs), because of its simple corporate structure that requires at least one founder only. Foreign entrepreneurs who wish to protect their assets are recommended to establish this legal entity type because the liability of its shareholders is solely limited to their shares.
Both individuals and companies are allowed to establish an LLC. Several establishment requirements apply to both individuals and companies, namely having a:
|o Registered business address and legal representative||o Legalised financial document|
|o Charter capital from 10,000 USD (depending on the type of business field)||o Notarised copies of the investor and legal representative’s identity.|
The only separate requirement is that companies are required to have a business certificate or certificate of the establishment.
Joint Stock Company (JSC)
Compared to a Limited Liability Company that is known for its simple organizational structure, a Joint Stock Company has a more complicated corporate system and demanding requirements. Due to its nature, a JSC is ideal for large companies. A majority of large corporations prefer to establish a JSC in Vietnam because this type of legal entity allows its owners to issue shares and list them on the Vietnamese stock exchange. Change of ownership can also be done quickly.
Just like an LLC, a JSC allows 100% foreign ownership, depending on the business sector. But, as the name suggests, a JSC in Vietnam allows a joint venture between foreign investors and local investors. Under Vietnamese law, a JSC can only be established when there are equal portions of shares. What is more, it is essential to know that this legal entity requires at least three shareholders for its establishment.
Investors who are interested in opening a JSC must satisfy these requirements:
- Proof of funds with a bank certificate
- An investment project proposal
- Documents for an Investment Registration Certificate application
- Details of every shareholder and their respective amount of shares
- Legal status certificates for all founding shareholders
- Capital bank account
- Land-use proposal
- Foreign Investment Certificate
- Audited financial statements and submission of annual return
Representative Office (RO)
The primary purpose of establishing a Representative Office is to establish a presence in the local market without pouring in large capital investment. Through an RO, foreign entrepreneurs can analyze the local market trends, conduct research, and promote marketing activities. An RO is strictly prohibited from performing any activities that will bring profits. It is expected that after gaining a presence in Vietnam, foreign entrepreneurs will set up a foreign-owned company in Vietnam.
To establish an RO, these requirements must be satisfied: the operations of the parent company overseas must be at least one year from the establishment date, and the RO’s Chief Representative is required to fulfill the conditions under Vietnam Law.
Branch Office (BO)
A Branch Office in Vietnam, just like in any other country, serves as an extension of its parent company overseas. Unlike a Representative Office, a BO is permitted to conduct all commercial activities of its parent company and generate profits. Moreover, it is not required to incorporate a separate legal entity in Vietnam.
In other words, a BO can do these activities: issuing VAT invoices on its own, can keep accounting and financial records together or separated from its headquarters, can enter into and ament contracts or agreements when necessary.
Other legal structures available are as follows:
|FDI LLC — 100% Wholly-Foreign-Owned entity|
|VN LLC — 100% Vietnam owned entity|
|Shelf company — Foreign investor or company acquire wholly an established FDI company in Vietnam and act as the new owner. 100% owned by the new foreign investor|