Types of enterprises foreign investors when establishing economic organizations in Vietnam

No.

Type of Enterprise

Characteristics

Advantages

Disadvantages

1

Single-member Limited Liability Company

- Owned by one organization or individual;

- The owner is liable within the charter capital of the company.

- Has legal entity status;

- The owner has full authority to decide on all matters relating to the company's operations;

- Where the foreign investor is an organization and is the owner of the one-member limited liability company, the company's management structure may operate under one of the two models provided for under the Law on Enterprises 2020.

- Limited capital mobilization capacity, as it is only permitted to issue bonds.

2

Multi-member Limited Liability Company

- Enterprise with from 2 to 50 members, which may be organizations or individuals;

- Members are liable for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except where a member has failed to contribute, or has failed to fully contribute, the committed capital contribution.

- Has legal entity status;

- May issue shares, bonds, and other securities in accordance with applicable regulations;

- Members are only subject to limited liability for the company's activities within the amount of capital contributed to the company.

- Limited capital mobilization capacity, as it is only permitted to issue bonds;

- The transfer of capital contributions must strictly comply with the principle of giving priority to existing members of the company and other conditions prescribed by the Law on Enterprises 2020 and the company's Charter.

3

Joint Stock Company

- A joint stock company is an- enterprise in which:

- The charter capital is divided into equal parts called shares;

- There must be at least 3 shareholders, with no maximum limit on the number of shareholders;

- Has legal entity status;

- Foreign investors (shareholders) are liable for the debts and other property obligations of the enterprise only within the amount of capital contributed to the enterprise;

- Shareholders have the right to freely transfer their shares to others, except in certain cases where restrictions apply under the Law on Enterprises 2020 and the company's Charter;

- May issue shares, bonds, and other securities to raise capital;

- Foreign investors may flexibly choose the organizational structure.

As there is no limit on the number of shareholders, conflicts of interest among shareholders may arise, potentially creating certain difficulties in the management and operation of the company

4

Partnership

- A partnership is an enterprise in which:

- There are at least 2 general partners conducting business under a common name;

- Partners must be individuals and are liable with all their assets;

- Capital contributing partners may be organizations or individuals and are liable for the company's debts only within the amount of capital they have committed to contribute to the company.

- Has legal entity status;

- Suitable for industries and professions that rely heavily on reputation, professional expertise, and mutual trust among members.

- General partners bear unlimited liability;

- Limited capital mobilization capacity, as the company is not permitted to issue any type of securities to raise capital.

5

Private Enterprise

A private enterprise is an enterprise owned by one individual, who is personally liable with all his or her assets for all activities of the enterprise.

- Simple organizational structure;

- The owner has full authority to decide on the enterprise's business activities.

- Does not have legal entity status;

- The owner bears unlimited liability;

- Limited ability to raise capital and expand its scale, as it is not permitted to contribute capital to establish, or purchase shares or capital contributions in, partnerships, limited liability companies, or joint stock companies, and is also not permitted to issue any type of securities.