How to set up a Limited Liability Company in Vietnam?

Prabhat Nigam

10 Sep, 2022

A limited liability company in Vietnam is one of the four kinds of business entities under which both local and foreign promoters have been allowed to conduct their business in accordance with the Vietnam’s Law on Enterprise^[1].   

What is a Limited Liability Company in Vietnam?  

An LLC is a legal entity which is formed by the capital contributions of each member to the company. Not more than 50 members can be members in a Limited Liability Company in Vietnam. The liability of a member of an LLC for the financial obligations of the company is restricted to the member’s capital contribution but does not extend to his/ her personal assets.

On the basis of the business sector, the promoter or investor can choose either of the following business structure of an LLC in Vietnam:

• 100% foreign owned LLC wherein all the members are foreigners; or
• An LLC that is partially owned by foreign investors also known as a joint venture enterprise wherein there are foreign investors and at least one Vietnamese member.

 There are two broadly two types of limited liability companies in Vietnam under Law on Enterprise. These are one-member LLC and multi-member LLC. 

Step-by-step guide to set up a Limited Liability Company in Vietnam

Following is the step-by-step guide to set up a Limited Liability Company in Vietnam:

1. Selection of name for the LLC: The first step in setting up a Limited Liability Company in Vietnam begins with selection of the name for the LLC. Following criteria is supposed to be kept in mind while selecting a name for the LLC:
2. Name of an LLC in Vietnamese should have two parts
3. The name of the LLC should not be identical or similar to the names of the existing companies or overlap with the name of a state agency or any other social organisation without taking consent from such unit. The name should not contain symbols or words which are in contrast with the Vietnamese culture and customs.
4. Foreign name of an LLC should be in consonance with Article 39 of the Law on Enterprise 2020.

• Documentation for setting up LLC in Vietnam: The next step in the process of registration of a Limited Liability Company in Vietnam is to obtain Enterprise Registration Certificate (ERC) and prepare the documentation before filing of application. Following are the documents which the promoters need to submit for the registration of LLC:
• Application for LLC registration
• LLC’s charter
• List of LLC’s members
• Copies of identification documents like passports, ID cards in case of individual members
• Copies of the identification of authorised representatives, business registration certificate or other equivalent documents for organisational members, copies of establishment
• Copies of the Registration documents in case of organisations who have been legalised by the consular (esp. for foreign organisations)
• Investment Registration certificate in case of foreign investors

• Contribution of capital and Business license application: It is quite likely that an LLC who wishes to conduct a business in Vietnam needs to obtain sector specific business license to operate their business entity. Therefore, every LLC must, depending on the choice of its business sector, is required to apply for a license to the relevant authority. It must be noted that irrespective of the conditional or unconditional business line that LLC wants to engage in, the business license can be obtained by such LLC only after the Enterprise Registration Certificate (ERC) and Investment Registration Certificate (IRC) applications have been successfully issued.

Another important aspect in the setting up of a Limited Liability Company in Vietnam is that the LLC has to make its capital contribution as mentioned in the company registration process within a period of 90 days after receiving the Enterprise Registration Certificate.   

• Other requirements for setting up of LLC
• Tax matters: Like any other organisation doing business in Vietnam, a Limited Liability Company in Vietnam is also subject to basic forms of tax such as business license tax, corporate income tax and other such taxes. For example: an LLC in Vietnam will be charged a Corporate Income Tax at the rate of 20 percent. However, there are certain sectors in the Vietnamese economy such oil and gas exploration where the corporate income tax is at higher rates. To incentivise businesses to set up businesses in Vietnam, government of Vietnam offers tax incentives if the LLC satisfies certain conditions.
• Duration of the registration process: In no case, the whole process of registering an LLC in Vietnam does not take more than a period of one month. Generally, for a foreign investor, it takes around 15 days to obtain the Investment Registration Certificate and 3 working days for the Enterprise Registration Certificate application.

However, if an LLC wants to enter certain “conditional” business sectors, then the promoters have to wait for a longer duration to complete further licensing procedures and getting the necessary approval.   

Conclusion 

The best business structure for the foreign investors can be either a wholly foreign-owned company LLC or a partially owned Limited Liability Company in Vietnam. These structures best suit the needs of the investors in their quest of business expansion in the Vietnamese market.    

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