Legal characteristics of a limited liability company

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Legal characteristics of a limited liability company

A limited liability company (LLC) was chosen as one of the four most popular types of businesses to register in Vietnam. Therefore, understanding the nature and legal characteristics of a can help business owners prepare well for their upcoming business.

What Is a Limited Liability Company (LLC)?

A Limited Liability Company or LLC is a business structure in which the owners or members have limited liability with respect to the actions of the company. An LLC offers the members the benefit of personal liability protection, meaning that the business liability cannot be recovered from the personal assets of the owners.

An LLC can be a single-member limited liability company or multiple-member limited liability company according to Clause 7, Article 4 of the Enterprise Law 2020.

Article 46. Multi-member limited liability companies

1. A multiple-member limited liability company means an enterprise that has 02 – 50 members that are organizations or individuals. A member’s liability for the enterprise’s debts and other liabilities shall be equal to the amount of capital that member contributed to the enterprise, except for the cases specified in Clause 4 Article 47 of this Law. The member’s stake (contributed capital) may only be transferred in accordance with Articles 51, 52 and 53 of this Law.

2. A multiple-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

3. Multiple-member limited liability companies must not issue shares except for equitization.

4. Multiple-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of this Law.

Article 74. Single-member limited liability companies

1. A single-member limited liability company is an enterprise owned by a single organization or individual ((hereinafter referred to as “owner”). The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital.

2. A single-member limited liability company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

3. A single-member limited liability company must not issue shares except for equitization.

4. Single-member limited liability companies may issue bonds in accordance with this Law and relevant laws; private placement of bonds shall comply with Article 128 and Article 129 of this Law.

From the date of issuance of the business certificate, a limited liability company with two or more members has legal status, and the owner has the status of a natural person.

2. Charter capital

The charter capital of the company is the total amount of capital that members commit to contribute to the company according to Clause 1, Article 49 of the Law on Enterprises.

Within 90 days from the date of business registration under Clause 2, Article 49, a member of the company must contribute capital to the company with sufficient and correct assets as committed to register the establishment of the enterprise.

3. Liability for Property

The company is responsible for all its assets because the company has legal status and the members are responsible for the assets they contribute to the company.

4. Ability to raise capital

Limited liability companies with two or more members are not allowed to raise capital by issuing shares. Because shares and shares are specific characteristics of the joint stock company model to raise capital. Acquiring new members through the issuance of shares will break the close connection of members in the company, which can lead to changes in the structure of the company.

Method of raising capital

– Admission of new members (no more than 50 members);

– Raising capital from active members of the company;

– Mobilizing capital through borrowing and credit activities;

– Release Stock.

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