Types of enterprises in Vietnam

The Enterprise Law 2020 stipulates 4 types of enterprises including: Sole proprietorships (DN TN), limited liability company (công ty TNHH), joint-stock company (công ty CP), and partnerships (công ty HD).

Sole proprietorships

According to Clause 1, Article 188 of the Enterprise Law 2020, a sole proprietorship is an enterprise owned by a single individual whose liability for its entire operation is equal to his/her total assets. Besides:

• A sole proprietorship must not issue any kind of securities
• An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of general partner of a partnership.
• A sole proprietorship must not contribute capital upon establishment or purchase shares or stakes of partnerships, limited liability companies or joint stock companies.

Limited liability company

a) Multi-member limited liability companies: According to Clause 1, Article 46 of the Enterprise Law 2020, multi-member limited liability companies is an enterprise that has between 02 and 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 the member contributed to the enterprise. Besides:

• The member’s stake (contributed capital) may only be transferred in accordance with the provisions of the Enterprise Law 2020;
• 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;
• Multiple-member limited liability companies must not issue shares except for equitization;
• Multiple-member limited liability companies may issue bonds in accordance with the Enterprise Law 2020 and other relevant laws.

b) Single-member limited liability companies: According to Clause 1, Article 74 of the Enterprise Law 2020, a single-member limited liability company is an enterprise owned by a single organization or individual. The owner’s liability for the company’s debts and other liabilities shall be equal to the company’s charter capital. Beside:

• 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;
• A single-member limited liability company must not issue shares except for equitization;
• Single-member limited liability companies may issue bonds in accordance with the Enterprise Law 2020 and relevant laws.

Joint Stock Company

According to Clause 1, Article 111 of the Enterprise Law 2020, a joint-stock company is an enterprise in which:

• The charter capital is divided into units of equal value called shares;
• Shareholders can be organizations and individuals; the minimum number of shareholders is 03; there is no limit on the maximum number of shareholders;
• A shareholder’s liability for the company’s debts and liabilities is equal to the amount of capital contributed to the company by the shareholder;
• Shareholders may transfer their shares to other persons except for the cases specified in the Enterprise Law 2020.

A joint-stock company has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

In addition, a joint-stock company has the right to issue shares, bonds and other kinds of securities of the company to raise capital.

Partnerships

According to Clause 1, Article 177 of the Enterprise Law 2020, a partnership is an enterprise in which:

• There are least 02 partners that are joint owners of the company and do business under the same name. There can be limited partners in addition to general partners;
• A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;
• A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.

A partnership has the status of a juridical person from the day on which the Certificate of Enterprise Registration is issued.

In addition, the Partnership may not issue any kind of securities.