Limited Liability Company Formation

What is a limited liability company? Let’s find out with Navi Accounting Established company. is as complicated as you think.
Limited liability company (LLC) is one of the most popular and selected types of enterprises in Vietnam, especially suitable for small and medium enterprises. With a flexible organizational structure, limited liability regime and simple establishment procedures, limited liability companies bring many benefits to investors. However, in order to operate effectively, it is essential to understand the nature, legal characteristics, advantages and disadvantages and the establishment process. 

1. Definition and classification of limited companies

Theo Luật Doanh nghiệp 2020, a limited liability company is an enterprise with legal status, in which the members are responsible for the debts and other property obligations of the enterprise to the extent of the contributed capital. There are two types of limited liability companies:

• One-member limited liability company: Owned by an individual or organization.
• Limited liability company with two or more members: There are 2 to 50 members contributing capital.

2. Outstanding legal characteristics

• The Company shall have its legal personality from the date of being granted Business registration certificate.
• Limited liability regime: Members are only responsible to the extent of the capital contributed to the company.
• Not issuing shares: Limited liability companies are not entitled to issue shares to raise capital.
• Restrictions on transfer of contributed capital: The transfer of contributed capital must comply with the provisions of law and the company’s charter, often requiring the consent of other members.

3. Advantages of a limited liability company

► Limitation of financial risk: The limited liability regime helps protect members’ personal assets against the financial risks of the company.
► Flexible organizational structure: Especially for single-member limited liability companies, the management and operation are simpler than that of joint-stock companies.
► Strictly control members: Regulations on the transfer of contributed capital help limit the entry of strangers into the company, ensuring stability in management.
► Suitable for small and medium enterprises: With a limited number of members and a simple structure, the limited liability company is the ideal choice for small and medium-sized enterprises.

4. Disadvantages of limited liability companies

• Restrictions on raising capital: No shares may be issued, so the ability to raise capital from the public is limited.
• Limited number of members: Up to 50 members, this may affect the ability to scale the company.
• Complex capital transfer: The transfer often requires the consent of other members, which can make it difficult to divest or attract new investors.

5. Procedures for establishment of a limited liability company

► Step 1: Preparation of information

• Company name: Must include the type of business and its own name, not duplicate with the registered business.
• Head office address: Must be clear, specific and under the legal use of the company.
• Business lines: Must be in accordance with the provisions of law.
• Charter capital: Determine the amount of charter capital suitable to the scale and business lines.

► Step 2: I prepare the file

• APPLICATION FOR SINGLE-MEMBER LIMITED LIABILITY COMPANY
• Articles of Association
• List of members (for limited liability companies with two or more members).
• Valid copies of personal identification documents of members and legal representatives.

► Step 3: Submission of Applications
Submit the dossier at the Business Registration Office of the Department of Planning and Investment where the enterprise is headquartered, or submit it online through the National Business Registration Portal.
► Step 4: CERTIFICATE OF BUSINESS REGISTRATION
Within 3 working days of receiving a valid dossier, the Business Registration Office will issue a Business Registration Certificate.
► Step 5: Disclosure of business registration information
After being granted an enterprise registration certificate, the company must publish the contents of enterprise registration on the National Business Registration Portal.

6. Some notes when establishing a limited liability company

• Set company name: The company name must not be the same or cause confusion with the name of another registered business.
• Conditional business lines: If registering conditional business lines, it is necessary to fully meet the conditions as prescribed by law.
• Charter capital: It is necessary to determine the appropriate level of charter capital, avoid registering too low capital compared to actual needs, affecting the reputation and operational ability of the company.

A limited liability company is a type of enterprise suitable for many investors in Vietnam, especially small and medium enterprises. With limited liability regime, flexible organizational structure and simple establishment procedures, limited liability companies bring many benefits. However, it is also important to note limitations such as the ability to raise capital and transfer contributed capital. Understanding the characteristics, advantages and disadvantages and the establishment process will help investors choose and operate the business effectively.
More info

► Introduction to Navi Accounting Services

► JOINT STOCK COMPANY

► Business Creation

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