How to Set Up a Limited Liability Company in Vietnam
- Limited liability companies (LLCs) are a common investment vehicle for investors looking at market entry options in Vietnam due to their reduced liability.
- LLCs can be 100 percent foreign-owned and are less cumbersome to set up as compared to a large corporation in Vietnam.
- Investors must do their due diligence to determine the appropriate market entry option suitable to their appropriate business lines and specific requirements.
Investors looking to enter the Vietnamese market or upgrade from a representative office can choose several legal structures to suit their business model. Investors can form a 100 percent foreign-owned enterprise under three main legal structure such as a limited liability company (LLC), a joint-stock company, and a branch office.
Vietnam Briefing discusses the advantages of an LLC and what investors need to know to set up in Vietnam.
LLCs are the most common type of investment for foreign investors due to their reduced liability and capital requirements. In an LLC, members are only liable for the debts of the partnership to the extent of the capital contribution they have invested in the company.
There is usually no minimum capital requirement for foreign investors that intend to establish an LLC in Vietnam, although authorities will expect the investor to commit a reasonable amount of charter capital according to the scale and business scope of the project. This capital must be committed within 90 days from the date at which the enterprise registration certificate is issued.
An LLC can either be a single member or a multiple-member company. However, the total number of members cannot exceed 50. Investors can be corporations or individuals. It is important to note that an LLC cannot issue shares.
An LLC can have more than one legal representative in Vietnam. This individual or individuals will be required to represent the firm in its Vietnamese transactions, arbitral disputes, and court proceedings. The exact responsibilities of all legal representatives must be detailed in the company’s charter. While legal representatives are not required to be Vietnamese nationals, it should be noted that at least one representative must maintain residence in Vietnam.
What documents are required to register an LLC?
There are several documents required for the registration of an LLC. In addition, the list depends on the investment project and whether the company will be fully owned by foreign investors or partially owned by foreign investors. We list some of the documents required.
- Certificate showing the amount of investment required;
- Articles of Association certificate;
- Proof of registered address;
- Information on the shareholders or members of the LLC;
- Business plan including the investment project and money that is invested; and
- Information on company director or legal representative and power of attorney;
The above documents must be notarized and translated into Vietnamese.
What are the steps required to set up an LLC?
We list some of the main steps that are required to establish an LLC, though these may vary depending on the specific business line.
- Investment registration certificate (IRC): Issued by the Ministry of Planning and Investment (MPI) and required when registering a foreign-owned company;
- Enterprise registration certificate (ERC): Also issued by the MPI and required for companies that are registered in Vietnam;
- Make the company seal;
- Tax registration: Register for tax which is paid through an online system after registering for an e-signature;
- Licensing: If applicable and depending on the business lines and conditional sectors, companies may need to apply for specific licenses;
- Open a bank account of the LLC;
- Announcement of the establishment of the LLC and registration on the national business portal.
All documents must be notarized and translated to complete the process.
How long does it take to set up an LLC?
An LLC can be set up in two to three months but can vary. We recommend hiring a professional firm to deal with the myriad of laws and procedures to complete the process.
What comes next?
Hiring, tax, and reporting.
Businesses need to register hired employees with the social insurance department. Foreign employees will also need to have the required work permits to work in Vietnam, which may take longer as Vietnam’s borders remain closed, however, this is still possible and our firm can assist investors in acquiring the required documents and entry permits.
Companies must also pay the required business license tax. They are also subject to corporate income tax (CIT), value-added tax (VAT), and personal income tax (PIT). Depending on the business line the company may be eligible for CIT reductions in the first years of operation.
LLCs are required to undertake tax audits that checks all revenues and expenses during the tax term to determine payable taxes.