Organizational Structure in a Single-Member Limited Liability Company 2024

The organizational structure in a single-member limited liability company (LLC) plays an important role in the formation and development of the company. A single-member LLC has a simple company structure. Being easy to manage personnel, it is the most popular form of company in Vietnam. In the following article, Long Phan will provide information on this topic.

Structure of a single member LLC

What is a Single-Member LLC?

According to Article 74 of the Law on Enterprises 2020, a single-member LLC is an entity owned by an individual or an organization.

A single-member LLC has the following characteristics:

• Owned by an individual or an organization.
• Has legal personality from the date of issuance of the business registration certificate.
• The owner of the single-member LLC is liable for the company’s debts and other liabilities within the amount of the company’s charter capital.
• A single-member LLC cannot issue shares, except for the purpose of converting into a joint-stock company.
• A single-member LLC can issue bonds.

Furthermore, according to Article 77 of the Law on Enterprises 2020 regarding the transfer of contributed capital in a single-member LLC, the company owner can only withdraw capital by transferring part or all of the charter capital to other organizations or individuals. Specifically:

• In the case where the owner transfers part of the company’s contributed capital to other individuals/organizations, the company will then have two capital-contributing entities. To ensure the organizational structure and form of operation, the company must convert into a two-member LLC or a joint-stock company to continue its operations.
• In the case where the owner transfers all of the company’s contributed capital to other individuals/organizations, the company must change its owner.

Organizational Management Models in a Single-Member LLC

Single-Member LLC Owned by an Organization

A single-member LLC owned by an organization is managed and operates according to one of two models:

• President of the company, Director or General Director.
• Members’ Council, Director or General Director.

Additionally, the company must have at least one legal representative. This person holds one of the key positions in the organizational chart of the single-member LLC, such as president of the members’ council, director, or general director, or president of the company.

If the charter of the single-member LLC does not specify otherwise, the president of the company or the president of the members’ council will be the legal representative of the company. Conversely, if the charter does not specify otherwise, the organizational structure and operations will follow the provisions of the Law on Enterprises 2020,

Based on Article 79, Clause 1 of the Law on Enterprises 2020.

Single-Member LLC Owned by an Individual

According to Article 85 of the Law on Enterprises 2020, the organizational structure in a single-member LLC owned by an individual is as follows:

• A single-member LLC owned by an individual has a president of the company, director, or general director.
• The company owner is the president of the company and may concurrently serve as or hire someone else to serve as director or general director.
• The rights and obligations of the director or general director are specified in the company’s charter and the employment contract.

Therefore, the owner of a single-member LLC established by an individual is the president of the company and may concurrently serve as or hire someone else to serve as director or general director.

Single-Member LLC Owned by the State

For a single-member LLC owned by the state, the state holds 100% of the company’s charter capital and has full authority to change the organizational structure, such as appointing, hiring, or dismissing the enterprise management levels. There are two basic models:

• President of the company, director/general director, supervisory board.
• Members’ Council, director/general director, supervisory board.

Furthermore, according to the new provisions of the Law on Enterprises 2020, there must be at least one legal representative, who may be the president of the Members’ Council, director, president of the company, or general director of the company, based on Article 79, Clause 2 of the Law on Enterprises 2020.

Organizational structure models in a single-member LLC

Organizational Structure Management in a Single-Member Limited Liability Company

The Members’ Council

Clauses 1 and 2 of Article 80 of the Law on Enterprises 2020 specify the position of the Members’ Council as follows:

• The Members’ Council consists of 3 to 7 members. Members of the Members’ Council are appointed and dismissed by the company owner with a term not exceeding 5 years.
• The Members’ Council, on behalf of the company owner, exercises the rights and fulfills the obligations of the company owner; on behalf of the company, it exercises the rights and fulfills the obligations of the company, except for the rights and obligations of the Director or General Director.
• The Members’ Council is responsible to the law and the company owner for the execution of the assigned rights and obligations according to the company’s charter, Law on Enterprises 2020, and other relevant legal regulations.
• The rights, obligations, and working regime of the Members’ Council are implemented according to the company’s charter, Law on Enterprises 2020, and other relevant legal regulations.

Company President

Based on Clauses 1 and 2 of Article 81 of the Law on Enterprises 2020, the role of the company president in the organizational structure of a single-member limited liability company is as follows:

• The company president is appointed by the company owner.
• The company president, on behalf of the company owner, exercises the rights and fulfills the obligations of the company owner; on behalf of the company, exercises the rights and fulfills the obligations of the company, except for the rights and obligations of the Director or General Director; is responsible to the law and the company owner for the execution of the assigned rights and obligations according to the company’s charter, this Law, and other relevant legal regulations.
• The rights, obligations, and working regime of the company president are implemented according to the company’s charter, Law on Enterprises 2020, and other relevant legal regulations.

Thus, the president of a single-member limited liability company can be the owner or be appointed by the owner.

Director/General Director

According to Clause 1 of Article 82 of the Law on Enterprises 2020, the position of the Director/General Director is as follows:

• The Members’ Council or the company president appoints or hires the Director or General Director for a term not exceeding 5 years to manage the daily business operations of the company.
• The Director or General Director is responsible to the law and the Members’ Council or the company president for the execution of their rights and obligations.
• The president of the Members’ Council, other members of the Members’ Council, or the company president may concurrently hold the position of Director or General Director, except as otherwise provided by law and the company’s charter.
• The Director/General Director has specific duties and rights such as deciding on issues related to the company’s daily business, implementing resolutions of the Members’ Council, and organizing the implementation of the company’s business plan.

Supervisory Board

According to Articles 79 and 85 of the Law on Enterprises 2020, the organizational structure in a single-member limited liability company owned by an organization or an individual is not required to have a Supervisory Board.

However, for a company with a state-owned enterprise (with the state holding 100% of the charter capital), a Supervisory Board must be established. In other cases, the decision to establish a Supervisory Board is at the company’s discretion.

Based on Clause 4 of Article 10 of Decree 47/2021/ND-CP, the operational regulations of the Supervisory Board are as follows:

• The scope and content of the rights, obligations, and tasks assigned to the Supervisory Board and its members;
• Coordination mechanism; rights, obligations, and responsibilities of the enterprise and enterprise managers regarding the activities of the Supervisory Board and its members;
• Coordination, reporting, and consultation mechanism between the owner’s representative body and the Supervisory Board and its members in the execution of the assigned rights and obligations;
• Coordination mechanism between the Supervisory Board, its members, the enterprise, enterprise managers, and direct owner representatives, state capital representatives in the enterprise, enterprise capital representatives in other enterprises, in the execution of rights, responsibilities, and obligations of the Supervisory Board and its members for the enterprise, subsidiary, or associated company;
• Evaluation mechanism for the execution of rights, obligations, and tasks of the Head of the Supervisory Board and its members;
• Salary, remuneration, bonus, working conditions, expense norms for working trips, and operational costs of the Supervisory Board and its members;
• Other contents as decided by the owner’s representative body.

Thus, Supervisory Board members are appointed by the enterprise owner and have the authority to approve contracts and adhere to the regulations as mentioned above.

Management Board in a One Member LLC

Consulting Services for Organizational Structure in Single-Member Limited Liability Companies

With a team of experts with many years of experience in the business field, Long Phan supports our customers in the process of establishing and managing single-member limited liability companies as follows:

• Consulting on regulations regarding the establishment and organizational structure of single-member limited liability companies;
• Assisting in building and establishing an organizational structure suitable for the type of enterprise;
• Providing comprehensive evaluation of the current organizational structure of the business and offering solutions to optimize the new organizational structure;
• Advising on personnel management processes, including building policies and management procedures encompassing recruitment, performance evaluation, development, and training of employees;
• Offering strategies and effective business management methods, from building a management system to financial management and developing business plans;
• Consulting, evaluating, and managing risks that could affect the business operations of the enterprise, and proposing preventive measures;
• Advising and proposing solutions to resolve disputes and conflicts arising during the operation.

The organizational structure in a single-member limited liability company plays a key role in shaping and promoting the development of the business. Having an effective organizational model creates a professional and creative working environment, thus fostering success and stability in today’s competitive business environment. If customers have any questions or need business consulting, please contact our hotline at 0906.735.386 for support from our experts.