Types of businesses in Vietnam: How to choose the most suitable one

Article overview

Types of businesses in Vietnam include private enterprises, partnerships, limited liability companies and joint stock companies, each type has its own characteristics and advantages and disadvantages. Choosing the right type of business is an important factor determining success and sustainable development. This article will help you understand how to choose the optimal type of business, helping to maximize benefits and minimize legal risks.

Types of businesses
Types of businesses

Types of businesses in Vietnam

As recorded in the Law on Enterprise 2020, there are 5 main types of businesses:

  • Joint stock company;
  • One-member limited liability company;
  • Limited liability company with two or more members;
  • Partnership company;
  • Private enterprise.
Types of businesses in Vietnam today
Types of businesses in Vietnam today

Advantages and disadvantages of each type of business

Each type of business has its own advantages and disadvantages, suitable for different goals and needs of investors. Specifically:

1. Joint Stock Company

Advantage:

  • Ability to mobilize large capital through stock issuance.
  • Shareholders are only responsible within the scope of their capital contribution, reducing financial risks.
  • Shares can be transferred easily and are flexible in changing ownership structure.

Disadvantages:

  • Establishment and management costs are high due to the large number of shareholders and complex structure.
  • Complex management requires professional organization.
  • Difficulties in internal control and sometimes conflicts between shareholders.

2. One Member Limited Liability Company (1 member LLC)

Advantage:

  • Quick and flexible decisions because there is only one owner.
  • Limited liability, protects the owner’s personal assets.

Disadvantages:

  • Difficulty in raising capital because shares cannot be issued.
  • Depends on the capacity and decisions of the owner, limiting diverse development.

3. Limited Liability Company with two or more members (Limited LLC with 2 or more members)

Advantage:

  • Share risks and responsibilities, protect personal assets.
  • Easily mobilize capital from other members or partners.
  • Flexible management and can change organizational structure.

Disadvantages:

  • Transfer of capital contributions requires the consent of members, limiting flexibility.
  • Members may be jointly liable if a member fails to fulfill a financial obligation.

4. Partnership Company

Advantage:

  • Simple management, easy decision making due to a small number of members.
  • Take advantage of members’ experience and resources, and promote common development.
  • Profits are shared according to agreement and fairly among members.

Disadvantages:

  • Unlimited liability, members are responsible for all personal assets.
  • Difficulty in raising capital because stocks or bonds cannot be issued.

5. Private Enterprise

Advantage:

  • Quick decision, no need to consult many parties.
  • Profit belongs to the owner, creating strong motivation for development.

Disadvantages:

  • Unlimited liability for financial obligations, which may affect personal assets.
  • Difficulty in raising capital and expanding scale due to financial constraints.

Factors affecting the decision to choose a business type

When establishing a business, choosing the right type is an important step that affects its long-term development and operations. Some important factors include:

  • Scale and operational goals: Scale and development goals determine the appropriate type of business.
  • Liability: The owner’s level of risk and liability affects the choice of type.
  • Ability to mobilize capital: Enterprises need to determine their ability to mobilize capital from different sources.
  • Management structure: Large businesses need complex structures, small businesses can be simpler.
  • Flexibility in ownership: The degree of flexibility in transferring shares affects the choice of type.
  • Scalability: The type of business that can raise capital easily will grow faster.

Benefits of choosing a suitable type of business

Benefits of choosing the right type of business include:

  • Optimize liability: Helps reduce owner risk and liability.
  • Easily mobilize capital: Create favorable conditions to mobilize capital from many sources.
  • Effective management: Establish a management structure appropriate to scale and goals.
  • Cost savings: Minimize the costs of establishing and maintaining a business.
  • Increased scalability: Easy to scale and grow, especially for joint stock companies.
  • Ensuring legal compliance: Helps businesses fully comply with legal regulations.
  • Flexible share transfer: Easily change the ownership structure in a joint stock company.
  • Clear rights and obligations: Minimize disputes by clearly defining the rights and obligations of members.
Benefits of choosing the right type of business
Benefits of choosing the right type of business

Consulting service for choosing the right type of business in Long Phan

To ensure minimize risks during the process of selecting and establishing a business. Customers should use Long Phan’s consulting services. Our consulting services include:

  • Consulting on determining long-term development goals and operating strategies to choose the appropriate type of business.
  • Guide businesses to choose the type of business suitable to their ability to mobilize capital.
  • Consulting on organizational and management structure appropriate to the scale and needs of the business.
  • Consulting on procedures and conditions for establishing a business.
  • Assist customers in drafting appropriate documents to establish a business.
  • Representing customers to submit documents to competent agencies.
  • Consulting on other related procedures.

Choosing the right type of business is an important decision that directly affects the sustainable development and success of the business in the future. If you have any questions or need advice on choosing the right type of business, please contact us via the hotline: 0906735386  to receive dedicated and professional advice from Long Phan consultants.