Starting and Operating a Limited Liability Company (LLC) in Vietnam: The Last Guide You’ll Ever Need

Here is everything you need to know about the setup timeline of an LLC, the most common business entity in Vietnam, from start to finish.

Introduction to Limited Liability Companies in Vietnam

Before we start, let’s talk about the intended audience for this article, or in other words, who this article will be most useful for. We wrote this guide to help foreign investors, entrepreneurs, and enterprises looking to expand their operations into Vietnam’s emerging market. 

As Vietnam’s most popular legal entity, many choose Limited Liability Companies (LLCs) for a variety of reasons: high security for shareholder(s), fast incorporation process with reduced paperwork, low operating costs, and much more. LLCs will offer you the most value for your investment with minimal risks. 

This article aims to provide you with all the essential information on LLCs, including their benefits, their variations, and the stages and procedures for starting and operating them. Everything you find below is based on over a decade of experience in market entry services, helping foreigners find new opportunities across Asia. 

Investing in Vietnam? Read more about our one-stop market entry services, including LLC incorporation!

Why LLCs are so popular with foreign investors

When doing business in Vietnam, foreigners may choose from a range of business entities, including LLC, joint-stock company, representative office, or branch office. 

Limited liability companies, in particular, are an easy choice thanks to their many benefits:

  • Security of shareholders’ assets: The shareholders’ private assets are shielded in the event of financial disputes or lawsuits. Even the government cannot seize the assets; neither can banks or creditors.
  • Reduced paperwork and streamlined process: Compared to larger organizations and other business structures, starting an LLC in Vietnam takes far less time.
  • Expansion made easy: An LLC makes for much simpler capital contribution from financial institutions, venture capital firms, and angel investors.

Types of LLCs in Vietnam

There are two types of limited liability companies, determined by their member count. 

Single-member LLC 

Consists of one member (who is also the company’s owner). This member is liable for all company’s liabilities and debts — only to the extent of the capital he or she invests.

According to the Law on Enterprises (2020), a company’s owner shall be the President, who may concurrently hold the position of Director/General Director or hire another person as the Director/General Director. This position has the ability to designate a board of members and dismiss members from it.

The owner of the company are entitled to the following rights:

  • Draw up and revise the company’s charter;
  • Decide the company’s annual business plan and development strategy;
  • Decide the company’s organizational structure; designate, dismiss the company’s executives and controllers;
  • Decide the company’s investment projects?
  • Decide solutions for market development, marketing and technology;
  • Approve contracts for borrowing, lending, sale of assets and other contracts prescribed by the company’s charter whose value are at least 50% of the total assets written in the latest financial statement (or a smaller ratio or value specified in the company’s charter);
  • Ratify the company’s annual financial statements;
  • Decide increase or decrease in the company’s charter capital, transfer part or all of the company’s charter capital to another organization or individual; decide issuance of bonds;
  • Decide establishment of subsidiary companies and contribution of capital to other companies;
  • Organize the supervision and assessment of the company’s performance;
  • Decide the use of profits after the company’s tax liabilities and other financial obligations have been fulfilled;
  • Decide the company’s reorganization, dissolution or file bankruptcy;
  • Recover all assets of the company after the dissolution or bankruptcy process is complete;
  • Other rights prescribed by this Law and the company’s charter.

The Director/General Director, if not the same person as the owner, is allowed to:

  • Organize the implementation of resolutions and decisions of the Board of Members or the company’s President;
  • Decide everyday operating issues of the company;
  • Organize implementation of the company’s business plans and investment plans;
  • Issue the company’s rules and regulations;
  • Designate, dismiss the company’s executives, except those within jurisdiction of the Board of Members;
  • Enter into contracts in the company’s name, except those within jurisdiction of the President of the Board of Members or the company’s President;
  • Propose the company’s organizational structure;
  • Submit annual financial statements to the Board of Members or the company’s President;
  • Propose plans for use of profits or settlement of business losses;
  • Recruit employees;
  • Other rights and obligations specified in the company’s charter and the employment contract.

Moving forward, should enterprises want to change their business type (from single-member to multi-member LLC), they are obliged to follow the order and procedures and time limit prescribed by the Vietnamese Law. For foreign-invested companies, when converting the type of enterprise, the following steps must be followed:

  • Step 1: Change IRC. Time limit for processing dossiers: 15 days from the date of receipt of complete and valid dossiers
  • Step 2: Change ERC. Time limit for processing dossiers: 03 days from the date of receipt of complete and valid dossiers

Multi-Member LLC

Two or more (up to 50 people) members form a multi-member LLC. As members of a multi-member LLC, they are given member rights including attending the board of members’ meeting, voting rights that are in proportion to their capital investment, provided shares and profits that are in proportion to their capital investment, and given priority for an extra capital contribution.

RELATED: Everything You Need to Know to Set Up a 100% Foreign-owned Company in Vietnam, including the other three types of legal entities.

As stated in the Law on Enterprises (2020), the company is allowed to transfer the capital contribution to the remaining members or non-members, but the conditions and method of transfer must comply with the provisions of law. Conversely, a member is entitled to request the company to repurchase that member’s stake if that member has voted against a resolution or decision of the Board of Members on the following issues:

  1. Amendments to regulations of the company’s charter on rights and obligations of members and the Board of Members;
  2. Reorganization of the company;
  3. Other issues prescribed by the company’s charter.

Similar to a single-member LLC, when the board chooses a Director/General Director, he/she could be outside the company (i.e. not necessarily a member of the board).

The Board of Members has the following rights and obligations:

  • Decide the company’s annual business plan and development strategy;
  • Decide increase or decrease in charter capital, time and method for raising more capital; issuance of bonds;
  • Decide investments in the company’s development projects; solutions for market development, marketing and technology transfer;
  • Approve contracts for borrowing, lending, sale of assets and other contracts prescribed by the company’s charter  whose value are at least 50% of the total assets written in the latest financial statement (or a smaller ratio or value specified in the company’s charter);
  • Elect, dismiss the President of the Board of Members; designate, dismiss, sign and terminate contracts with the Director/General Director, chief accountant, controllers and other executives specified in the company’s charter;
  • Decide the salaries, remunerations, bonuses and other benefits of the President of the Board of Members, Director/General Director, chief accountant, controllers and other executives specified in the company’s charter;
  • Ratify annual financial statements, plans for use and distribution of profits or settlement of losses;
  • Decide the company’s organizational structure;
  • Decide establishment of subsidiary companies, branches and representative offices;
  • Revise the company’s charter;
  • Decide reorganization of the company;
  • Decide dissolution or file bankruptcy of the company;
  • Other rights and obligations prescribed by Law and the company’s charter.

 The Director/General Director of a multi-member LLC is able to:

  • Organize the implementation of resolutions and decisions of the Board of Members;
  • Decide everyday operating issues of the company;
  • Organize implementation of the company’s business plans and investment plans;
  • Issue the company’s rules and regulations unless otherwise prescribed by the company’s charter;
  • Designate, dismiss the company’s executives, except those within jurisdiction of the Board of Members;
  • Enter into contracts on behalf of the company, except those within jurisdiction of the President of the Board of Members;
  • Propose the company’s organizational structure;
  • Submit annual financial statements to the Board of Members;
  • Propose plans for use and distribution of profits or settlement of business losses;
  • Recruit employees;
  • Other rights and obligations specified in the company’s charter, resolution and decisions of the Board of Members, and his/her employment contract.

RELATED: Should you choose an LLC or JSC when entering Vietnam?

Phase 1: Setting Up Your Company in Vietnam

Upon entering Vietnam’s market, you and your company will be legally required to carry out these procedures.

Initial Incorporation

  • Obtain legalized copies of foreign documents from your home country. These documents can include passports, bank statements, etc. Time taken: likely 7-14 business days.
  • Lease an office address. The address must be located in Vietnam and must be an office building, house or virtual office (i.e. not in a residential apartment building). Time taken: 1-3 business days.
  • Submit all above documents to apply for Investment Registration Certificate (IRC). At this step you must also appoint a Legal Representative (or Nominee Director), who must be a resident of Vietnam. Time taken: 35-40 business days.
  • Submit the IRC to obtain an Enterprise Registration Certificate (ERC), thereby officially establishing your business. Time taken: 7 business days.
  • Engrave the company’s official seal and declare its use to the government. Time taken: 7 business days. 

After this stage, your company will become an official legal entity. 

Post-incorporation Initial Compliance

  • Submit initial tax registration to the tax authorities. Time taken: 7 business days.
  • Open your company’s bank account and submit evidence of the investment balances. Time taken: 1-3 business days.
  • Inject investment capital into the bank account. Time taken: within 90 days of the ERC issuance date. 
  • Install a physical company sign at your business location (automatically done for virtual offices). Time taken: 2-5 business days. 
  • Obtain any other license or certificate required for your specific business sector. 
  • Register an e-signature for online tax payments. Time taken: 3-7 business days.
  • Submit a declaration of business license fee. Time taken: 1-3 business days. 

These steps can be done simultaneously or in any order. After this stage, your company will be able to legitimately do business. 

Phase 2: Establishment of Operations

Now that your company has started its operations in Vietnam, it must be aware of ongoing matters of legal compliance in tax & accounting, human resources & payroll (and immigration compliance). 

Tax & Accounting

  • Declare Personal Income Tax (PIT) after paying your employees’ salary.
  • Declare your business’ Value Added Tax (VAT) and Business License Tax annually. 
  • Submit Corporate Income Tax (CIT) at the end of each quarter.
  • Submit any other sector-specific taxes, e.g. special consumption tax, environmental protection tax, import & export taxes.
  • Conduct and submit a report of an FDI Company Yearly Audit, carried out with an independent auditor. 

HR & Payroll Needs

  • Monthly tasks: Calculate, adjust, and contribute regulatory insurance; report and track PIT for employees; ensure internal procedures be compliant (labor contract signing; salary adjustment, etc.); consult HR about employment regulation changes (if any), report and track PIT for employees, consult HR about internal regulation changes (if any).
  • Yearly tasks: Submit Labor Declaration Report, finalize yearly PIT, declare company’s internal regulation.

Immigration Compliance (optional)

  • Apply for Work Permits and/or Temporary Residence Cards (TRCs).
  • Apply for a Business Visa or Investor Visa.

Phase 3: Restructuring Your Vietnamese Company

This stage goes further down the line in an LLC’s development, as companies will only undergo restructuring if and when they need to. 

RELATED: Vietnam’s business opportunities, tax incentives, regulations and more

Restructuring refers to adaptations of an established company to changes & challenges such as going public or shifting business strategies.

  • Ownership transfer: Many investors or startups begin with a plan to grow their business to its full potential before selling it for great profit. There are many ways this can happen: sell the business, reapportion its shares, or lease it.
  • Mergers & acquisitions (M&A): This can include a friendly takeover (where the acquiring company offers a premium on the acquired shares) or a hostile takeover (where the acquiring company buys shares from a public stock exchange).
  • Legal restructuring (converting to another entity): When shareholder numbers exceed 50 people, the company may choose to become a Joint-Stock Company (JSC). This can allow it to go public (provided capital requirements are met).
  • Dissolution: Liquidation, in other words clearing and settling the company’s assets and liabilities, is the only way for businesses in Vietnam to be able to come to the end of their legal existence.

Ready to start your own LLC in Vietnam?

Navigating the paperwork and bureaucracy (which Vietnam is (in)famous for) is no easy task. The legal infrastructure has many grey areas, and the language barrier can also be a hindrance, taking up your company’s time and resources. It helps to have a partner that knows the ins and outs of every stage in the process. With the right assistance, you can jumpstart your incorporation process and be up and ready in less than 2 months.

InCorp Vietnam (formerly Cekindo) has over a decade of experience in market entry services, with a presence in 8 countries across APAC. With over 500 legal experts serving over 12,000 Corporate Clients across the region, our expertise speaks for itself. We provide transparent legal consulting, setup and advice based on local requirements to make your business perfectly fit into the market with healthy growth.

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