Establishing a Limited Company: What You Need to Know

You are looking to set up a business, but wondering how to choose the right type to register your business. A Limited Liability Company  (also known as a Limited Liability Company ) with its advantages such as: having independent legal status, limited liability on the basis of contributed capital, ... can be considered as a model. suitable for many business organizations.

In a series of articles on corporate law, Uplevo would like to send you an article about a Limited Liability Company , including definition, differentiating types, advantages and disadvantages, and how to register to establish a Limited Company.

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Establishing a Limited Liability Company: What You Need to Know
1. What is a Limited Liability Company?
2. Types of limited liability companies
3. Advantages and disadvantages of limited liability companies 4. Limited company

First, let's learn with Uplevo:

1. What is a Limited Liability Company?
According to the current law in Vietnam, a Limited Liability company (also known as a limited company) is a completely independent legal entity. In other words, the business owner and the business are two separate entities.

With the separation of legal status between the business and the owner, the business owner can  have limited liability  when the company settles disputes, encounters legal problems, or enters bankruptcy proceedings. property liquidation.

2. Types of limited liability companies
According to the 2014 Enterprise Law , limited liability companies in Vietnam include two types: one member limited liability company, and two or more member limited liability companies. Specifically:

Type of limited company

One member limited liability company:
One member limited liability company is an enterprise owned by an individual or an organization. The owner of the business has limited liability for property and debt obligations, based on the extent of the charter capital of the business.

One-member limited liability companies have legal status from the time the enterprise receives the business registration certificate from the state management agency.

One-member limited liability companies do not have the right to issue shares to raise capital from outside.

Limited liability company with 2 or more members
Limited liability company with 2 or more members is an enterprise in which:

The number of members in the company does not exceed 50 people.
Members of the company can be individuals or organizations.
The members of the company have limited liability for debts and financial obligations on the basis of their contributed capital to the enterprise.
A limited liability company with 2 or more members has legal status from the time of receiving the business registration certificate from the competent state management agency.
Limited liability companies with 2 or more members are also not allowed to issue shares.
In addition, members in a limited liability company with 2 or more members are allowed to transfer part or all of their capital to other individuals or organizations in accordance with the provisions of the Enterprise Law 2014.

3. Advantages and disadvantages of a limited company
When businesses decide whether or not to choose to operate under the limited liability company model, they need to consider the advantages and disadvantages that this form brings:

The number of members in the company is limited, which helps business owners to have many advantages in making decisions faster and easier, especially with important and strategic decisions.
Members of the company have limited liability for financial obligations and debts. For a one-member limited liability company, the limit on the charter capital, with a two-member limited liability company, the limit on the amount of capital that member contributes in the business.
A limited liability company has a legal status, seal, and assets separate from the owner. This creates favorable conditions for businesses in management activities, as well as cooperation, stamping and signing contracts with partners.
Enterprises can completely raise capital through the form of bond issuance.

The number of members in a limited company is limited to 50. This makes it difficult for businesses to expand their operations.
Members of a limited company are not allowed to withdraw contributed capital from the company, except in some cases as prescribed by law (such as capital transfer, capital redemption, some other special cases).
Although the law stipulates that members in a 2-member limited liability company are allowed to transfer their contributed capital, the procedures and processes of this activity are complicated and binding.
Limited companies are not allowed to issue shares to raise capital from outside.
4. Registration of establishment of a limited company
Step 1: Prepare documents
In order to register the establishment of a limited company, business owners note that they need to submit some of the following documents to complete the procedures, including:

An application for business registration (according to the form guided in  Clauses 1, 6 and 7 of Decree No. 78/2015/ND-CP ).
Charter of the company (as prescribed in Article 25, Chapter II, Law on Enterprise 2014 ).
List of members (as prescribed in Article 26, Chapter II, Enterprise Law 2014 ).
Copies of documents such as:
Citizen identification cards, people's identity cards, passports or other authentication papers for members being individuals.
Establishment decision, business registration certificate or other authentic documents, certificate of business representative for members being organizations.
For members who are foreign organizations, a copy of the business registration certificate or equivalent document that has been consularly legalized is required.
Investment registration certificate for foreign investors in accordance with the Law on Investment.

Step 2: Submit registration form
The person establishing the business (or an authorized person) submits the application for registration at the Business Registration Office. In the case of a Limited Company, submit the registration at the Business Registration Office of the province/city where the enterprise is headquartered.

The registration authority will consider the validity of the application and issue the Business Registration Certificate within 3 working days from the date of submission of the application. In case of refusal, the enterprise will be notified in writing by the approval agency, with a request to amend and supplement the dossier.

Specific documents and registration procedures, businesses can refer to the article:  Process of Establishing a Company, Enterprise (New Summary)

Suitable business field to establish a limited company
There are many suitable business fields for you to choose from in setting up a limited company, from retail, wholesale, fashion, washing , car repair, maintenance, printing, design, …

The limited liability company model is especially suitable for small and medium sized enterprises, which are in the process of developing and building their organizational structure.

A limited company is a type of business in which the owner and the business have completely separate legal status. Enterprises have their own assets and seals. The owner has limited liability for the debts and financial liabilities of the business.

Members of a limited liability company have the right to dispose of part or all of their contributed capital, through transfer activities in accordance with the law and the company's charter; are  obliged  not to withdraw their contributed capital (except for cases permitted under the provisions of  the Enterprise Law 2014 ).

Enterprises can register their establishment at the Provincial/City Business Registration Office, where the company is located. Registration papers, the same process as prescribed by current law. The application processing time is 3 working days from the date of application submission.

Hopefully the above information will help you in choosing an operating model and establishing a Limited Liability Company.

Wish your business success and growing day by day!

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