What are the types of business entities in Vietnam according to the Enterprise Law?

This English version is translated from the Vietnamese original. In case of any discrepancy, the Vietnamese version prevails.

What types of business entities does the Law on Enterprises regulate in Vietnam?

Law on Enterprises 2020 (No. 59/2020/QH14) in Article 1 defines the scope of regulation, which includes four types of business entities:

"…limited liability companies, joint-stock companies, partnership companies and private enterprises; provisions on enterprise groups."

Furthermore, according to the provisions of the Law on Enterprises 2020, the concept of "company" includes limited liability companies, joint-stock companies, and partnership companies—meaning that private enterprises are not classified as a "company" in the legal sense. This is an important distinction when choosing a business type.

What are the characteristics of a limited liability company (LLC)?

An LLC is one of the most commonly chosen business types in Vietnam, particularly for small and medium-sized enterprises. An LLC comprises two forms:

• Single-member LLC: Owned by one individual or one organization. The owner is liable for debts and other financial obligations within the scope of the company's charter capital.

• Multi-member LLC: Has from 02 to 50 members, which may be organizations or individuals. Members are liable within the scope of their contributed capital, except in cases of special liability as prescribed by law.

In particular, for a single-member LLC, the owner must contribute the full charter capital within 90 days from the date of receipt of the Business Registration Certificate. If the owner fails to contribute, contributes insufficiently, or contributes outside the prescribed time limit, the owner may be liable with all of their assets for financial obligations and losses arising from breach of the capital contribution obligation.

What are the legal characteristics of a joint-stock company?

According to Clause 1 of Article 111, a joint-stock company has the following basic characteristics:

"a) The charter capital is divided into equal parts called shares; b) Shareholders may be organizations or individuals; the minimum number of shareholders is 03 and there is no maximum limitation; c) Shareholders are liable only for debts and other financial obligations of the enterprise within the scope of their contributed capital; d) Shareholders have the right to freely transfer their shares to others, except as provided in Clause 3 of Article 120 and Clause 1 of Article 127 of this Law."

A joint-stock company is the only business type among the four types regulated by the Law on Enterprises that has the right to issue shares to raise capital. A joint-stock company may also offer shares for sale, issue bonds, and issue other securities according to law. This form is suitable for enterprises seeking to expand in scale, attract multiple investors, or aim to become a public company listed on the securities market.

Note on dividends: According to current regulations, dividends are defined as "after-tax profits paid for each share in cash or other assets"—replacing the former term "net profits".

How do partnership companies and private enterprises differ from other business types?

Partnership companies must have at least two partners who are individuals, jointly owning the company and conducting business under a common name. Partners are liable with all of their assets for the company's obligations. Additionally, the company may have contributed capital members who are individuals or organizations; these members are liable only within the scope of their committed contributed capital. A partnership company acquires legal personality from the date of receipt of the Business Registration Certificate.

Private enterprises are owned by one individual, and the owner is liable with all of their assets for all business activities. Private enterprises do not have legal personality, cannot issue securities, and have no mechanism for accepting contributed capital members. The owner may increase investment capital or use borrowed capital to support business operations.

What fundamental rights do enterprises have after establishment?

Regardless of which business type is chosen, all enterprises are guaranteed basic rights under Article 7, including:

• Freedom to engage in trades or professions not prohibited by law (Clause 1).

• Business autonomy, choice of organizational form, adjustment of scale and business sectors (Clause 2).

• Choice of capital mobilization, allocation, and use methods (Clause 3).

• Freedom to seek markets, customers, and enter into contracts (Clause 4).

• Right to refuse to provide resources not in accordance with legal requirements (Clause 9).

Which business type should be chosen when establishing an enterprise?

The choice of business type depends on many factors: the number of founding members, capital mobilization needs, degree of asset liability, and long-term development plans. Below is a brief comparison:

Business Type	Minimum Number of Members	Asset Liability	Share Issuance	Bond Issuance
Single-member LLC	1	Limited	No	Yes
Multi-member LLC	2	Limited	No	Yes
Joint-stock company	3 shareholders	Limited	Yes	Yes
Partnership company	2 partners	Mixed	No	No
Private enterprise	1 individual	Unlimited	No	No

The choice of business type should be based on the structure of founding members, capital mobilization needs, governance mechanisms, asset liability, and long-term development direction.

LLCs are typically suitable for enterprises with a limited number of owners, prioritizing control of ownership structure and limiting asset liability. Joint-stock companies are more suitable for enterprises planning to expand their shareholder base, raise capital through share issuance, or target the securities market. In contrast, partnership companies and private enterprises have distinctive characteristics regarding asset liability, suitable for specific business models.

Therefore, the choice of business type from the outset should consider both current needs and the possibility of reorganizing the enterprise in the future.

A&D Law Firm provides enterprise establishment consulting services in Vietnam, including advice on selecting business type, ownership structure, charter drafting, establishing governance mechanisms, and implementing business registration procedures. We assist enterprises in building an appropriate legal foundation from the establishment stage and in outlining long-term development direction.

This article is for general legal information reference only and does not substitute for legal advice in specific cases. Legal provisions are subject to change; please contact a lawyer for accurate and up-to-date advice on your situation.