Complete Guide Of Setting Up A Foreign Company In Vietnam

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Are you planning to open an equity in Vietnam? What type of entity is best suited to you and how to overcome risks in small businesses? We have the local knowledge to help you navigate these minefields. Let's dive into crucial information below before starting a business in Vietnam.

Note:
*FOEs: Foreign-owned Enterprises
**JVEs: Joint Venture Enterprises

How many types of businesses in Vietnam?
There are 5 main business enterprises types which foreign enterprises can choose to set up legal entities in Vietnam. In which, the two most common types are Limited Liability Company (LLC) and Join-stock Company (JSC). Brief description of 5 types are as follows:

1. Limited Liability Company (LLC)
- 100% FOEs* and JVEs** can be established as LLC
- There is usually no minimum capital requirement for establishing an LLC in
Vietnam
- Total members must be less than 50. Investors can be corporations or individuals.

2. Joint-stock Company (JSC)
- FOEs* and JVEs** can issue securities and bonds as joint-stock companies
- There is no minimum charter capital requirement
-  A JSC is required to have at least three shareholders. There is no limitation on the maximum number of shareholders, nor on their nature – they can be individuals or institutions, Vietnamese or foreigners

3. Partnership Company
- JVEs** can be established as a partnership company in Vietnam
- Partnerships cannot issue any type of securities in Vietnam

4. Representative Office (ROs)
- A representative office is forbidden from conducting any revenue-generating activities
- ROs are permitted to conduct market research
- ROs in Vietnam are permitted to hire staff directly

5. Branch Office
- A branch office is not allowed to constitute a separate legal entity
- Be entitled to do business in Vietnam
- To set up a branch, a parent company must have had conducted business in its home country for at least 5 years.

Pros and Cons of each type
​1. Limited Liability Company
Legal Status: Separate legal entity
+ Pros: 
Liability limited to capital contribution
No restrictions on business scope
+ Cons: 
Cannot issue shares
Maximum 50 members

2. Joint-stock Company
Legal Status: Separate legal entity
+ Pros: 
Liability limited to capital contribution
No restrictions on business scope
Can issue shares and go public
No limitation on the number of shareholders
+ Cons: 
The required minimum shareholders is 3
Supervisory Board is required for most JSCs, depends upon the number and type of investors

 3. Partnership Company
Legal Status: Half separate legal entity. Generally used for professional services offered by individuals (e.g: attorney, architect)
+ Pros: 
​One of the partners can be excluded from unlimited liability
+ Cons: 
Requires at least 2 partners
Requires professional certificates
Individually liable for the partnership debts without limit

 4. Representative Office
Legal Status: Non-separate legal entity
+ Pros:
Easy registration procedures
+ Cons:
Cannot conduct profit-making activities
Parent company bears liability

5. Branch Office
Legal Status: Non-separate legal entity
+ Pros:
Can carry out commercial activities within the parent company’s scope
+ Cons:
Business scope is limited to parent company
Parent company bears liability

How To Set Up A Foreign-owned Company

Document Required:

• A certificate of incorporation
  
• A company charter or articles of association
  
• Audited financial statements for the past 12 months
  
• Valid personal identity cards or passports of any of the business’ authorized representatives
  

Time Required:

• On average, it takes 45 days to process depending on specific businesses
  
• Sometimes, the overall process likely will be longer, however, due to time necessary to fulfill all the documentation requirements.
  
• Once the legal entity is set up, expect some additional time to open a bank account, handle admin issues, etc., as well as recruiting.
  

Note: Depends on the type of business you choose, documents required and processing time can be varied. Above information is basic requirements for setting up an entity for foreign companies in Vietnam.

Bonus: Some facts you should know before setting up an office in Ho Chi Minh city: 

• Location: There is a wide range of options in Ho Chi Minh City, most office buildings are located in the CBD: District 1 and District 3

 

• Minimum Rental Space: Most office building leasers offer space bigger than 50 sq-m. For smaller spaces, co-working office is a better choice

 

• Rental Contract: There is a common requirement of at least 1 year contract, 1-3 months prepaid and 2-3 months of deposit

 

• Rental Fee: There is a wide range of rental fee depending on building grade and location. Most expensive: District 1 and District 3. Range: from $US9-$US78 psqm per month
• Tax: 10% VAT will apply
• ​​Other fees may apply: Service fee: $US1 - $US5 psqm and Parking fee