Vietnam permits the existence of a wide range of business types and corporate structures. The following are the most common types of foreign investors who choose to register.
1. Wholly foreign-owned limited liability company (LLC)
The majority of foreign investors choose to incorporate their business in Vietnam as a Limited Liability Company (LLC). The procedure for forming an LLC is known to be simple, with little paperwork involved. Vietnam allows 100% foreign ownership LLC in many industries like consulting, trading, manufacturing, IT, F&B, FMCG, education, etc.
Some industries such as logistics, transportation, media, and advertising, limit foreign ownership between 51% to 99%. Even so, an LLC is still permitted in these businesses. It requires the investor to form a joint venture with a local firm in the same industry. This joint venture, fortunately, can be arranged through nominee ownership.
Requirements for setting up a limited liability company in Vietnam​​
In Vietnam, an LLC can be formed with a single owner or multiple shareholders of any nationality. An LLC can have up to 50 shareholders. The most basic conditions to form a business is:
- Business address: During the setup phase, most businesses allow you to use the virtual office as the primary business address. Some conditional businesses, however, which have specific requirements regarding business location, do not allow this. A residential address, such as a house or apartment, is not permitted to be used as a business address.
- Resident Director: A limited liability company (LLC) may have more than one director (legal representative). These director positions may or may not be the same as the owner positions. The owner of a company can be the legal representative of the company at the same time. He can also appoint someone else to take this role. However, there is one condition. At least one director must reside in Vietnam. Many foreign-owned companies encountered this issue not having one during the registration stage. Fortunately, this position is attainable.
- Capital investment: The investor is not required to put up any money upfront. He will be able to inject this amount once the company registration is complete. The timeline is 90 days to complete this capital commitment. He will, however, face a penalty if he fails to meet this deadline. The company will be forced to close in the worst-case scenario.
Aside from the three basic requirements for every business listed above, certain business lines may have additional registration requirements. If you are unsure whether your intended business is subject to any additional requirements, please contact Vietnam Business Gateway (VNBG).
2. Joint venture
A joint venture company is a limited liability company that is owned in part by a foreign entity. It is a business arrangement between a Vietnamese company and a foreigner. In most cases, businesses typically enter into this type of arrangement because the government requires so.
The joint venture is required in certain industries, such as:
- Advertising
- Agriculture and forestry
- Electronic games businesses
- Storage service
- Tourism
- Transportation services
- Advertising, Media, Digital Marketing
Foreign investment in the above sectors is dictated by governmental regulations and may be between a maximum of 49% to 99%. Some investors choose a joint venture to benefit from having a domestic specialist or to tap into the resources, connections, or distribution channels of these businesses. Contact us if you want our help to arrange a local partner for your venture.
Requirements for setting up a joint venture in Vietnam
Similarly, a Joint venture company must appoint a resident legal representative, open a capital account with a bank in Vietnam and obtain approval for a foreign investment certificate. They must provide a bank certificate of deposit for the amount of share capital that is transferred within 3 months of incorporation.
In addition, Joint venture companies are often required to provide higher share capital and may experience longer time periods in obtaining a license. The company must provide a registered address in Vietnam and annual audited financial statements and an annual return for license renewal.
3. Free zone company
Generally, a free zone company may be an option for businesses that will manufacture and export the majority of their products. The company is registered with an industrial park or a special economic zone after government authorities approve it. Eligible projects often provide tax benefits. The requirements for setting up a free zone company in Vietnam are dependent on the specific project. Often, they require a minimum capital investment of USD 200,000. They may also require a certain amount of job formation in Vietnam.
4. Public limited company
Actually, a public limited company may be a better option if a foreigner is planning to form a business with multiple partners or finance its business with the issuance of equity. This type of business must be set up with a minimum of three shareholders of any nationality. At least one resident director must be appointed as the company’s legal representative.
In addition, this type of company must also meet the requirements of the other limited companies listed above, including opening a capital bank account in Vietnam, obtaining a bank certificate showing the availability of funds to be invested in Vietnam, issuing a foreign investment certificate, and submitting an annual return for license renewal and annual financial statements. If a public limited company wants to list, it must have share capital above USD 475,000 if the company has been profitable during the previous year.
5. Nominee company
In brief, a nominee company in Vietnam is a local limited liability company with a local nominee appointed as a sole shareholder. This type of business arrangement is typically established to reduce capital requirements or provide services and products in industries that are not open to foreign ownership.
6. Branch office
Alternatively, the law in Vietnam allows foreign companies from certain business areas to open branch offices in the country if they have been performing business activities abroad for a minimum of five years.
This branch office is required to appoint a resident representative and file annual financial statements. This type of entity may be recommended to help ease licensing issues in certain industries, such as the banking, finance, and insurance sectors.
7. Representative office
A representative office can be opened to establish a local presence in Vietnam without being subject to local tax regulations. There are minimal reporting requirements for representative offices.
However, representative offices cannot trade or conduct manufacturing operations. It can complete market research or promote the parent company’s business. This business type is available if the business has been performing business activities abroad for a minimum of one year.
Company setup with VNBG
At Vietnam Business Gateway, we provide professional guidance and help you choose the most appropriate type
Expertise – Our consultants are familiar with the various types of businesses in Vietnam and the rules and regulations that affect your business. We help you identify and minimize risks.
Strategy – VNBG helps you identify the most cost-effective method to set up and manage your business.
Knowledge – Our expert team is familiar with minimum capital requirements, labor contract requirements, immigration laws, and other legal and financial issues that may impact your business. We provide you with key information so that you can make informed decisions about the future of your business.
Once your company has been set up, we provide additional business services to support your operations in Vietnam, including HR and recruitment services, EOR and payroll services, admin assistance, tax compliance, etc. With that, your company can seamlessly transition into a new market.
Contact us to get started on establishing a compliant, efficient, and flexible entity that meets your needs.
