Choosing the appropriate enterprise for business activities is a critical job, it is orientation and the vision for the development of business activities in the future. The different types of businesses will impact the following aspects:
- The ability to raise capital;
- Investment risks;
- The complexity of the procedures and the cost of establishing a business;
- corporate management Organization;
- Prestigious of Enterprises because of consumption habits;
Please refer to the characteristics, advantages and disadvantages of these types of companies as follows:
Limited liability Company with two or more members
Limited liability Company with two or more members is an enterprise in which members are responsible for the debts and other property obligations of the enterprise in the extent the amount of capital committed to contribute to the enterprise. Members of the company could be organizations, individuals. The minimum number of members is two and maximum not exceeding fifty. Limited Liability Company has legal personality from the date of being granted Business Registration Certificate. However, Limited Liability Company may not issue shares to raise capital.
Limited Liability Company with two or more members must have Board of members, Chairman of the Board of members, directors. Limited liability Company with more than eleven members must have a Supervisory Board.
Limited Liability Company is the most common type of enterprise in Vietnam today.
- Because of having legal personality, members of the company are only responsible for the activities of the company to the extent of capital contributed to the company, there is little risks to the capital contributors;
- The number of members in Limited Liability Company is not much, its members are often acquaintances, trust each other, so the management and running of the company is not too complicated;
- The regime of capital transfer is tightly regulated; investors are easy to control the change of members, limit penetration of strangers into the company.
- Due to the limited liability, reputation of Company in partners and customers is also somewhat affected;
- Limited Liability Company is regulated more strictly by law than private firms or partnerships;
- The capital mobilization of a Limited Liability Company is limited because of not having right to issue shares.
Joint Stock Company
Joint Stock Company is an enterprise, in which:
- The charter capital is divided into equal portions called shares;
- Shareholders are responsible for the debts and other property obligations of the enterprise to the extent of capital contributed to the business;
- Shareholders have the right to freely transfer their shares to another person, except for the case when shareholders own voting preference shares;
- Shareholders may be organizations, individuals; the minimum number of shareholders is three and the maximum number is not restricted.
- Company shares have legal personality from the date of being granted Business Registration Certificate. Joint Stock Company may issue securities to the public in accordance with the law on securities.
- Joint Stock Company must have General Meeting of Shareholders, the Board of Directors, Director (General Director); Joint Stock Company with more than eleven shareholders must have a Supervisory Board. The advantages and disadvantages of joint stock company:
- Liability regime of Joint Stock Company is limited liability; shareholders are only responsible for the debts and other property obligations of the company to the extent of contributed capital, so that the level of risks is not high.
- Operating ability of Joint Stock Company if very broad, in most sectors;
- Capital structure of Joint Stock Company is flexible creating favorable conditions for many people to contribute capital to the Company.
- Capital mobilization ability of Joint Stock Company is very high by issuing shares to the public, this is the specific characteristic of Joint Stock Company;
- The transfer of capital in Joint Stock Company is relatively easy, so the scope of the object participating in a Joint Stock Company is very large. Even the civil servants have the right to purchase shares of Joint Stock Company.
- The management and running of Joint Stock Company is complicated because the number of shareholders can be very large,
- The establishment and management of Joint Stock Company are more complex than other types of companies due to tightly bound by the provisions of law, particularly in finance and accounting systems.
For details, please contact us for advice and cooperation.