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Type of Business

1. A private enterprise is an economic organization owned and operated by an individual with full control over business activities. It has no legal status and the owner has unlimited liability for debts. 2. A limited liability company (LLC) is a legal entity where the company and owners are separate. Owners have limited liability up to their capital contributions. An LLC can have up to 50 shareholders and is not permitted to issue shares. 3. A one member limited liability company is an LLC with a single owner who is responsible for debts up to the charter capital and cannot withdraw capital but can transfer ownership.

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31 views5 pages

Type of Business

1. A private enterprise is an economic organization owned and operated by an individual with full control over business activities. It has no legal status and the owner has unlimited liability for debts. 2. A limited liability company (LLC) is a legal entity where the company and owners are separate. Owners have limited liability up to their capital contributions. An LLC can have up to 50 shareholders and is not permitted to issue shares. 3. A one member limited liability company is an LLC with a single owner who is responsible for debts up to the charter capital and cannot withdraw capital but can transfer ownership.

Uploaded by

phamhoanghien
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© © All Rights Reserved
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1/ Private enterprise – (Sole proprietorship)

A private enterprise is an economic organization which is permitted to register


business and conduct business activities in accordance with regulations. Privately
Owned Enterprises need to have assets and transaction office. The owner is also
the legal representative who has full control over all business activities of the
company. The owner may directly operate all activities of their company or hire
another person to do this job. A private enterprise is unlimited liability company
and has no legal status.
Advantages:
- Private enterprises have the right to completely decide matters relating to the
business operation.
- Private businesses are less bound by the law.
-Private businesses make assure their partners and customers with their unlimited
liability in characteristic.
Disadvantages:
- The risk of owners is high due to the fact that this is not a legal entity
- Unlimited liability of private enterprises means that not only the company's assets
but also the business owner’s are responsible for the debts of the company.
2/ Limited Liability Company (LLC)
LCC is a legal entity recognized by the law (Vietnamese business law). Company’s
owner and company are two separate legal entities. According to the law, the
company has the legal status from the date in the business registration certificate,
the company’s owner is the person with the rights and obligations corresponding to
the ownership of the company.

LCC has no more than 50 shareholders. It is only liable for debts and other
financial obligations within the scope of the company's property obligations. LCC
is not allowed to issue shares to raise capital.

Advantages:
- Limited Liability: Company is only liable for debts within the amount of
company capital so that it is less risky for the capital contributor.

- The transfer of capital is strictly regulated so it is not easy to change


shareholders. This type helps investors to manage the number of members and
limit the penetration of strangers into the company.

Disadvantage:
- The prestige of the company is partly affected by the limited liability.

- It is more strictly regulated by the law than a private enterprise or partnership.

- It has no right to issue shares to raise capital.


3/ One member limited liability company
One member limited liability company is a special form of LLC. According to the
law of Vietnam, it is owned by an organization and the owner shall be responsible
for the debts and other property obligations of the enterprise within its charter
capital.

The company’s owner may not directly withdraw but can transfer all or parts of the
charter capital to another organization or individual. This type of company has the
legal status from the date of the business registration certificate. One-member
limited liability companies are not allowed to issue shares.

The owner of the company is not allowed to receive profits of the company if the
company fails to pay all the debts and other property obligations.
Depending on the size and lines of business, the internal management structure of a
one-member limited liability company may either include: the Board of Directors
and the Director or the Chairman and the Director.
4/ Joint Stock Company.
A joint stock company whose charter capital is divided into equal parts called
shares is established and existed independently. It is allowed to have a shareholder
meeting, a Board of Management and a Director (General Director). In the case of
a company with more than eleven shareholders, there must be a Board of
Controllers.

Shareholders are only responsible for the debt and other property obligations of the
company within the amount of charter capital. They also have the right to freely
transfer their shares to others, the minimum number of shareholders is three and
the maximum number is unlimited. Companies of this type have the right to issue
securities in accordance with the law on securities.

Advantages:

- Limited Liability: Company is only liable for debts within the amount of
company capital so that it is less risky for shareholders.

- The Joint Stock Company operates in most areas/ sectors.

- The capital structure is flexible which enables many people to contribute capital
to the company.

- The capital mobilization ability of the joint stock company is very high.
- The transfer of capital in joint stock company is relatively easy, so the scope of
participation is very broad, even civil servants have the right to buy shares of joint-
stock companies.
Disadvantages:

- The management and operation of a joint stock company is complicated by the


fact that the number of shareholders can be very large, people do not know each
other and there may be group interest conflicts.

- Establishment and management of joint stock companies are also more complex
than other types of companies because they are tightly bound by the law, especially
in the financial and accounting regulations.
5/ Partnership companies
Partnership companies must have at least two members who will act as partners in
the company. Capital contributers are optional. They are only responsible for the
debts of the company within the amount of capital which they contributed to the
company.

Members are shared profits according to the proportions of the contribution to the
company charter capital and partnership members have equal power when deciding
on the business activities.

Advantages:

- Partnership company is a combination of personal prestige of many people. Due


to the unlimited liability of partners, this type of business easily receive partners’
and customers’s trust.

- The management of the partnership companies is not complicated because most


of the managers are prestigious people who trust each other.
Disadvantages:

- Due to the unlimited liability of partnership, the level of risk of members is very
high.

- This type of company is defined in the 2005 Company Law but in practice it is
not popular.

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