Business incorporation has become synonymous with responsible business ownership. Yet, so many misconceptions and rumors exist about the benefits of business incorporation in Vietnam. So it’s no wonder that even the savviest entrepreneurs are at a loss as to whether incorporation is right for them, what it will cost, and where to start.
Business incorporation (which, by the way, is an umbrella term for many business structure options) may be right for some investors, but it isn’t for all. So it’s worth doing some stepping back and ascertaining whether incorporation is right for you.
Here are some points to consider:
What is Business Incorporation?
As mentioned above, business incorporation is a loose umbrella term that covers a variety of options for legally structuring your business. These options include becoming…
- Limited liability company (LLC)
- Joint stock company (JSC)
- Joint Venture Company
- Partnership Company
- Branch Office or Subsidiary Company
- Business Cooperation Contracts (‘BCC’)
- Representative Office, or
- Public and Private Partnership (‘PPP’) contract
Whatever business structure you choose needn’t be set in stone, and can be changed as your business matures. For example, many small investors start out as sole proprietorships or partnerships with formal incorporation taking place at a later date.
Of the many business entities that owners consider, LLCs and Branch Office are two of the most popular.
The Benefits of Incorporation
Here are some of the benefits you can realize if you decide to incorporate your business:
Personal Liability Protection – An incorporated company affords protection from any personal liability for your business debts and obligations. For example, if someone sues your company they can only go after your company’s assets, not your own.
Tax Benefits – If you incorporate you may gain tax benefits, although only under certain circumstances. This is one area to discuss with an accountant, as the marginal tax rates for corporations with taxable incomes in some cases can be higher than those for an individual in the same scale.
Corporate Identity – Incorporating can give a greater sense of credibility to your business.
Raising Capital – You can raise capital more easily through the sale of stock and securities if your business is incorporated.
Unlimited Life – Your corporation can have an indefinite life and outlive you. Do note that LLCs have a limited duration. Get more information on business structure differences from the GBS.
The Disadvantages of Incorporation
Some of the disadvantages of incorporation, particularly for the small business owner, include:
Paperwork – Depending on the structure you choose, you may need to provide many types of documents to The Vietnam’s Ministry of Planning and Investment office at the city your company located.
Cost – The fees associated with initial incorporation and ongoing maintenance can put a strain on start-ups. However, LLCs can be a more economic alternative to incorporation.
Is Incorporation Right for My Business?
At the end of the day, choosing the right business structure for your small business comes down to several factors such as your risk of liability, your tax obligations, business objectives, and so on.
Because the needs of every business are different, and the regulation varies from city-to-city, it’s worth an hour or two with a knowledgeable attorney to investigate all of the issues that will affect your decision.
Getting Started with the Process of Incorporation
All business incorporations must be filed with local government. Whether you choose to pursue this through an attorney or choose an online legal service is up to you. But try to get referrals and recommendations from other businesses that have been through the process.
More resources at: The Ministry of Planning and Investment Portal: http://www.mpi.gov.vn/en/Pages/default.aspx
Any support you may need, please contact GBS, a leading provider of incorporation services in Vietnam at
- Email: email@example.com
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