Types of Business Structures

When entering the Vietnamese market, a company can choose from six different types of structures, each with distinct benefits and requirements. To establish a company, it need a moderate amount of investment capital and may requires few months before it become operational.

Representative Office
(RO)

Ideal for companies that want to explore the market without commercial activity.

Market research, promotion, and liaison activities
Not a separate legal entity
No revenue-generating activities
Limited to hiring local support staff
Not subject to corporate income tax
Relatively easy with fewer compliance requirements
Cannot own property or assets
Annual license renewal

Limited Liability Company (LLC)

Suitable for most foreign investors due to limited liability and flexibility.

Full business activities, production, and trade
Independent legal entity
Full commercial activities
Can hire and manage staff independently
Subject to corporate income tax
Higher complexity with stricter compliance
Full ownership rights
Monthly and annual tax filings, audits, and license renewal

Joint-Stock Company
(JSC)

Best for companies planning to issue public shares.

Raise capital through public or private shares
Independent legal entity, can have multiple shareholders
Full commercial activities, public offering of shares
Requires Board of Directors and strict governance
Subject to corporate income tax
Higher complexity, requires shareholder agreements
Allows for multiple shareholders and foreign ownership
Monthly and annual filings, shareholder meetings, audits

Branch Office (RO)

A branch of a foreign parent company that offers services and conducts commercial activities within the allowed sectors.

Business operations, contracts, and generating revenue
Dependent legal entity of the parent company
Limited business activities specified in registration
Can hire local and foreign staff
Subject to corporate income tax
Moderate complexity depending on business activities
Can lease and own property, but limited ownership rights
Monthly and annual tax filings, annual license renewal

Joint Venture

A partnership between local and foreign companies, often necessary in restricted sectors where 100% foreign ownership is not permitted.

Collaboration between foreign and local companies
Independent entity co-owned by foreign and local partners
Allowed to operate in all permitted sectors
Requires agreement between all partners
Subject to corporate income tax, depends on ownership structure
Medium complexity, requires partnership agreements
Shared ownership between foreign and local partners
Regular reporting and compliance based on partnership type

Public-Private Partnership (PPP)

Focused on infrastructure projects, PPPs are partnerships between the government and private entities, operating under various models like BOT (Build-Operate-Transfer) and BOO (Build-Own-Operate).

Collaborative projects between public and private sectors
Legal framework defined by the government
Infrastructure, public services, large-scale projects
Joint management between public and private entities
Subject to taxation as defined in agreement
High complexity with long-term agreements
State retains some control or ownership of assets
Compliance defined by PPP contract

Heard of Foreign Invested Enterprise (FIE)?

A Foreign-Invested Enterprise (FIE) refers to a business entity that allows foreign investors to engage in a foreign market through various legal structures. FIEs are often subject to stringent government regulations at multiple critical stages, which can impact the profitability of foreign investments and limit the control that foreign investors have over their operations within the host country.

An FIE can be formed under several business structures, including a Representative Office, Limited Liability Company (LLC), Joint-Stock Company (JSC), Branch Office (RO), Joint Venture, or Public-Private Partnership (PPP). Each of these structures offers different levels of operational flexibility, control, and profitability for foreign investors looking to establish a presence in a foreign economy.

Learn more about establishment of foreign-investors enterprise (FIE)

Comparison Types of Business Structures

To assist you in determining which investment entity might be suitable for your needs in Vietnam, the tables below provide an overview of each primary entity type and the most significant advantages and disadvantages to consider

Business Structure	Pros	Cons
Representative Office	Low cost and easy to establish; Simplified reporting and administrative requirements; Ideal for market research and establishing a local presence.	Cannot conduct direct business activities; Limited scope of operations to marketing and networking; No revenue generation capability.
Limited Liability Company (LLC)	Limited liability for owners; Flexible management structure; Easier to attract investors; Separate legal entity with its own rights and responsibilities.	Subject to corporate taxes and compliance regulations; Complex formation and reporting requirements; Personal liability may arise in some jurisdictions.
Joint-Stock Company (JSC)	Ability to raise capital through share issuance; Limited liability for shareholders; Transferable ownership structure, promoting investor confidence.	More complex and expensive to establish; Subject to stringent regulations and higher reporting standards; Potential dilution of ownership for shareholders.
Branch Office	Can conduct business and generate revenue; Simplified administrative processes compared to establishing a new entity; Direct access to parent company resources.	Not a separate legal entity, making it liable for parent company actions; Limited to operating within the scope of the parent company's business; Restricted control over operations.
Joint Venture (JV)	Access to local expertise and market knowledge; Shared resources and risks; Flexibility in structuring management and operations.	Potential for conflicts between partners; Complex negotiations for establishing agreements; Slower decision-making due to shared control.
Public Private Partnership (PPP)	Combines public resources with private sector efficiency; Shared investment and risk; Opportunity for large-scale projects and infrastructure development.	Complex legal and financial frameworks required; High dependency on government cooperation; Political and financial risks can impact project stability.

Foreign-Invested Enterprises (FIE) are usually under which business structures?

FIEs can typically be formed under these structures:

Limited Liability Company (LLC)
Joint-Stock Company (JSC)
Joint Venture

Can I conduct business without setting up an entity?

Yes, businesses can operate through a Representative Office, which allows for activities like market research and liaison services without engaging in direct commercial operations.

Is an audit required for each business structure?

Not all business structures require an audit. LLCs and JSCs are subject to annual audits, whereas Representative Offices and Branch Offices may have different compliance requirements.

What is the difference between a Limited Liability Company (LLC) and a Joint-Stock Company (JSC) in Vietnam?

An LLC is simpler and ideal for smaller businesses with fewer shareholders, while a JSC is suitable for companies planning to issue shares publicly and typically has a more complex management structure.

What are the restrictions on a Representative Office in Vietnam?

Representative Offices are not allowed to conduct revenue-generating activities. Their functions are limited to market research, promotional activities, and acting as a liaison for the parent company.

Can a foreign-owned LLC own land in Vietnam?

Foreign-owned LLCs cannot own land but can lease property for up to 50 years depending on the business activities and project type.

Are there any sectors in Vietnam that require a Joint Venture instead of a 100% foreign-owned entity?

Yes, certain restricted sectors, such as telecommunications and media, require foreign investors to partner with a local entity through a Joint Venture.

What are the compliance requirements for a Public-Private Partnership (PPP) in Vietnam?

PPPs involve strict compliance with government regulations, long-term agreements, and regular reporting based on the specific type of partnership model (e.g., BOT, BOO).