(+84) 9 61 57 18 18
info@vietanlaw.com

Compare joint stock company and sole proprietorship in Vietnam

Joint stock company and sole proprietorship are types of enterprises that have many differences from each other. Therefore, many traders have asked the question whether they should choose to establish a joint stock company or a sole proprietorship. To answer client’s questions, Viet An Law Firm offers an article about compare joint stock company and sole proprietorship in Vietnam below.

Compare joint stock company and sole proprietorship in Vietnam

Table of contents

Hide

    Legal basis

    • Law on Enterprises 2020;
    • Decree 47/2021/ND-CP guiding the law on Enterprises, as amended and supplemented by Decree 16/2023/ND-CP.

    Compare joint stock company and sole proprietorship in Vietnam

    No Criteria Joint stock company Sole proprietorship
            1 Legal basis Chapter V from Article 111 to Article 176 of Law on Enterprises 2020 Chapter VII from Article 188 to Article 193 of Law on Enterprises 2020
            2 Owner Referred to as a shareholder, and can be an individual or an organization ·      Referred to as sole proprietorship’s owner, and can be only an individual.

    ·      The owner of a sole proprietorship must not concurrently owner of a household business or hold the position of general partner of a partnership

            3 Member Individuals and/or Organizations Must be individuals.
            4 Number of members ·      Minimum: 03 shareholders

    ·      Maximum: No limited

    Have only a member.
            5 Dossier for establishing company Include:

    ·      An enterprise registration application form

    ·      Company’s chapter

    ·      The list of founding shareholders; the list of shareholders that are foreign investors.

    ·      A copy of documents such as: Legal document of individuals, organization; Investment Registration Certificate.

    Include:

    ·      An enterprise registration application form

    ·      A copy of legal documents of the sole proprietorship’s owner.

            6 Structure Can be chose one of the two models below:

    ·      General Meeting of Shareholders (GMS), Board of Directors, Board of Controllers and Director/General Director.

    ·      General Meeting of Shareholders (GMS), Board of Directors and Director/General Director

    Primary model: only include a sole proprietorship’s owner
            7 Decision rights about issues of company Issues shall be through and approved by GMS, Board of Directors The sole proprietorship’s owner can self-decide all of the issues in the operation process of this enterprise.
            8 About responsible for assets A shareholder’s liability for the company’s debts and other asset liabilities is equal to the amount of its contributed capital to the company; The owner of the sole proprietorship shall be personally responsible for all activities of the enterprise.
            9 About the legal person From the date on which the Enterprise Registration Certificate is issued, a joint stock company has the legal person. Have not a legal person.
          10 Capital A joint stock company’s chapter capital is contributed by shareholders and is divided into units of equal value (shares). The investment capital of the sole proprietorship owner is all of its assets.
          11 Capacity to raise capital Have the high capacity to raise capital, because can be published shares, bonds, and other securities. Have the low capacity to raise capital, because can be only depended on the assets of the sole proprietorship owner and must not be issued any kind of securities
          12 Rights about capital contribution to establish or purchase shares, contributed capitals Be allowed to contribute the capital to establish and purchase shares of joint stock companies, contributed capitals of partnerships, limited liability companies. Not be allowed to contribute the capital to establish and purchase shares of joint stock companies, contributed capitals of partnerships, limited liability companies.
          13 Capicity to convert of an enterprise A joint stock company can be converted into a limited liability company with single member or multiple member. A sole proprietorship can be converted into a limited liability company, joint stock company or partnership.
          14 Ways, and conditions to convert an enterprise Ways to convert a joint stock company into a single member limited liability company (Article 203 of Law on Enterprises 2020)

    ·      All shareholders convert all shares to a shareholder.

    ·      All shareholders convert all shares to an organization/ individual that is not a shareholder.

    ·      The company has only a shareholder.

    Ways to convert a joint stock company into a multiple member limited liability company (Article 204 of Law on Enterprises 2020):

    ·      Without raising additional capital or transferring shares to other organizations, or individuals.

    ·      Raising additional capital or transferring shares to other organizations, individuals

    ·      Transfering all or part of shares to other organizations and individuals

    ·      Only 02 shareholders remain in the company

    Conditions to convert (Article 205 of Law on Enterprises 2020):

    ·      Be granted the Enterprise Registration Certificate.

    ·      The owner makes a written commitment to take personal responsibility for all debts.

    ·      The owner has a written agreement with the parties of ongoing contracts.

    ·      The owner has a written commitment or agreement with other limited partners to continue hiring the existing employees of the sole proprietorship.

    Advantages and disadvantages of joint stock companies

    Advantages of joint stock companies

    • Shareholders only need to bear limited liability for the debts and other property obligations of the company within the scope of their contributed capital, so the risks of shareholders will be much lower than the risks that sole proprietorship owners must bear.
    • Has a high ability to mobilize capital, because can be issued in shares, bonds, and other securities.
    • Easy to create a division of benefits between groups of shareholders.
    • Individuals or organizations can become members of a joint stock company.

    Disadvantages of joint stock companies

    • The management structure of a joint stock company is quite complicated, so operating and managing the company’s operations can sometimes become complicated.
    • Dossiers for establishing a joint stock company are more complicated and have more requirements than those of a sole proprietorship.

    Advantages and disadvantages of sole proprietorships

    Advantages of sole proprietorships

    • The company’s organizational and management structure is simple, so sole proprietorship owners can easily operate and manage the company’s activities.
    • Sole proprietorship owners have the right to decide on all issues in the company’s operations, so there is no division of interests between groups.
    • The dossier for establishing a sole proprietorship is simpler than that for establishing a joint stock company.

    Disadvantages of sole proprietorships

    • The sole proprietorship owner must bear unlimited liability with all of its assets. Mean that, the level of risk that sole proprietorship owners must bear is very high.
    • The capacity to raise capital is low because it only relies on the personal assets of the enterprise owner and cannot issue any type of securities.
    • Only individuals can own sole proprietorships and enterprise owners are not allowed to simultaneously be the owner of a business household or a general partner of a partnership.

    Thus, joint stock companies and sole proprietorships have many differences and also have their advantages and disadvantages. Therefore, depending on your needs, customers can choose the type that you think is suitable.

    If clients have any questions about types of joint stock companies and sole proprietorships, please contact Viet An Law Firm for our best support!

    Related Acticle

    Setting up a foreign invested company (FDI) in Vinh Phuc

    Setting up a foreign invested company (FDI) in Vinh Phuc

    Currently, foreign investment is one of the development trends and is supported to attract foreign capital (FDI) into Vietnam. Establishing a foreign invested enterprise is one of the investment forms…
    Establish a foreign invested (FDI) company in Long An

    Establish a foreign invested (FDI) company in Long An

    Establish a foreign invested company (FDI) in Long An to take advantage of the province’s dynamic investment climate. Long An province has attracted more than USD 11.1 billion in foreign…
    Set up a branch of a foreign insurance company in Vietnam

    Set up a branch of a foreign insurance company in Vietnam

    Foreign insurance company has become more and more popular and preferred by investors. Because many investors are interested in investing in service industries in Vietnam, especially the insurance business. The…
    Domestic Travel Service License Fees in Vietnam 2024

    Domestic Travel Service License Fees in Vietnam 2024

    Circular No. 43/2024/TT-BTC stipulates a 50% reduction in state fees for domestic travel licensing from July 1, 2024, to the end of 2024. This amendment promotes the development of the…
    Post establishment process of JSC company in Vietnam

    Post establishment process of JSC company in Vietnam

    Key procedures after establishing a JSC company in Vietnam will be navigating in the next steps of this article. According to information from the Department of Business Registration Management (Ministry…

    CONTACT VIET AN LAW

    Hanoi Head-office

    #3rd Floor, 125 Hoang Ngan, Hoang Ngan Plaza, Trung Hoa, Cau Giay, Hanoi, Vietnam

    info@vietanlaw.com

    Ho Chi Minh city office

    Room 04.68 vs 04.70, 4th Floor, River Gate Residence, 151 – 155 Ben Van Don Street, District 4, HCM, Viet Nam

    hcm@vietanlaw.com

    SPEAK TO OUR LAWYER

    English speaking: (+84) 9 61 57 18 18 - Lawyer Dong Van Thuc ( Alex) (Zalo, Viber, Whatsapp)

    Vietnamese speaking: (+84) 9 61 37 18 18 - Dr. Lawyer Do Thi Thu Ha (Zalo, Viber, Whatsapp)