Before starting a company or business, you must choose a suitable form of business to start your business. According to the law, there are 4 forms applicable to companies and businesses that are popular such as: Private enterprises, 1 member limited liability companies, limited liability companies with 2 or more members and joint stock companies. Here we introduce the advantages and disadvantages of each type of company or business.
- One member limited liability company
A single-member limited liability company is an enterprise owned by an organization or individual (hereinafter referred to as the company owner); The company owner is responsible for the company’s debts and other property obligations within the company’s charter capital.
– The owner of the company may be an individual who can not find a partner who can still set up the company. Or another organization splits the investment capital into another field.
– Having legal status, being responsible for debts and other property obligations of the company within the amount of capital committed to contribute to the company with little risk to the owner, this is an advantage compared to private enterprise.
– The company owner has full authority to decide all issues related to the company’s operations.
– Having a compact and flexible organizational structure, simpler procedures than 2TV Company Limited and Joint Stock Company.
On the downside
– Due to the limited liability regime, the company’s reputation and competitiveness with other partners is somewhat limited.
– Not issuing shares, raising capital is still limited. If you want to raise more capital from other individuals and organizations, you must change the type of business.
2. Private enterprises
A private enterprise is an enterprise owned by an individual and is solely responsible for all of its activities.
– Owing to only one individual, the owner of a private enterprise has full autonomy in deciding all matters related to the operation of the business.
– Private enterprises are less bound by the law due to the infinite liability regime as a guarantee for business partners as well as credit institutions that have cooperated with them.
– The organizational structure of a private enterprise is simple and compact.
– The infinite responsibility regime creates trust for partners and customers of private businesses, attracting business cooperation.
On the downside:
– Owners of private enterprises are always highly risky because they must bear unlimited liability with all their assets before all business activities of the enterprises.
– Private enterprises have no legal status.
3. Joint stock company
A joint stock company is an enterprise in which:
– Charter capital is divided into equal parts called shares.
– Shareholders may be organizations or individuals; minimum number of shareholders is 03 and unlimited maximum number.
– Shareholders are only responsible for debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise.
– Shareholders may freely transfer their shares to other people, except for the cases specified in Clause 3 Article 119 and Clause 1 Article 126 of the Law on Enterprises 2014.
– The liability regime of the joint stock company is limited liability, shareholders are only responsible for the debt and other property obligations of the company within the contributed capital, so the level of risks of the shareholders is not. high.
– The operating ability of the joint stock company is very wide, in almost all fields and trades.
– The capital structure of the joint stock company is very flexible, enabling many people to contribute capital to the company.
– The ability to raise capital of a joint stock company is very high through the issuance of shares to the public, this is a unique feature of the joint stock company. The transfer of capital in joint stock companies is relatively easy.
Disadvantages of joint stock companies:
– The management and operation of the joint stock company is complicated because the number of shareholders can be very large, there are many people who do not know each other and may even split into opposing groups of shareholders. about the benefits.
– The establishment and management of joint stock companies is also more complicated than other types of companies due to strict ties with the provisions of law, especially on the financial and accounting regimes.
Legal grounds: According to the Enterprise Law 2014
4. Limited liability companies with 2 or more members
A limited liability company with two or more members is an enterprise of which:
– Members may be organizations or individuals; The number of members does not exceed 50; – Member is responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise, except for the case specified in Clause 4 Article 48 of the Law on Enterprises 2014;
– The capital contribution of members is only transferable in accordance with Articles 52, 53 and 54 of the Enterprise Law 2014.
– The company has a legal status, so the company’s members are only responsible for the company’s activities within the amount of capital contributed to the company, so there is little risk to the capital contributor.
– The number of responsible company members is not much and the members are often acquaintances and trust in each other, so the management and administration of the company is not too complicated.
– The capital transfer regime is tightly adjusted so investors can easily control the change of members, limiting the penetration of strangers into the company.
On the downside:
– The company is limited in the amount of capital contributed to the company’s reputation
- TAX PREFERENTIAL POLICIES TO VIETNAM’S FOREIGN INVESTMENT (FDI)
- FORM OF BUSINESS COOPERATION CONTRACT
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- Has not paid all the debts of the enterprise been dissolved?
- THE ANNUAL GENERAL MEETING OF THE JOINT STOCK COMPANY