When starting a business, one of the most important decisions that founders need to make is choosing the right business model.In Vietnam, with a diverse legal system and various types of businesses, choosing the right model not only helps startups operate smoothly but also optimises costs, management, and fundraising capabilities.So, which model should startups choose?Let’s explore this article together to find a detailed answer!
Popular business models in Vietnam
Before delving into the analysis, let’s review the types of business entities that startups can consider under the 2020 Enterprise Law:
Private enterprise: An individual owner, liable without limit with all their assets.
Partnership: Has at least 2 general partners, bears unlimited liability, and may have capital-contributing members.
Limited liability company (LLC):
Single-member LLC: An individual or organisation as the owner, with limited liability within the scope of the contributed capital.
LLC with 2 or more members:From 2-50 members, also with limited liability.
Joint-stock company (JSC): Has at least 3 shareholders, with no maximum limit, and is liable according to their capital contribution.
Which model should a startup choose?
1. LLC – A safe choice for small startups
Advantages:
Easy to establish, simple procedures.
The owner is only responsible within the scope of their capital contribution, reducing personal financial risk.
Suitable for small-scale or newly started startups, when there are only 1-2 founders.
Disadvantage:
Limitations in raising external capital because they do not issue shares.
The management process can become more complex when adding new members.
Suitable for whom?:Startup in the service sector, simple technology, or not yet needing large funding.
2. Joint-stock company – The “star” for ambitious startups
Advantage:
Easily raise capital through issuing shares – ideal for startups looking to attract funding from investment funds or angel investors.
Flexible management structure, suitable for a large and diverse team of founders.
Create a professional and reputable image with partners and customers.
Disadvantage:
The establishment procedure is more complex, requiring at least 3 initial shareholders.
Higher operating costs (shareholder meetings, financial reports…).
Suitable for whom?: Technology startups, innovation, or those with plans for rapid expansion and significant fundraising.
3. Private enterprise – Personalised choice
Advantages:
Simple, easy to manage, suitable for founders who want to take the lead themselves.
Low establishment cost.
Disadvantage:
The owner has unlimited liability – if the company incurs debts, personal assets are also affected.
Cannot easily add members or raise capital.
Suitable for whom?: Super small startups, individuals running their own businesses (for example, freelancers transitioning to entrepreneurship).
4. Partnership company – Rare but still has a place
Advantage:
Create high trust due to the unlimited responsibility of the general partners.
Suitable for a group of founders with close relationships who want to share responsibility together.
Disadvantages:
High financial risk, few startups choose it due to its “gamble” nature.
Who is it suitable for?:Rarely chosen by startups, usually only suitable for traditional business groups.
Note when choosing a business model for a startup
Business goals: Do you want to develop compactly or scale up significantly?If aiming for fundraising, a joint-stock company is the optimal choice.
Number of founders: If alone, a single-member LLC or a private enterprise is sufficient.Many people consider a 2-member LLC or a joint-stock company.
Financial capability: A startup with limited capital should prioritise a model with low initial costs, such as an LLC.
Tính pháp lý: Đừng quên tham khảo luật sư hoặc chuyên gia để đảm bảo mô hình phù hợp với ngành nghề và quy định pháp luật.
Flexible changes: If you want to convert later (for example, from LLC to JSC), you need to understand the process clearly to avoid confusion.
Why is choosing the right business model important?
Cost savings: The right model helps you avoid wasting money and time on unnecessary procedures.
Attracting investors: Investment funds often prefer joint-stock companies because they are easy to join and withdraw from.
Protecting founders: Choosing a limited liability model helps you avoid “carrying” debt with personal assets.
Which model should you choose for your startup?
There is no one-size-fits-all answer for every startup, but if you are just starting out and want safety, an LLC is the ideal starting point.And if you have big ambitions, aiming for the international market or raising millions in funding, a joint-stock company will be the perfect “launchpad.”Carefully consider your goals, team, and resources before making a decision.
Are you still unsure?Please leave your questions or consult business advisory services for more detailed support.Choose the right model today, and your startup will have a solid foundation to break through tomorrow!
H&P GROUP CO., LTD.
Address: 38/26 Nguyễn Văn Trỗi, Ward 15, Phú Nhuận District, Ho Chi Minh City, Vietnam
Hotline: 028.6650.4729
Email: info@hpg-tax.com
