LLC or JSC? Deciding the Best Upgrade from a Vietnam RO

A representative office gives foreign companies a low-cost presence in Vietnam, but its limitations are fixed. It cannot sign contracts, issue VAT invoices, earn revenue, or employ operational teams beyond basic administrative roles. These constraints are manageable only during early market exploration. Once the business requires local revenue booking, expanded staffing, contract execution under Vietnamese law, or access to regulated business lines, a representative office no longer provides a functional platform.

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Choosing the Right Market Entry Vehicle in Vietnam — LLC, JSC, or Representative Office

In this context, foreign companies intending to operate commercially in Vietnam typically establish a full foreign-invested enterprise. The next step is selecting the appropriate structure: the single-member or multi-member Limited Liability Company (LLC) and the Joint Stock Company (JSC).

Evaluating the only two viable structures: LLC or JSC

The structural difference between an LLC and a JSC begins with ownership. An LLC is based on capital contributions from one owner or a small group of up to fifty members, and interest transfers require formal approval. A JSC requires at least three shareholders and issues shares that are easier to transfer and scale.

A practical example demonstrates the divergence. A foreign technology company planning to admit a minority strategic investor within the first years of operation may find the JSC structure more practical, since share transfers and new issuances follow established procedures. In an LLC, similar ownership adjustments require formal membership changes, which can introduce additional procedural steps. Companies that intend to maintain long-term concentrated ownership may find the LLC structure more straightforward.

How governance affects control and execution

LLCs operate with compact governance. Decision-making rests with the owner or members’ council, and the general director executes these decisions with relatively few formalities.

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A JSC has a more structured governance framework that includes shareholder meetings, a board of directors, and, when required, a supervisory board. The legal representative holds statutory authority to bind the company in both structures, but in a JSC, this role functions within a broader governance hierarchy. Boards must assess which model aligns better with their internal control approach.

Matching sector licensing and capital expectations to structure

A company’s licensing pathway and capital commitments influence whether an LLC or a JSC is more suitable. Licensing authorities such as the Department of Planning and Investment and the management boards of industrial and economic zones review applications based on sector-specific requirements and operational scope.

Licensing expectations across open and regulated sectors

Many sectors, including consulting, trading, and general services, do not impose statutory minimum capital and allow full foreign ownership. Certain regulated sectors, such as education, insurance, or fintech, require investors to satisfy defined licensing conditions and may involve further operational approvals after incorporation. These requirements can affect whether a structure capable of accommodating multiple investors or broader oversight is more practical.

Minimum capital requirements and investment sufficiency

Although most sectors have no statutory minimum capital, regulated industries impose clear thresholds. Fintech payment-intermediary businesses require at least VND 300 billion (US$11.3 million), non-life insurers at least VND 400 billion (US$15.1 million), composite insurers more than VND 1.3 trillion, and foreign-invested universities at least VND 1 trillion (US$49.3 million).

These thresholds represent legal capital requirements for specific sectors. Projects funded entirely by the parent company with concentrated ownership may align with the LLC model, while ventures anticipating additional shareholders or staged capital increases may find the JSC structure more suitable.

Compliance obligations that begin once the RO is replaced

A foreign-invested enterprise is subject to Vietnam’s full corporate, tax, and labor compliance framework. It must register for VAT and apply the prevailing rate, including the current 8 percent reduction valid through 2026 for most eligible goods and services. It must pay corporate income tax at the 20 percent standard rate, make quarterly provisional payments, submit the annual CIT return, issue electronic invoices, withhold employee income tax, participate in social insurance, and maintain statutory records.

Annual financial statements must be audited by a licensed Vietnamese audit firm. The compliance workload differs between structures only in governance requirements; JSCs must coordinate shareholder and board meetings, while LLCs operate with fewer internal procedures.

Executing the transition from RO to a full entity

Upgrading to a full entity involves two coordinated tracks: establishing the new foreign-invested enterprise and dissolving the representative office. Provincial timelines can differ based on administrative workload and the type of business activity, so planning should account for these variations.

Establishing the new foreign-invested enterprise

Vietnam does not convert representative offices into companies. A new foreign-invested enterprise must be established.

This involves preparing the investment proposal, obtaining the investment registration certificate, securing the enterprise registration certificate, drafting the charter, opening statutory bank accounts, registering for tax, activating electronic invoicing, and obtaining any sector-specific licenses. In straightforward, non-regulated sectors, this process can often be completed in thirty to forty-five working days.

Dissolving the representative office

The representative office must be dissolved through notification to the issuing authority, submission of the final activity report required under the RO license, closure of bank accounts, completion of labor and social insurance obligations, and finalization of tax closure. ROs must also close their tax code and, if applicable, deregister employment-related reporting. Continuity of employee seniority and social insurance can be maintained if contract transitions are sequenced appropriately.

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After both processes are completed, commercial agreements such as leases and supplier contracts can be transferred to the new entity.

Arriving at the strategic decision: LLC or JSC?

The appropriate structure depends on how the company intends to operate in Vietnam over the long term. Once ownership dynamics, governance preferences, licensing requirements, capital needs, and compliance obligations are understood, the choice becomes clearer.

When an LLC is the strategic fit

An LLC may be suitable when the Vietnam business will remain closely held, when the decision-making structure benefits from compact governance, and when operational simplicity is preferred.

When a JSC is the strategic fit

A JSC may be suitable when the business anticipates involving additional shareholders, raising capital, or entering sectors where multi-layer governance is operationally practical. Its share-based structure accommodates changes in ownership more easily than an LLC.

Establishing a structure that supports future strategy

The decision between an LLC and a JSC ultimately depends on how the Vietnam operation is expected to evolve, not only at incorporation but over the next several years. What matters most is selecting the form that aligns with the company’s wider regional strategy and gives the Vietnam business the capacity to operate confidently and predictably from the outset.

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