Choosing the right business structure in Vietnam as a foreigner

The best business structure for foreigners in Vietnam is rarely the one with the most features. It is the one that lets you do exactly what you plan to do, at the lowest compliance cost, without forcing a restructure 2 years later.

That sounds obvious. In practice, foreign investors often pick a structure by habit. A parent company abroad uses a branch network, so it asks for a branch. A founder hears that representative offices are cheap, so they start there, then discover they cannot invoice a single customer.

This page compares the options by what each one is legally allowed to do. It does not cover filing steps, documents or costs. For the procedure itself, see the guide to set up company in Vietnam.

What business structures can foreigners choose in Vietnam?

There are 2 families of options, and the difference between them matters more than any detail inside them.

Vietnamese legal entities. A company incorporated in Vietnam under the Law on Enterprises 2020. It has its own legal personality, its own tax code and its own liability. For foreign investors, this almost always means a limited liability company (LLC) or a joint stock company (JSC).

Extensions of a foreign company. A representative office or a branch, licensed under Decree 07/2016/ND-CP. Neither is a separate legal entity. Both act on behalf of the foreign parent, which remains responsible for them.

Private enterprises and partnerships also exist under Vietnamese law. They are rarely suitable for foreign investors and are not discussed here.

The split also shapes the tax footprint. A representative office has no revenue of its own, so it does not carry corporate income tax on sales, although it must still handle personal income tax for its staff. A branch and a subsidiary both earn income in Vietnam and are taxed on it. When people search for the best business structure for foreigners in Vietnam, this is often the first practical difference they need to see.

Limited liability company (LLC) vs joint stock company (JSC)

Both are companies with limited liability. The differences lie in who can own them, how ownership moves, and how much governance they require.

A practical reading of the table: an LLC is built for control, a JSC for capital raising. For most first-time investors, the best business structure for foreigners in Vietnam turns out to be the simpler of the two.

Most foreign parent companies set up a single-member LLC. When the owner is an organization, Article 79 lets it choose between a company chairman model and a members' council model, which gives a group with a regional office a light structure that still mirrors its internal approvals.

A JSC earns its extra governance only when shares will actually move: outside investors, employee share plans, or a long-term listing plan. Otherwise, it is overhead.

If your decision turns mainly on how many investors you have and whether you will fundraise, the separate guide on choosing the right business entity in Vietnam works through that question in more depth.

When should foreign investors choose a representative office?

A representative office is a listening post. Under Article 30 of Decree 07/2016/ND-CP, its activities are confined to liaison, market research and promoting the parent company's business. It cannot carry out profit-generating activities.

The entry conditions are modest. The foreign trader must have operated for at least 1 year (Article 7), and the license is issued for 5 years, capped by the remaining validity of the parent's own registration (Article 9). Licensing sits with the provincial Department of Industry and Trade, or with the management board where the office is inside an industrial park, economic zone or high-tech zone (Article 5).

A representative office makes sense when:

• You are still testing whether Vietnam is worth a full investment.
• You need staff on the ground to manage suppliers or distributors, while contracts are signed by the parent abroad.
• You want a visible presence for marketing before revenue starts.

It does not make sense when you need to invoice Vietnamese customers, hold inventory, or employ a sales team that closes deals locally.

There is also an exit point to plan for. A representative office cannot be "upgraded" into a company. When the business is ready to trade, the investor sets up a new company and, usually, closes the office. Budget for both steps if you expect the office to be temporary.

Consider an Australian education technology company. It hires 2 people in Ho Chi Minh City to meet schools and gather feedback, while licenses are sold by the Australian entity. A representative office fits perfectly. The day a Vietnamese school wants a local contract and a VAT invoice, it no longer does.

Branch vs subsidiary: key differences

A branch is the parent company operating directly in Vietnam. A subsidiary is a separate Vietnamese company that the parent owns.

The 5-year history requirement alone excludes many investors. The scope rule excludes many more, because only certain service sectors are committed for branch presence. In ordinary trading, manufacturing and consulting, a branch is usually not the available or the sensible route.

Liability is the other deciding point. A dispute or tax claim against a branch reaches the parent directly. With a subsidiary, exposure stays inside Vietnam.

How to choose a business structure based on your goals

The best business structure for foreigners in Vietnam follows the activity, not the investor's home-country habits. Here is how the choice usually plays out.

Small businesses and consulting services

A single-member LLC is the default. One foreign individual or one parent company owns it, decisions are fast, and the compliance load is the lightest of any operating structure.

Take a British management consultant moving to Da Nang. She wants to contract directly with Vietnamese clients. A representative office cannot do that. A single-member LLC owned by her personally can, with her as legal representative, provided she resides in Vietnam as Article 12.3 of the Law on Enterprises 2020 requires for at least 1 legal representative.

When 2 or 3 professionals start together, a multi-member LLC keeps control inside the group. Article 52 gives existing members the first right to buy any departing member's stake, which stops shares drifting to outsiders.

Trading and import-export businesses

Trading needs an operating company. The choice is usually between a single-member LLC owned by the parent and a multi-member LLC with a local or regional partner.

Watch the business lines. Wholesale and import-export are generally open to foreign investors. Retail to consumers requires a separate business license under Decree 09/2018/ND-CP, and opening further outlets may require an economic needs test. The structure does not change those rules, but it changes who holds the license and who carries the liability.

Consider a Korean trading house with 3 partners from different family branches. A multi-member LLC gives each a defined stake with first-refusal protection. A JSC would only be worth it if the group expects to bring in investors from outside.

Manufacturing and technology companies

Manufacturing almost always calls for a subsidiary. Factory leases, import of machinery, environmental approvals and investment incentives all attach to a Vietnamese legal entity with an investment project.

Technology companies face a fork. A software development centre serving the parent is a natural single-member LLC. A startup planning funding rounds, employee share options or an eventual listing should look at a JSC early, because converting later means a second round of registration and shareholder paperwork.

A German machinery maker that needs local assembly and after-sales service is a clear subsidiary case. A branch would expose the German parent to every claim in Vietnam, and its activities may fall outside the scope committed for branches anyway.

Ownership, liability and management considerations

Three questions cut across every structure.

Who will own it, directly or through a holding company? Many groups hold their Vietnamese subsidiary through a regional holding company. That choice affects which treaty applies to the investor's market access and how beneficial ownership must be declared. Since Decree 296/2026/ND-CP took effect on 23 July 2026, every layer must be traced to the individuals at the top, and holding capital on behalf of someone else is expressly prohibited.

Who will be on the ground? Every company needs at least 1 legal representative residing in Vietnam. If the owner lives abroad, plan for a resident director from the start, along with the work permit and residence card that person will need.

How much liability can the parent accept? Subsidiaries ring-fence risk in Vietnam. Branches and representative offices do not. For a parent with significant assets, that difference alone often settles the question.

100% ownership or a joint venture?

Ownership share is a structural choice too. In most sectors a foreign investor may hold 100% of the company. A joint venture with a Vietnamese partner is then optional, chosen for the partner's licenses, premises, customer base or knowledge of local procedure.

The trade-off is control. A 70/30 joint venture LLC means a members' council where the minority can still block decisions that the charter reserves for a higher voting threshold. Draft those thresholds deliberately, not from a template.

One more point. Market access rules sit above all of this. If a sector requires a Vietnamese joint venture partner or caps foreign ownership, it narrows the structure options before any preference comes into play.

What to decide before registering your company?

Before you file anything, write down clear answers to 5 questions. Together they point to the best business structure for foreigners in Vietnam for your plan:

1. Will the Vietnamese presence earn revenue locally, or only support the parent?
2. Who are the owners, and will new investors join in the next 3 years?
3. Which exact business activities will it carry out?
4. Who will be the legal representative living in Vietnam?
5. How much liability is the parent prepared to carry in Vietnam?

If the answer to question 1 is "no revenue yet", start with a representative office. If question 2 points to outside investors, look hard at a JSC. In almost every other case, the answer is an LLC.

Changing later is possible. A representative office can be closed and replaced by a company, and an LLC can be converted into a JSC. But each change is a new procedure, and choosing correctly at the start is usually the cheaper path.

Frequently asked questions about business structures in Vietnam

What is the best business structure for foreigners in Vietnam?

For most foreign investors, a single-member LLC. It allows full trading activity, limits liability, and keeps governance simple. A JSC is better when outside investors will come in. A representative office suits market research only.

Can a foreign individual own a company in Vietnam without a local partner?

Yes, in most sectors. A local partner is needed only where market access rules require a joint venture or cap foreign ownership.

Can a representative office sign contracts with Vietnamese customers?

Not for its own revenue. Under Decree 07/2016/ND-CP, its role is limited to liaison, market research and promotion for the parent company.

Is a branch cheaper than a subsidiary?

Not necessarily. A branch requires a parent with at least 5 years of operation, is limited to committed sectors, and exposes the parent to direct liability. For most investors, it is not the cheaper route once risk is counted.

Can I change the structure later?

Yes. An LLC can convert into a JSC, and a representative office can be closed after a company is formed. Each change is a separate procedure, so the initial choice still matters.

Talk the structure through before you commit

A 30-minute discussion of the 5 questions above usually settles which is the best business structure for foreigners in Vietnam in your particular case. LHD Law Firm reviews business plans for foreign investors and recommends the structure, ownership chain and legal representative arrangement before any filing starts.

• Ho Chi Minh City: HP Tower, Floor 7, 60 Nguyen Van Thu Street, Tan Dinh Ward. Tel: +84 28 2244 6739. Email: all@lhdfirm.com
• Ha Noi: Anh Minh Tower, Floor 4, 36 Hoang Cau Street, O Cho Dua Ward. Tel: +84 24 6260 4011. Email: hanoi@lhdfirm.com
• Da Nang: 71 Ly Tu Trong Street, Thach Thang Ward. Tel: +84 905 987 929. Email: danang@lhdfirm.com

Legal sources referenced: Law on Enterprises 2020 (Articles 12, 46, 47, 52, 74, 75, 79, 111, 113, 120, 137), Decree 07/2016/ND-CP (Articles 5, 7, 8, 9, 30), Decree 09/2018/ND-CP, Decree 296/2026/ND-CP.

Client's of LHD Law Firm

Hopefully, this article will help you know thoroughly about how to start a business in Vietnam as a foreigner. The above is two factors, in our opinion, it is also the two main difficulties of foreign businesses when they start their businesses in Vietnam. However, about corporate culture, you can gradually get used to but  the law must be clear from the beginning. Therefore, if you want to be more clear about business laws when you start a business in Vietnam, you can contact with LHD Law Firm (Free Quotation and legal advise)