The time for the crucial question has arrived ! How much capital will I register and contribute to my company.
Usually at PCA, we always ask our Clients to consider three points before going ahead and deciding how much capital they want to contribute.
1/ The legal capital is the required by law. It is the minimum capital that you have to contribute that has been decided by decree by the Vietnamese legislator. Most business lines (activities), will require no minimum capital which means you can decide to register your company with a tiny amount! Activities such as management consultancy, restaurants, software development are common and typical activities requiring no minimum capital by law. Others, such as real estate development or tour operator will require a minimum legal capital and other “licenses”.
2/ The credibility capital is the capital that will give you credibility towards stakeholders. Among the latter, we can distinguish: banks, clients, suppliers, landlords, the government agencies. The level of credibility of your company will indeed be set by the level of capital you decide to contribute. Depending on your business, you may not require to be “credible” with your partners but one should be careful about the government agencies. For instance a low capital may bring trouble to your company and make straightforward things such as getting a work permit obtention, much more difficult. Until May 2021, we have not incorporated a company with less than 5000USD capital, less than that amount can compromise immigration documents and other documents granted by the government agencies. Please note that this amount may change with time and new law updates.
3/ The capital of a business is the money it has available to pay for its day-to-day operations and to fund its future growth. Once you take into account the point 1/ and 2/, it is time to consider your business needs. If you open a restaurant, you will need more capital than an IT development company in which you will be the sole employee. It is necessary to calculate the capital i.e. the working capital in our case to make sure the business will not miss cash before the sales can cover the expenses. Operations such as loan agreement and/or capital raise are expensive to make compliant and we would like to avoid our Clients to go that way as much as possible, that is why it is more judicious to do it right at the first try! For an entrepreneur, it is all about allocating the right amount of money to the right account!
Once you have considered these 3 points, you are ready to decide the right amount of contributed capital for your brand new company and go ahead with your incorporation.
Contact PCA Company Services experts for more on the charter capital of your Limited Liability Company !