Advantages and disadvantages of a single-member limited liability company

1. Advantages of a single-member limited liability company

• Because a single-member LLC is owned by an organization or an individual, the owner will have the right to decide all matters related to the company's operations without having to occasionally ask for opinions or suggestions from other parties, making company management simpler;
• Because a single-member LLC possesses legal status, the company is recognized as a legal entity that can participate in relationships independently. This gives the business stability in legal life and legal entity and does not have to face unexpected changes like natural persons, legal entity activities are prolonged and are not affected by changes in members;
• The owner of a single-member LLC is only liable within the limit of the company's charter capital according to Clause 1, Article 74 of the 2020 Enterprise Law, thereby minimizing risks for the owner when participating in production and business activities;
• The organizational structure is closely built with the Chairman of the company, Director or General Director. In the case of a company owned by an organization, it can be organized according to the model of the Board of Members (with one person elected as Chairman of the Board of Members), Director or General Director (according to Article 79 of the Enterprise Law 2020);
• The company owner has the right to transfer all or part of the charter capital of a one-member LLC according to Article 76 of the Law on Enterprises 2020;
• Ability to increase charter capital by contributing additional capital from the owner of the single-member LLC; mobilizing investment capital from other individuals or organizations (according to Article 87 of the Enterprise Law 2020) or through issuing bonds.

Note: A single-member LLC must convert its type of company into a joint-stock company or a two-member LLC when increasing its charter capital from contributions from other organizations or individuals.

2. Disadvantages of a single-member limited liability company

• A single-member LLC has a more stringent legal system than a private enterprise;
• A single-member LLC is not allowed to issue shares, so it is limited in the process of raising capital for the company;
• To raise additional capital from other individuals or organizations, a single-member LLC needs to carry out procedures to convert its business type to a two-member or more LLC or a joint stock company.

A single-member LLC has advantages such as simplicity in management, protection of personal assets and high control, but also has disadvantages such as limitations in capital mobilization, dependence on personal financial resources and lack of diversity in decision-making opinions.