Co., Ltd. is the type of business favored today by the flexibility in business and for capital. So between a 1-member limited company and 2 or more members, what kind of company should be established? This article will analyze the pros and cons of each type of limited company so that you can easily make a decision!
What is a limited company?
A one-member limited liability company is an enterprise owned by an organization or individual. The owner of the company is responsible for the company's debts and other property obligations within the company's charter capital.
Two or more members of co., ltd. are enterprises with 02 to 50 members who are organizations and individuals. Members are responsible for the debts and other property obligations of the enterprise within the amount of capital contributed to the enterprise.
Comparison of 1 member and 2-member limited company
Same
- All have legal status after receiving a business registration.
- Members can be individuals or organizations.
- The owners are all responsible for the company's obligations within the scope of their capital contribution.
- Neither issued bonds.
different
| Criteria | 1 Member Limited Liability Company | Limited Company 2 or more members |
| Features | There is only one member, be it an individual or organization. | The minimum number of members is 2, the maximum number of members is 50, members can be both an organization and an individual. |
| Organizational structure | Organized in 2 models: + Member Council, Director or General Director.+ Company President, Director or General Director. There is a controller for the owner who is an organization and no controller for the owner who is an individual. | These include: + Board of Members + Director or General Director + Supervisory Board. |
| Charter capital | Charter capital, the company may not reduce the charter capital, if it wants to increase the charter capital, the owner of the company invests more or mobilizes more capital contributed by others. | Have the right to reduce charter capital or increase charter capital by increasing member's capital contribution; Adjust the increase in charter capital level corresponding to the increased value of the company's assets. |
| Capital transfer | In case the company converts part of the capital to another person, it must carry out procedures for conversion of type to a limited company with 2 or more members. The company may only be transferred when it has paid off all debts and other property obligations. | If the members do not agree to buy back the contributed capital, they may transfer the internal shares in the company or transfer them to people outside the company.If the company has only two members and the other transfers all to the other, then the transition must be made to the type of one-member limited company. |
Pros and cons of 1 member limited company
Advantages
- The owner of the company will have full discretion to decide all matters related to the operation of the company.
- An individual can also set up a business, not necessarily find a partner to co-establish a business.
- The owner of a one-member limited liability company is solely responsible for the company's activities within the amount of capital contributed to the company, limiting risks to the owner.
- There is a compact, flexible organizational structure. The establishment procedure is simpler than the type of 2-member limited company.
Disadvantages
- The raising of capital will be restricted due to the non-issuance of shares. If you want to mobilize more capital contributed by individuals, other organizations will have to carry out procedures to convert the type of enterprise into a two-member limited company or joint stock company.
- 1 member limited liability company is subject to stricter legal regulation.
- The salary paid to the owner is not included in the reasonable cost when calculating corporate income tax
Pros and cons of 2-member limited company or more
Advantages
- Members are usually acquaintances, trust each other, so it is favorable to manage and run the company as well as raise capital.
- The capital transfer regime is strictly adjusted so investors can easily control the change of members, members who want to transfer capital will have to prioritize transfer to the remaining members of the company first.
- Members are responsible for the debts and obligations of the company within the amount of capital contributed, so in the event of a risk, the responsibility of the contributor will be less than that of other types of companies.
Disadvantages
- 2-member or more co., ltd. may not issue shares, so the company's capital mobilization will be limited. The company will not have the capital to be able to implement large business plans.
- The minimum number of members is 2 maximum is 50, because there are strict regulations on the number of members, the number of members is limited to a certain range, it is impossible to add people or fewer people if it exceeds or does not have enough people within the specified scope.
In general, Co., Ltd. is the type of company suitable for individuals and organizations who want to do business in a small, medium or no need to issue shares to raise capital. Depending on the needs and conditions of the investor, choose to set up a 1-member limited company or 2 or more members accordingly. If the investor wants to decide all activities of the company, it is recommended to choose a 1-member limited company and if the investor wants to cooperate with other investors to do business together or want more capital, it is recommended to choose a 2-member limited company or more.
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