A partnership company is a business entity where at least two individuals or entities come together to operate under a common name, sharing joint and unlimited liability for any debts or obligations. This model is widely used in family businesses and small enterprises, offering benefits such as ease of management, trust among partners, and easier access to financing.
1. What is a Partnership Company?
A partnership company is a business entity where at least two people contribute capital and operate under a common name, sharing joint and unlimited liability for debts and obligations arising from business activities.
In practice, this type of company is often established by family members. Due to the joint and unlimited liability, it is essential that the members trust and truly understand each other. The establishment of a partnership is typically based on a contract between the members, although agreements can be made orally. In some cases, even without a formal declaration, simply engaging in joint commercial activities is considered the establishment of a partnership business.
Pursuant to Article 177 of the 2020 Enterprise Law, a partnership is an enterprise in which:
– There are least 02 partners that are joint owners of the company and do business under the same name ((hereinafter referred to as “general partner”). There can be limited partners in addition to general partners;
– A general partner shall be an individual whose liability for the company’s obligations is equal to all of his/her assets;
– A limited partner can be an organization or an individual whose liability for the company’s debts is equal to the promised capital contribution.
2. Advantages and Disadvantages of a Partnership Company
2.1. Advantages of a Partnership Company
In the era of economic development and international integration, partnership companies have become a very popular business model to enhance the competitiveness of enterprises by combining assets, resources, and experience from the partners.
– Easy to gain trust from business partners: This arises from the credibility of each individual in the management team, as they are jointly and severally liable for the company’s obligations with all their assets, ensuring a high level of responsibility.
– Management and operation are not too complex: Due to the small number of members, and because the members are trustworthy and reputable, management is relatively simple.
– Easier to obtain financing: Banks are more likely to trust and lend money to this type of business, as well as allow deferred debt repayment, due to the unlimited joint liability of the partners.
– A lean organizational structure that is easy to manage: This is ideal for small and medium-sized enterprises.
– Recognized as a legal entity: This business model is officially acknowledged as having legal status.
2.2. Disadvantages of a Partnership
As with any business model, there are some drawbacks, particularly related to capital, such as the ability to raise capital or make contributions. For partnership companies, the inability to issue any form of securities limits their funding sources, requiring members to contribute more assets or accept new partners. Additional disadvantages include:
– Blurring of personal and company assets: There is no clear distinction between company assets and personal assets, which could lead to legal complications.
– High risk: Due to joint and unlimited liability, general partners face significant risks.
– Capital raising limitations: Despite having legal status, partnership companies cannot issue securities, so capital raising depends solely on the contributions of existing or new members.
– Ongoing responsibility: General partners remain responsible for company debts even after leaving the company, especially for commitments made before their exit.
3. Documents and procedures for establishing a partnership
3.1. Dossiers for establishing a partnership
To register a partnership company, the following documents are required:
- Application for business registration in the prescribed form.
- Company’s charter.
- List of company members and information about capital contributors (if applicable).
- A copy of identification documents (citizen ID, passport, etc.) of the members.
3.2. Procedures for establishing a partnership
The registration documents must be submitted to the Business Registration Office at the company’s main office location.
3.2.1. Direct Registration or by Postal Service
The applicant submits the business registration documents to the Business Registration Office according to Decree 01/2021/ND-CP.
After receiving the registration documents, the Business Registration Office issues a receipt. The company will receive its business registration certificate within 3 working days.
If the documents are incomplete or the company name is incorrect, the office will notify the applicant within 3 working days to amend the documents.
3.2.2. Registration via Electronic Network with Public Digital Signature
The applicant submits the information, uploads electronic documents, and signs the registration electronically via the national business registration portal (https://dangkykinhdoanh.gov.vn).
After completing the submission, the applicant will receive an electronic receipt.
If the documents meet the requirements, the Business Registration Office issues the business registration certificate. If not, they will request amendments.
3.2.3. Registration via Electronic Network with Business Registration Account
The applicant uses the business registration account to submit information and sign the registration documents online.
The registration process and receipt issuance are similar to the above methods.
After successful submission, the applicant will receive a receipt, and if the documents are accepted, the Business Registration Office will issue the business registration certificate.
While partnership companies offer advantages such as simplicity, trust, and financial flexibility, they also come with challenges, particularly regarding liability, capital raising, and the merging of personal and company assets. Despite these limitations, the partnership model remains a popular choice for many businesses due to its straightforward structure and legal recognition.
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