The time for the crucial question has arrived ! How much capital will I register and contribute to my company.
At PCA, we ask our Founder(s) to consider three factors helping them to decide how much capital they want to contribute.
► The legal capital is the required by law for your specific business line(s) related to the activities you wish to start in Vietnam. It is the minimum capital that the Founder(s) must contribute that has been decided by decree by the Vietnamese legislator and prescribed by the Investment law. Most business lines (activities) will require no minimum capital i.e. the Founder(s) may decide to register the company with a marginal capital. Common activities such as management consultancy, restaurants, software development are 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 “license(s)” called sub-license(s).
► The credibility capital is the one that will grant the Founder(s) credibility towards stakeholders. Among these, we distinguish banks, clients, suppliers, landlords, the authorities, etc. 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”, but one should be vigilant about the governmental agencies. For instance, a low capital may not allow the Founder(s) to sponsor work permits, business visas and temporary resident cards.
► The working capital of a business is the capital that is available to pay for its day-to-day operations and to fund its future growth before sales can take over. Once the legal and the credibility capitals are sorted out, it is time to consider your business needs. 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. We advise the Founder(s) to careful calculate the need in working capital before deciding an amount.
Contact PCA Company Services experts for more on the charter capital of your Limited Liability Company !