Viet Nam- proud to be one of the place which has the percentage of start-up companies risen the most in

the world and continue to grow every years till now. However, according to Tuoi Tre newspaper, just

almost only 3% of them can success and more than 80% will shut down within a year. The reason for this

situation can be explained in various ways: lack of knowledge about business management, cannot raise

enough capital,… and the biggest reason behind all of those aspects is that they had already wronged in

choosing the type of business to operate. When starting into a new business, youngers usually build up a

sole proprietorship company because they look for the simpliest formation. They cannot believe in other

people so they try to maintain all the works by themselves. And as a result, they fail because of

overloaded work. Whereas with the person who starts by a partnership company tend to be easier to

success due to its effectiveness but also simple at the same time. It is the opinion of this writer that the

weight of evidence tips the scales towards those who believe that partnership company is the wise choice

to start a company.

A partnership is a form of business where two or more parties (known as “partners”) agree to cooperate

due to their mutual interests, along with the responsiblility for managing the company, income or losses

that the business generates. Doctors, dentists and socilitors are typical examples of professionals who may

go into partnership together, they can benefit from share expertise, but like sole proprietorship, have

unlimited liability. What makes it different from sole proprietorship is that a partnership can also have a

limited liability partner ( limited liability partner: someone who invests capital into business, but have no

right in controlling the business.) who shall only takes the responsibility for the debts of the company to

the extent of the amount of capital that they have contributed to the company but in exchange have no

parts in running the enterprise (A.172.1c Enterprise Law). It should also be mentioned that a partnership

may start and operate under one common name (hereinafter referresd to as unlimited liability partners),

which creates a distinction in legal entity between partners and business. For this reason, a partnership

shall enjoy legal entity status as from the date of inssunace of enterprise registration certificate (A.172.2,3
Enterprise Law). To distinguish partnership from other type of businesses, there are four features which

need to be discussed in details: financial resources, partnership management, taxation, reputation.

It cannot be denied that partnership management is the easiest and the most effective way of all for a

start-up company. To prove this statement is true, let’s compare between partnership and sole

proprietorship as an general example. Regarding to sole proprietorship, a type of business run by one

individual who has full direct control and responsibility of all decisions in the company making it

sometimes difficult to them because of their lack of knowledge about the situation. Whereas the main

advantage of partnership over sole proprietorship is shared responsibility, this allows each partners can

concentrate on their own specialization. Rather than trying to run the company all by yourself, splitting

the work according to their skills will allow them to make the most of their abilitties. To illustrate the

point, consider a hairdresser was in partnership with someone with a business background, so in order to

be a successful business, one should concentrate more on providing hair salon service and another shall

handle the finance.

One should also be noted in opening a company is that reputation is not an easy thing to build up in a

short time, but in partnership companies, they are much better at creating a branch that is widely known.

This is due to the fact that partnership companies combine individuals reputation of who already had their

name in specific fields also with unlimited liability relationship that each members committed to the

company which make the company easier to create trust and gain profit from the customers. A clear-cut

example of this would be Certified Public Accountant Viet Nam partnership company ( now is CPA Viet

Nam limited liability company) with the reputation from being a member of Moore Stephens

International auditing firm has easily become well-known in Viet Nam comapnies and within 5 years has

successfully became an Official member of Vietnam Tax Consulting Association. The effectiveness of

these above aspects makes the partnership management become a crucial reason why people tend to

choose this formation in the first time operating the business.

Financial resource is another essential element when operating a company. The fact that there are less

financial burdens when it comes to partnership business makes this type of formations the best choice for

newcomers to conduct a new business. Starting a new company can be really expensive, you might have

overspent for inventory, equipment, retail space and labour salary… and a partner can easily overcome

your financial issue. Instead of paying everything yourself, more parties means lesser contribution of

capital is required from each partner, which will allow better flexibility and more potential for growth. It

also means more prospective profit, which shall be equally shared between partners. There is alternative

point of view, which holds that ordinary partnerships are subject to unlimited liability just like sole

proprietorship. This is due to the fact that partners share the liability and financial burdens of the business

of all of their asset, which in most of partners’s point of view are very risky. However, unlike sole

proprietorship’s formation, their concern can be countered by the formation of a limited liability

partnership, which can both ease their disturb and still taking advantage of the flexibility of the finance.

As a result, partnership company is the best choice for whom who wish to operate a enterprise but still

getting trouble with raising capital.

Opponents of the point of view outlined above profess that taxation is a major drawbacks of partnership.

This may be the reason why partnership does not receive as much concern as sole proprietorship by

enterpreneurs. For partnership, this can be explained due to article 36.1, Law on Enterprise 2014 stated

that partners in the partnership company must transfer their ownership of assets contributed as capital to

the company. Therefore, there still a separation of assets between company members and the company, so

the assets of the enterprise and partners are not one. One should also noted that Law of personal income

tax, article 2a stated that after paying enterprise tax, each partners in the partnership company still have to

pay personal income tax due to their profit which is divided base on the capital contribution ratio.

Whether the responsibility of a member in the company is finite or infinite does not affect whether or not

it is subject to personal income tax. Because of this, the company has to pay twice as much as other type

of business. On the other hand, since sole proprietorship does not enjoy separate legal entity status, it is
not taxable. This does not mean that sole proprietorship companies can avoid the duty of paying tax, but

to be compare with partnership having double tax, it might be a better choice.

Overall, after esculating specific aspects between sole proprietorship and partnership, serveral

conclusions can be made. Firstly, partnership is better for newcomers when operating a company. This

can be explained by various factors that had already given above: finance, management, reputation, profit

which are all the simplest problems that each companies had at the first step but this formation is suitable

for all those requests. Secondly, because of double tax on both enterprise and partners in partnership

which makes the profit that each members earn in the first place became smaller and smaller. For this

reason, many entrepreneurs prefer to open a company by themselves. However, that thought of most start-

up makes it the reason why their companies cannot celebrate their “second” year in business. With the

idea that you will do everything by yourselves will prevent your company opportunity to become partners

with international cooperations. When talking about cooperating with big cooperations, trust is a must

that both parties must have for each other, a trust in your partners, a trust in your project will succeed.

Although people usually dennied that the value of trusting people because it is not a visible benefit so

they refuse to rely on it. However, imagine that both partner have no intend to trust each other, so what

will happen in that situation. For instance, a hundred billions contract was signed and no one can

guarantee about the other side productivity, the case happens is that they both want to check all the work

by themselves and the amount of work is now double which wil make them more nervous. This still be a

burden for a large group of persons to finish and one side seems to be even more impossible. And

apparently, partnership give you more advantage in this factor. By knowing each other reputation in

specific fields will help you to divide each partners works more efficiently. Therefore, partners do not

have so much worries about each other because they have a certain trust on their abilities. The way of

sharing the work among people helps the productivity become more efficient and effective.

It can be clearly seen that for start-up companies, partnership might be considered to be a better choice

because of its particular benefits such as management, reputation, finance. Although there are some
drawbacks with this type of business. However, for an entreprenur, when combining different aspects

together to decide which formation to operate, partnership seems to to be better choice to start with due to

various advantages bringing to you in first step. Therefore, there is ample evidence to conclude that

partnership will give newcomers better start.