What is a Branch Office? Benefits, Structures and Example

Branch Office (or branch) is a unit of operation owned and managed by a business entity. Establishing branch offices facilitates the expansion and development of business activities for the enterprise. In this article, Maison Office will help you understand what a Branch Office is, as well as its functions and operational mechanisms.

1. What is a Branch Office?

A branch office is a secondary location of a company, physically separate from the main office, that conducts some or all of the same business operations. Unlike a subsidiary, a branch office isn’t a separate legal entity. This means the main company has full responsibility for the branch’s actions and debts.

A branch office will typically have a branch manager who will report directly to, and answer to, a management member at the main office.

2. What are the functions of a Branch Office?

The branch will be responsible for performing all or part of the functions of the enterprise, including the function of representation by authorization. Therefore, the functions of the branch will be similar to those of the enterprise, specifically including:

– Networking, maintaining relationships, and transactions with the enterprise’s partners.
– Production, trading goods, and providing services.
– Promoting the expansion of investment opportunities, new business in the market.
– Researching, synthesizing information, supporting the enterprise in accessing the market and new partners.
– Promoting and introducing the enterprise’s products and services.
– Market review, representing the enterprise in litigation involving infringements, unhealthy competition affecting business operations.

– Representing the enterprise in its operational area, conducting business activities, and developing the market according to the established direction and strategy.
– Reporting on the results of activities, financial results, personnel, and legal issues related to the operation of the branch to the parent company.
– Compliance with legal regulations and company regulations throughout the operation.

3. Advantages and disadvantages of establishing a company branch

Establishing a company branch can bring many benefits to the business, but it also comes with challenges and risks. Therefore, before deciding to establish a Branch Office, let’s explore the advantages and disadvantages of this form!

3.1 Advantages

Key advantages of establishing branch offices include:

– Expanding the market and potential customer base, allowing businesses to seize new business opportunities in different regions.
– Establishing multiple branches in provinces and cities helps businesses reduce transportation costs and facilitates transactions and contract signing for customers.
– Establishing connections with local customers and partners, thereby increasing credibility and brand recognition for the business.
– Branches have functions similar to those of the enterprise, allowing them to proactively organize business activities and other internal matters within the branch.
– Branches are entitled to register their own seals, represent the company in contract signing within the scope authorized by the legal entity.
– Branches can establish business locations under the branch.

3.2 Disadvantages

In addition to the above advantages, establishing a company branch also has some limitations such as:

– Initial establishment procedures are quite complex, similar to establishing a new company.
– Difficulties in remote management and control lead to lack of transparency and legal risks.
– The enterprise is directly responsible before the law for all activities and misconduct of the branch.
– Conflicts with the parent company may arise regarding goals, strategies, and business directions.
– Branches are required to pay an annual business license tax.

4. How many branches can a business establish?

Article 45 of the 2020 Enterprise Law regulates the registration of branch establishment as follows: “Enterprises have the right to establish branches, representative offices in Vietnam and abroad. Enterprises may establish one or more branches, representative offices in a locality according to the administrative boundaries.”

With the above regulation, businesses now have the right to establish branches both domestically and internationally. In addition, there are no restrictions on the number of branches that a company can establish. Therefore, businesses can consider establishing multiple branches in various regions depending on the goal of expanding business operations.

5. Regulations on Naming a Branch Office

According to Article 40 of the 2020 Enterprise Law, naming a branch must comply with specific regulations as follows:

– The branch name must be written in Vietnamese alphabet characters, which may include the letters F, J, Z, W, numbers, and symbols.
– The branch name includes the name of the enterprise and must be accompanied by the phrase “Chi nhánh” (Branch), without using the phrases “Công ty” (Company) or “Doanh nghiệp” (Enterprise).
– The branch name must be written or affixed at the branch’s headquarters.
– The branch name must be written or printed smaller than the Vietnamese name of the enterprise on documents, records, and transaction papers issued by the branch.

The 2020 Enterprise Law clearly stipulates the regulations for naming company branches. Therefore, any violation of the above regulations by a business entity will result in administrative penalties ranging from 30,000,000 to 50,000,000 VND.

6. Procedures for Establishing a Company Branch

Below are the steps for registering the establishment of a branch according to the latest regulations:

Step 1: Prepare documents

First, the business entity needs to prepare a set of documents for registering the establishment of the branch, including the following documents:

– Notification letter of branch establishment (signed by the legal representative of the enterprise);
– Written decision on branch establishment;
– Copy of the meeting minutes on branch establishment (for single-member LLCs, sole proprietorships, this document is not required);
– Appointment decision of the head of the branch;
– Certified copy of one of the legal documents of the head of the branch:
– ID card/Citizen ID/Passport (for Vietnamese nationals);
– Passport, work permit, temporary residence card issued by the competent authority of Vietnam (for foreigners).

Step 2: Submitting documents

The business entity can submit the documents directly to the Department of Business Registration at the provincial or municipal level where the branch intends to be established. Or submit online through the website of the National Business Registration Portal.

Step 3: Receiving results

Within 03 working days from the date of receiving the documents, the Department of Business Registration will receive and verify the validity of the document set.
– If the documents are valid, the business entity will be issued a Certificate of Registration of branch activities.
– If the documents are not valid, the Department of Business Registration will notify in writing the required amendments or supplements to the document set.

7. Comparison between Branch Office and Representative Office

Branch Office and Representative Office are two important entities in the business field. However, not everyone can accurately distinguish between these two terms. The following section will help you understand the similarities and differences between a branch and a representative office:

7.1 Similarities

Although branches and representative offices are used for different purposes, they also have some significant similarities:

– According to the 2020 Enterprise Law, both branches and representative offices are dependent units, operating under the authority of the enterprise.
– Both forms apply the same naming principles (based on Article 40 of the 2020 Enterprise Law).
– Neither branches nor representative offices have legal personality.
– Branches and representative offices can be established both domestically and internationally.
– Branches and representative offices have their own tax identification numbers and must go through registration procedures at the Department of Business Registration where the branch or representative office is located.

7.2 Differences

To distinguish between a company branch and a representative office, we can rely on the following three basic criteria:

Therefore, it can be seen that a company branch has more functions and is more flexible in choosing its accounting form. However, establishing a branch will incur more taxes, including VAT, personal income tax, and corporate income tax.

If a business wants a unit to support product promotion, service promotion, or customer relationship development, a representative office would be a suitable choice. However, if a business needs to expand its market and strengthen its business activities, it should choose to establish a company branch.

A Branch Office is one of the options that businesses can choose when they need to expand and develop their business activities. However, establishing a branch requires the business to understand the legal regulations to avoid unnecessary mistakes and risks. Hopefully, this article by Maison Office has provided you with useful information!

Bui Duc Huy

Editor and content team manager at Maison Office.

With over 5 years of experience in consulting and extensive content editing in the real estate services and interior design field. Sharing valuable information with customers, partners, and attracting millions of views.