4 notes on sole proprietorships in Vietnam from January 1, 2021

4 notes on sole proprietorships in Vietnam from January 1, 2021

According to Article 188 of the Enterprise Law 2020, four specific notes on sole proprietorships are prescribed as follows:

1. A sole proprietorship is an enterprise owned by an individual who is fully responsible with all his/her assets for all activities of the enterprise.
2. A sole proprietorship is not allowed to issue any kind of securities.
3. Each individual is only allowed to establish one sole proprietorship. The owner of a sole proprietorship cannot simultaneously be the owner of a household business or a partnership member of a partnership company.
4. A sole proprietorship has no right to contribute capital to establish or purchase shares or capital contribution in a partnership company, limited liability company, or joint-stock company.

According to Article 19 of the Enterprise Law 2020, the documents for registration of a sole proprietorship include:

1. The application for enterprise registration.
2. A copy of legal documents of the individual for the owner of the sole proprietorship.

Additionally, Article 189 of the Enterprise Law 2020 notes that the investment capital of the owner of a sole proprietorship is registered by the enterprise owner himself/herself. The owner of a sole proprietorship is obligated to register the exact total investment capital, which specifies the amount in Vietnamese Dong, freely convertible foreign currencies, gold, and other assets; for capital in other assets, the type of assets, quantity, and remaining value of each type of asset must be clearly stated.

During the operation, the owner of a sole proprietorship has the right to increase or decrease his/her investment capital in the enterprise's business activities. Any increase or decrease in the investment capital of the owner of a sole proprietorship must be fully recorded in accounting books. In the case of reducing the investment capital to below the registered capital, the owner of a sole proprietorship can only reduce the capital after registration with the Business Registration Authority.

Details of the document can be found in the Enterprise Law 2020, effective January 1, 2021.

Le Vy

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