From January 01, 2021, the Enterprise Law 2020 takes effect, introducing several new regulations regarding sole proprietorships. Below are 6 essential points to know when establishing a sole proprietorship in Vietnam.
Article table of contents
6 things to know when establishing a sole proprietorship in Vietnam (Illustration image)
1. What is a sole proprietorship?
According to Article 188 of the Law on Enterprises 2020, a sole proprietorship is an enterprise owned by an individual who takes full responsibility with all their assets for all activities of the enterprise.
2. Characteristics of sole proprietorships in Vietnam
Article 188 of the Law on Enterprises 2020 specifies the following characteristics of sole proprietorships:
- Not allowed to issue any type of securities;
- Not allowed to contribute capital to establish or purchase shares, capital contributions in a partnership, limited liability company, or joint stock company;
- Each individual is only entitled to establish one sole proprietorship;
- The owner of a sole proprietorship is personally responsible with all their assets and cannot concurrently be the owner of a business household, a member of a partnership.
3. Conditions for obtaining a Certificate of Business Registration for a sole proprietorship in Vietnam
According to Decision 1523/QD-BKHDT, the conditions for obtaining a Certificate of Business Registration for a sole proprietorship are as follows:
- The business lines registered must not be prohibited from business investment;
- The enterprise's name must be appropriately constituted: The name includes two components (type + proper name); does not violate the naming prohibitions, does not duplicate and does not cause confusion, does not use a foreign language and does not abbreviate the enterprise's name;
- Having valid business registration documents;
- Paying the business registration fee in full.
4. Procedures for establishing a sole proprietorship in Vietnam
For direct registration (the fee is VND 50,000 according to Circular 47/2019/TT-BTC)
- The person establishing the enterprise or the authorized person submits 01 set of documents and pays the fee at the Business Registration Office where the enterprise is headquartered.
-Upon receipt of the documents, the Business Registration Office issues a receipt.
- Within 03 working days, if the documents are valid, the Business Registration Office issues a Certificate of Business Registration for the sole proprietorship. If the issuance is refused, the Business Registration Office will notify in writing.
For electronic registration using a digital signature (free of charge)
- The legal representative declares information, uploads electronic documents, and digitally signs the registration documents according to the process on the National Business Registration Portal: https://dangkykinhdoanh.gov.vn
- After sending the registration documents, the legal representative receives an electronic receipt. If the documents are not valid, the Business Registration Office will notify electronically for amendments or additions.
- If the documents meet the conditions, the Business Registration Office sends the information to the tax authority to create the enterprise code. After receiving the code from the tax authority, the Business Registration Office issues the Certificate of Business Registration and notifies the enterprise.
For electronic registration using a Business Registration Account (free of charge)
- The legal representative declares information, uploads electronic copies of personal authentication documents on the National Business Registration Portal to be granted a Business Registration Account.
- The legal representative uses the Business Registration Account to declare information, upload electronic documents, and authenticate the registration documents electronically on the National Business Registration Portal https://dangkykinhdoanh.gov.vn
- After sending the registration documents, the legal representative receives an electronic receipt.
- The Business Registration Office reviews and sends an electronic notification for amendments or additions if the documents are not valid. When the documents meet the conditions, the Business Registration Office sends information to the tax authority to create the enterprise code. Upon receiving the enterprise code from the tax authority, the Business Registration Office notifies the enterprise electronically of the issuance of the Certificate of Business Registration.
- Upon notification of the issuance, the legal representative submits a hard copy of the registration documents along with the receipt to the Business Registration Office. The legal representative can submit directly or by post.
- Upon receipt of the hard copy, the Business Registration Office reconciles the documents and issues the Certificate of Business Registration if the contents match.
Note: If the hard copy is not received within 30 days from the notification date, the electronic registration will no longer be valid.
5. Documents for establishing a sole proprietorship
According to Decree 122/2020/ND-CP on coordinating procedures for enterprise registration, Decree 78/2015/ND-CP on enterprise registration, and Decision 1523/QD-BKHDT, the documents include:
1. Business Registration Application;
2. A valid copy of one of the personal identification documents as stipulated in Article 10 of Decree 78/2015/ND-CP of the sole proprietorship owner (valid citizen ID card, ID card, or Vietnamese passport for Vietnamese citizens; valid foreign passport or equivalent international document for foreigners).
3. The original Business Registration Certificate and a valid copy of the taxpayer registration certificate if the enterprise is converted from a business household.
Note: When authorizing another person to perform the registration procedures, the authorized person must submit a valid copy of one of the personal identification documents, along with one of the following documents (not necessarily notarized or certified):
- A valid copy of the service contract with an organization providing registration-related services and the organization’s authorization letter for the individual conducting the procedures.
- An authorization letter for the individual performing the registration procedures.
6. A sole proprietorship can be converted into an LLC, JSC, or partnership in Vietnam
According to Article 205 of the Law on Enterprises 2020, a sole proprietorship can be converted into a limited liability company, joint stock company, or partnership at the discretion of the sole proprietorship owner if the following 4 conditions are met:
- The enterprise meets the conditions for obtaining a Certificate of Business Registration;- The sole proprietorship owner commits in writing to personally be responsible with all their assets for all unpaid debts and to pay the debts when due;
- The sole proprietorship owner has a written agreement with the parties of unfulfilled contracts on the acceptance and continuation of those contracts by the converting company;
- The sole proprietorship owner commits in writing or agrees in writing with other capital-contributing members on the acceptance and use of the current employees of the sole proprietorship.
Within 03 working days from the receipt of the documents, the Business Registration Office reviews and issues the Certificate of Business Registration if the conditions are met and updates the legal status of the enterprise in the National Business Registration Database.
Le Vy
