Vietnam Sole Proprietorship Registration

Vietnam Sole Proprietorship Registration

10-02-2018 84 Comments 254 Views

In Vietnam, if you are engaged in any activity that is carried out on a continual basis for the purpose of gain, you must register a business - such as sole proprietorship, private limited company or limited liability partnership. This guide provides information on registration of a sole proprietorship in Vietnam.

To learn about various types of business entities in Vietnam, refer to Vietnam Representative Office Registration.

Sole proprietorship is the simplest form of business structure in Vietnam. However, it is suitable only for very small single-owner type business that does not carry any risks. Unlike a private limited liability company, a sole proprietorship does not provide limited liability protection and your personal assets are not protected from business risks.

Vietnam sole proprietorship registration

Vietnam sole proprietorship registration

Sole - Proprietorship - Quick Facts.

  • A sole proprietorship in Vietnam does not constitute a separate legal entity therefore it is not distinct from the owner - proprietor. The business owner is personally accountable for all liabilities incurred during the course of the business.
  • Any Vietnam registered company or a natural person of at least 18 years of age is eligible to register a sole proprietorship.
  • Sole proprietorship must appoint at least one manager who is a natural person of at least 21 years of age and who is ordinarily resident in Vietnam - a Vietnam Citizen or a Permanent Resident. In most of the cases, the owner himself - herself will act in this capacity.
  • A local Vietnam address must be provided as the business address for the sole proprietorship. Under the Home Office Scheme, residential premises can be used as a business address but owners must seek written approval from HDB or URA to use their homes for home office use.
  • Vietnam citizens or PRs registering Sole Proprietorship must ensure that their Medisave accounts have sufficient funds before proceeding with the registration.
  • Profits of the sole proprietorship are treated as income of the individual who owns the entity, thus it is subjected to a tax rate as that of personal income and where the owner is a pte ltd company, the profits will be subjected to corporate tax rate.
  • As a Vietnam sole proprietorship is not a legal entity, it cannot register another business firm.
  • Sole proprietorship must ensure that all letterheads, invoices, bills or other documents used for the purposes of doing business have the registration number listed.
  • Sole proprietorships do not need to audit their accounts or file annual returns with Accounting and Corporate Regulatory Authority as any profits will be taxed as personal taxes.
  • Raising funds or expansion options as a sole proprietorship will be limited because investors will hesitate to deal with non incorporated entities.
  • Any changes to the particulars of the business must be lodged with the Registrar within 14 days from the date of change.
  • Registration of Vietnam sole proprietorship needs to be renewed annually.

Considerations for Foreigners.

Practically, a sole proprietorship is not an option for foreigners. Foreign business professionals should incorporate a private limited company instead. For further details about private limited companies, refer to set up a new company in vietnam.

Documents Required and Registration Procedure.

In order to register a sole proprietorship business in Vietnam, the following documents/information are required:

  • Proposed business name.
  • Description of principal activities.
  • Local business address for the proposed business.
  • Copy of Singapore ID for the owner.
  • Local residential address of sole-proprietor.
  • Declaration of compliance and Statement of Non Disqualification.

Registration procedure involves - reserving the name and registration of the business. The registration procedure is computerized and quick. Registration of sole proprietorship can be completed within 1 day, provided all the documents are lodged properly with due endorsements. However if the name or the nature of business requires referral to another authority, it may take a few weeks. Examples of businesses that may be referred to relevant authorities include financial, media, educational services.

To maximize chances of speedy name approval, make sure that it.

  • Is not identical or too similar to any existing local company or business names.
  • Does not infringe with any trademarks or copyright.
  • Is not obscene or vulgar.
  • Is not already reserved.

Documents Issued by Accounting and Corporate Regulatory Authority.

Once you have submitted the sole proprietorship business registration application and if everything is in order, the registrar will send an email notification confirming the successful registration along with the registration number. Vietnam government does not issue a hardcopy registration certificate anymore by default as the soft copy is valid and acceptable in Vietnam.

After you have received the email notification of successful registration, you can retrieve a business profile for your new Vietnam sole proprietorship that contains important registration information. The original email notification of business incorporation along with the business profile are the two important documents that you will need in Vietnam to open business bank account, sign office lease, obtain a business phone line.

Bank Account Opening.

After registering the sole proprietorship in Vietnam, a bank account can be opened in any of the several international, foreign and local banks in Vietnam. The business can open separate accounts of various currencies or a single multi - currency account. The account opening procedure varies across the banks and most of the bank require the business owner to be present in person while opening the account. Typically, the following documents will be required:

  • Account Application.
  • Copy of Vietnam Identity Card for the owner.
  • A latest print out of the business profile for sole - proprietorship.
  • Minimum Deposit in Cash or Cheque.

Sole Proprietorship Advantages.

  • Ease of setting up: It is the easiest and least expensive business structure to set up.
  • Owner Control: As a sole proprietor you are in complete control of all the business affairs including decision making.
  • No profit sharing: You accrue all income generated by the business.
  • Ease of termination: Terminating a sole proprietorship is easier, less time consuming and less expensive than other business entities.
  • Least compliance requirements: You are free of the obligation of filing returns annually and only need to renew your membership every year.

Sole Proprietorship Disadvantages.

  • No separate legal entity: You are inseparable from your business. This makes you financially and legally responsible for all debts and legal actions against the business.
  • Unlimited liability: Creditors may sue you for debts incurred and can also obtain a court order to claim against your personal assets, including your property.
  • No corporate tax benefits or incentives: Taxes are determined at your personal income tax rate and you do not enjoy special tax benefits that are available to a private limited company.
  • Limited capital: Capital is limited to your personal finances and the profits generated by the business. Thus, business expansion is limited and difficult.
  • No perpetual succession: The business lives and dies with you as you and the business are one and the same thing.
  • Low public perception: This entity is the least preferred for serious businesses as nobody would be willing to lend you large sums of money. It is also difficult to attract high - caliber employees or senior level executives who usually look for a more advanced form of business structure such as a private limited company.
  • Sale - transfer of all or part of the business: You can transfer the business only by the sale of business assets.

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In Summary.

Sole proprietorship is the basic no frill type of entity suitable for businesses with no or negligible risk. This type of business entity essentially meets the statutory requirement to register all profiteering activities carried out on a continuous basis. Freedom from compliance formalities and undivided authority is a merit but also the limiting factor for potential growth and development. Due to the unlimited liabilities, we do not recommend sole proprietorship to business professionals. Instead, we recommend that they incorporate a private limited Vietnam company.

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