The sole proprietorship is the simplest way of doing business in Vietnam. It comes with various advantages, among which swift registration procedure and no required share capital.
Below, our company formation agents in Vietnam explain the conditions and process to open a sole trader in this country. We are at your service if you want to operate under this type of business form.
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Documents to open a sole proprietorship in Vietnam
Before going to the registration phase of this type of business, let’s review the documents you need to draft if you want to become a sole proprietor in Vietnam:
- the standard application form issued by the Companies House;
- ID copy if you are a Vietnamese citizen or residence permit if you are a foreigner;
- the trading name reservation form;
- proof of a local address;
- valid email address and phone number;
- details about the capital injected in the business;
- details about the activities to complete;
- an estimated number of employees (if you intend to hire personnel).
Our Vietnamese company formation consultants can help you prepare the registration file. You should also note that you need to register for taxation when choosing this business form. Our accountant in Vietnam can help with this step.
Who can operate as a sole trader in Vietnam?
Here are the conditions a person must meet to be allowed to create a Vietnamese sole proprietorship:
- he or she must be an adult (at least 18 years old);
- the person must be in full mental capacity;
- he or she must have not been convicted for any crime (a clean criminal record is required);
- the applicant cannot work in public administration or in the army.
Foreign citizens are also allowed to open companies in Vietnam, including sole proprietorships.
How to register as a sole trader in Vietnam
The sole proprietor is registered like any other type of company with the Vietnamese Trade Register. Once the documents listed above are gathered, the applicant can send them via regular postal services or online. Our company registration representatives in Vietnam can also handle this process. Following that:
- it will take about 3 days for the application to be reviewed and accepted or denied;
- in case of acceptance, the sole proprietorship certificate is issued in 6 working days;
- in case of denial, the applicant can complete the missing file or correct what was wrong (clarifications for easy correction is provided by the Registrar).
To avoid mistakes, you can rely on our local specialists in drafting the application.
Post-Registration Steps
After opening a sole proprietorship in Vietnam, there are a few more steps that will ensure the company will be ready to conduct business activities abiding the law in effect. The company needs a company seal, if the owner will choose to use one and a Digital Signature Certificate to manage electronic tax filings, which are mandatory.
Another necessary step when opening a company in Vietnam is opening a corporate bank account and depositing the declared investment capital. If the sole proprietor hires employees, they must register labor usage and pay mandatory social, health, and unemployment insurance contributions.
If you set up a sole proprietorship in Vietnam and manage to considerably grow the business, at a certain point, it will be more advantageous to turn the business into an LLC. This is because an LLC provides limited liability, separating the owner’s personal assets from the business debts and financial risks. Our company formation lawyers in Vietnam are at your disposal, ready to advise you on the right move and assist you with the transition.
Licensing requirements
It is possible for a Vietnamese sole trader to obtain a business license. This is often the case of professionals, such as doctors, dentists, architects to have their degrees and certifications that attest to their qualifications.
Apart from these, there is also a license fee to pay in accordance with the capital invested, as follows:
- VND 2 million per year, if the sole trader invested less than 10 billion dong;
- VND 3 million per year, for a capital of more than 10 billion dong.
Our agents can advise on the licensing fees to pay as a sole proprietor in Vietnam.
Differences between a Sole Proprietorship and an LLC
Here are a few differences between opening a sole proprietorship in Vietnam and opening an LLC, which will help entrepreneurs decide between the two. The key difference is the fact that, for the sole proprietorship, the owner is personally responsible for all business debts, obligations, and legal risks. In an LLC, the company is a separate legal entity. When they open a company in Vietnam in the form of an LLC, the owners are only liable up to the amount of capital they have contributed to the company.
The sole proprietorship allows only one owner, meanwhile the LLC can have up to 50 owners or members. Another difference consists in the level of rising capital for company formation in Vietnam, which is lower for a sole proprietorship and significantly higher for an LLC. Also, the transfer of ownership is more difficult for a sole proprietorship than for the Limited Liability Company.
A sole proprietorship is easier to establish, while the LLC is subject to stricter corporate laws and more compliance and reporting requirements. Our company formation agents in Vietnam can advise you on the best business form for your company and can help you set it up easier and quicker.
Taxation of sole traders in Vietnam
From a taxation point of view, please consider that the sole trader will be subject to the corporate tax, just like any other business. As such, after registering with the Tax Department, the proprietorship must pay the:
- 20% corporate tax (other rates may apply in accordance with the types of activities developed);
- 0% to 10% value added tax.
Opening a sole proprietorship in Vietnam is a decision and process that can be made best when collaborating with an experienced company incorporation agent. For new entrepreneurs, the sole proprietorship offers speed and simplicity. If you want to open a sole proprietorship in Vietnam and need support, do not hesitate to contact our local representatives.