7 Pros and Cons of Sole Proprietorship In Vietnam To Consider

A sole proprietorship is one of the most popular business organizations worldwide. They are easy to set up and require fewer resources and legal requirements than other business entities. Vietnam has a favourable business climate, and is usually welcome to investors. It’s no surprise that the region has a large number of sole proprietorships or small businesses. If you’re interested in setting up one-man business in Vietnam, you need to learn about what you stand to gain and any potential threats to your operations. This piece will reveal everything you need to know about setting up sole proprietorship in Vietnam.

Sole Proprietorship in Vietnam: Upside and Downside

The Law on Enterprises 2020 defines a sole proprietorship as a business entity that’s owned by a single person. This person will have a full control over the business’s activities and use of capital. It’s the simplest business structure available to investors, and serves as a double-edged sword. The benefits and drawbacks of this type of business includes;

Upside of a Sole Proprietorship

Full Control of Business’s Resources

A sole proprietorship will be completely responsible for controlling the business’s resources. He or she will control the businesses operations too, and will increase or decrease capital during the operations. Most sole proprietorships are completely funded by the owner of the business. However, there are situations when this owner will seek for additional financing from other sources.

Full Access To Business’s Profits

A sole proprietorship does not have a board of directors or partners to share their profits. This means that he will be completely responsible for all his profits. He will decide how to introduce it back into the business or spend it for personal reasons. It’s also up to the owner to avoid a conflict of interest between the businesses’ and personal needs.

Easy To Set Up

As mentioned earlier, a sole proprietorship is one of the simplest business organizations in Vietnam. The registration process for this type of business is relatively simple. Also, the required documents for the business incorporation is simple and easy to obtain.

Downside of a Sole Proprietorship

These are the drawbacks of a sole proprietorship;

• He or she may be overwhelmed by the scale of operations of the business. Even after hiring qualified staff, a sole proprietor will remain in charge of the business.
• He or she can’t issue any shares of the business.
• He or she will only be allowed to own a single sole proprietorship, and will not be allowed to join a separate partnership.
• He or she cannot contribute to the formation of limited liability companies or joint stock companies. They can also not buy shares or stakes in another business.

Eligibility For a Sole Proprietorship

To become a sole proprietor, the person must meet the following requirements;

• Must be 18 years and above
• Must have the mental capacity to run a business
• Must have no criminal records
• Mustn’t be a state official or member of the army
• Mustn’t own a sole proprietorship or any other business

What Are The Requirements and Procedure To Register For A Sole Proprietorship?

The Law on Enterprises on 2020 states that the documents required to register for a sole proprietorship include;

• Application form for the business
• Official name of the business
• Business address, fax number, phone number, and email address
• Business contact lines
• Details on business capital, business lines
• Tax and invoice registration details
• Number of employees, information on insurance payment
• Personal details of the owner, including full name, signature, nationality, residence, and ID number

Business Registration Procedure For A Sole Proprietorship In Vietnam

The Law on Enterprises 2020 reveals the process of registering a sole proprietorship in Vietnam. These steps include;

• Submit an application form to the business registration authority. This application form should also include all the document you’re required to submit. You may submit online or by post
• The business registration authority will consider your application and issue a certificate. You should get feedback within three working days of submitting your application. If your application is rejected, you’ll get details about what went wrong and necessary adjustments to make via an email.

Tax Duties Of A Sole Proprietor

As a profit generating entity in Vietnam, you’ll be subject to different types of tax duties. Here are some of the tax duties that’ll be expected from you;

• Licensing Fee: Sole proprietorships are obliged to to submit the licensing fee declaration by January 30 of the year preceding the establishment or inauguration year.
• Corporate Income Tax: This a tax levied on the profits generated by the business’s activities within a year.
• Value Added Tax: This tax is levied on all the goods and services offered by your company to customers, and those purchased from suppliers.
• Personal Income Tax: This tax is levied on the income of the sole proprietor.

How Can We Help?

A sole proprietorship is a simple business organisation. But it still has numerous business activities. In fact, many experts have explained that sole proprietorship is one of the hardest businesses to run because the owner will be in charge of everything. They’ll be responsible for funding the business, hiring staff and degerming the next direction for the entity. It’s no surprise that most sole proprietors need all the help they can get. And that’s where we come in.

Premia TNC is a top-rated business consultancy firm. Our services are available to all types of businesses in Vietnam, especially sole proprietorship. From years of experience, we have identified some of the biggest issues that sole proprietors face. As a result, we have designed our services to help them. Our team of professionals will work with you to create custom solutions for your business.