How to Establish a Business Under Vietnam’s Enterprise Law 2024

How to Establish a Business Under Vietnam’s Enterprise Law 2024: Starting a business in Vietnam is a promising venture as the country continues to develop economically, attracting both local and foreign investors. To successfully navigate the process, it is essential to understand the requirements and legal framework set by Vietnam’s Enterprise Law 2024. This guide will take you through the step-by-step process of establishing a business in Vietnam under the updated regulations, ensuring compliance and a smooth setup.

1. Choosing the Right Business Structure

How to Establish a Business Under Vietnam’s Enterprise Law 2024

The first and most critical step in starting a business is choosing the appropriate business structure. Vietnam’s Enterprise Law offers several options, each with its own advantages:

• Sole Proprietorship: A business owned and managed by one individual who is personally responsible for its liabilities.
• Limited Liability Company (LLC): This is one of the most popular options for small to medium enterprises. An LLC can be a single-member or multi-member company, offering limited liability protection for owners.
• Joint-Stock Company (JSC): Suitable for larger businesses that require substantial capital. A JSC can issue shares to raise capital from investors, making it an attractive option for scaling.
• Partnership: Two or more individuals share ownership and management responsibilities. Partnerships in Vietnam are divided into general partnerships and limited partnerships.

Selecting the appropriate business structure depends on your business goals, the level of liability you are willing to assume, and how you intend to raise capital.

2. Naming Your Business

Choosing a business name is more than just a creative exercise; it must adhere to specific legal guidelines. According to Vietnam’s Enterprise Law 2024:

• The name must not be identical or confusingly similar to existing registered businesses.
• The name should not use words or symbols associated with state agencies or political organizations.
• Business names must be in Vietnamese characters but can include numbers and symbols. Foreign language versions or abbreviations are permitted but must comply with the law.

Conduct a thorough search through Vietnam’s National Business Registration Portal to ensure your chosen name is unique.

3. Business Registration Process

Once you have chosen your business structure and name, the next step is registering your company. The registration process under Vietnam’s 2024 Enterprise Law involves the following steps:

• Prepare the registration dossier: This includes your business name, business structure, headquarters address, charter capital, and a list of shareholders or members (if applicable).
• Submit the dossier: You will need to submit the registration dossier to the Department of Planning and Investment (DPI) in the province where your company is headquartered. The registration can be done online via the National Business Registration Portal or in person.
• Obtain the business registration certificate: After successfully submitting your dossier, the DPI will review your application. If everything is in order, you will receive your business registration certificate within 3-5 working days.

This certificate serves as official proof of your business’s legal existence in Vietnam.

4. Charter Capital Requirements

The 2024 law allows businesses to determine their charter capital based on the specific needs of their operations. However, certain sectors, such as banking, real estate, and insurance, may have minimum capital requirements.

When deciding your charter capital, keep in mind that it influences the company’s financial credibility. A higher charter capital can boost your company’s reputation with clients and partners but may also increase your tax obligations.

5. Establishing a Business Bank Account

Once your business is officially registered, you must open a corporate bank account in Vietnam. This account will be used for all business-related transactions, including paying taxes, employee salaries, and receiving payments from clients.

To open a corporate account, you will need:

• The business registration certificate
• The company’s charter
• Personal identification of the legal representative (passport or ID card)

Choosing a bank that aligns with your business needs is crucial, particularly if you expect to conduct international transactions or require a wide range of financial services.

6. Tax Registration

After receiving your business registration certificate, you must register with the tax authorities. All businesses in Vietnam are subject to taxation, and it’s essential to understand your tax obligations from the start. Key taxes include:

• Corporate Income Tax (CIT): Vietnam has a standard CIT rate of 20%, although certain industries and locations may qualify for preferential rates.
• Value-Added Tax (VAT): The standard VAT rate in Vietnam is 10%, with reduced rates for specific goods and services. Some sectors are exempt from VAT.
• Personal Income Tax (PIT): Employers are responsible for withholding and paying PIT on behalf of their employees.
• Social Insurance Contributions: Employers must register employees for social insurance and contribute to social security, health insurance, and unemployment insurance on their behalf.

Ensuring you are compliant with tax regulations from the outset will prevent potential legal issues and penalties.

7. Licensing and Permits

Depending on the type of business you are starting, you may be required to obtain additional licenses and permits. For example:

• Food and Beverage: Businesses in the food industry must secure food safety and hygiene certificates.
• Construction: Companies in the construction sector need specialized permits for building and safety compliance.
• Import/Export: Businesses dealing with imports and exports must register with customs authorities and obtain an import/export license.

Researching and securing the appropriate permits for your industry is a crucial step in ensuring legal compliance.

8. Hiring Employees

If you plan to hire employees, the 2024 Enterprise Law mandates certain employer obligations:

• Employment Contracts: All employees must have a written contract specifying job duties, salary, working hours, and conditions for termination.
• Social Insurance: Employers must contribute to social insurance for employees and ensure that workers are registered with the appropriate agencies.
• Labor Regulations: Employers must adhere to Vietnam’s labor laws, including setting fair wages, providing safe working conditions, and respecting employee rights such as maternity leave and annual leave.

Adhering to these guidelines will not only ensure compliance but also help in attracting and retaining talent for your business.

9. Protecting Intellectual Property

If your business involves unique products, services, or branding, it is vital to protect your intellectual property (IP). Vietnam’s intellectual property law allows you to register:

• Trademarks: Protects brand names, logos, and symbols.
• Patents: Covers inventions and technological advancements.
• Copyrights: Protects literary, artistic, and other creative works.

Registering your intellectual property rights will help safeguard your business from competitors and legal disputes.

10. Corporate Governance and Compliance

Once your business is established, maintaining compliance with corporate governance requirements is essential. Key areas to focus on include:

• Annual Reports: Businesses must submit annual financial reports to the DPI and tax authorities.
• Board Meetings: Depending on your business structure, holding regular board meetings may be mandatory to ensure proper decision-making.
• Audits: Larger businesses may be required to undergo external audits to ensure financial transparency.

Keeping up with corporate governance practices ensures the long-term success and credibility of your business.

Conclusion

Establishing a business under Vietnam’s Enterprise Law 2024 requires careful planning and adherence to legal procedures. By following the steps outlined in this guide, you can navigate the process smoothly, ensuring your business is set up for success in Vietnam’s growing economy. Whether you are a local entrepreneur or a foreign investor, understanding the legal requirements will protect your business interests and help you thrive in this dynamic market.