This article provides guidance on household businesses, including:
- Prepare the necessary knowledge about household businesses.
- Procedures for registering a household business
- Should you establish a company or a sole proprietorship?
1. Overview of Household Businesses
1.1. What is a household business?
Household business is the official term defined in legal documents. In society, there are common terms used to refer to household businesses such as individual household business or sole proprietorship.
A household business is defined as a business establishment registered and established by an individual or members of a household, who are liable for the household's business activities with all of their assets.
In cases where household members register a business, they authorize one member to act as the business representative. The individual registering the business, or the person authorized by the household members to act as the business representative, is the business owner.
1.2. In which cases is it necessary to register a household business?
According to the regulations at Decree 01 / 2021 / ND-CP According to relevant legal documents, cases where registration for establishing a household business is mandatory include:
- Individuals or households conducting business with a fixed location: If an individual or household conducts business at a fixed location (e.g., shop, restaurant, salon, etc.), they must register their business with the district-level business registration authority where the business is located.
- Businesses operating in conditional sectors: Businesses and industries subject to conditional investment (e.g., food business, transportation services, education, healthcare, etc.) are required to register as household businesses to meet legal requirements and obtain operating licenses.
- Regular business activities, not subject to registration exemption: Independent, regular commercial business activities (excluding street vending, snacking, mobile business, seasonal business, or low-income services) must be registered as household businesses.
1.3. Cases where business registration is not required.
According to the Clause 2, Article 79 of Decree 01/2021/ND-CPRegistration is not required in the following cases:
- Households engaged in agriculture, forestry, fisheries, and salt production.
- Street vendors, snack sellers, itinerant traders, mobile businesses, seasonal businesses.
- Service workers with low income (the low income level is defined by the People's Committee of the province or city, and does not exceed the starting point for personal income tax).
Note:
- If conducting online business on e-commerce platforms, individuals or households may still need to register as a business household if their revenue exceeds the prescribed limit or if their business falls under a regulated industry.
- Failure to register a business in mandatory cases may result in a fine of VND 5.000.000 to VND 10.000.000 according to Clause 1, Article 62 of Decree 122/2021/ND-CP.
1.4. Who has the right to establish a household business?
Individuals and household members who are Vietnamese citizens with full legal capacity as stipulated in the Civil Code have the right to establish a business household, except in the following cases:
a) Minors; persons with limited legal capacity; persons who have lost their legal capacity; persons with difficulties in understanding and controlling their behavior;
b) Persons who are being prosecuted for criminal offenses, are being held in temporary detention, are serving prison sentences, are undergoing administrative sanctions at compulsory rehabilitation centers or compulsory education facilities, or are prohibited by the Court from holding certain positions, practicing certain professions, or performing certain jobs;
c) Other cases as prescribed by relevant laws.
1.5. How many household businesses can each person establish?
Individuals and household members are only allowed to register one business nationwide and are entitled to contribute capital, purchase shares, or acquire equity in businesses in their individual capacity.
1.6. If a household business has already been established, what types of enterprises is it not allowed to participate in?
Individuals and household members are only allowed to register one household business nationwide and have the right to contribute capital, purchase shares, or acquire capital contributions in businesses in their individual capacity. Therefore, even after establishing a household business, it is still possible to establish and register the following types of businesses:
- To contribute capital or purchase equity in a limited liability company.
- Being allowed to contribute capital or purchase shares in a joint-stock company.
Individuals and household members register as household businesses. One cannot simultaneously be the owner of a private business., a general partner of a partnership company unless agreed upon by the remaining general partners.
1.7. Rights and obligations of the business owner and household members participating in business registration.
- The business owner fulfills tax obligations, financial obligations, and conducts business activities in accordance with the law.
- The business owner represents the business as the person requesting the resolution of civil matters, as plaintiff, defendant, or party with related rights and obligations before arbitration panels, courts, and other rights and obligations as prescribed by law.
- The business owner may hire others to manage and operate the business. In this case, the business owner and the household members registered as business owners remain responsible for debts and other financial obligations arising from the business activities.
- The business owner and household members who register the business are responsible for the business activities of the household.
- Other rights and obligations as prescribed by law.
2. Should I establish a company or a sole proprietorship?
Choosing between open a company or household business It depends on your business size, goals, and legal needs. Below is a detailed analysis of the advantages and disadvantages of each form, along with factors to consider to help you make the right decision.
2.1. Overview of Comparison Between Household Businesses and Enterprises
|
Criteria |
Household business |
the Company |
|
Legal responsibility |
Unlimited liability (liability with all assets) |
Limited (within the scope of contributed capital) |
|
Workforce size |
Fewer than 10 employees |
Unlimited |
|
Registration procedure |
Simple, fast (3 days) |
More complex, requires regulations and reports (3-5 days) |
|
Tax |
Fixed tax if revenue is under 1 billion VND/year or tax based on declaration (% VAT on revenue + % personal income tax on revenue) |
VAT, corporate income tax, periodic financial statements |
|
Bill |
Previously, either a physical retail invoice or an electronic invoice could be used (optional). From June 1st, 2025: Household businesses with annual revenue of VND 1 billion or more must issue invoices from cash registers, and if paying taxes based on declarations, they must issue electronic invoices. |
VAT bill |
|
Capital mobilization |
Unable to raise capital. |
It is possible to raise funds through shares or bonds. |
|
Reputation with partners |
Lower |
Higher, more professional |
|
Operating costs |
Lower |
Higher level (accounting, reporting, taxation) |
2.2. What should I choose?
Choose sole proprietorship if:
- You're just starting your business, with annual revenue under 1 billion VND, a small scale operation, and limited capital.
- We want to save costs and minimize administrative procedures.
- Engage in simple businesses such as retail and small services.
- There is no need to work with large partners or issue VAT invoices.
- The installation process of under 10 labor
Choose the company if:
- You plan to expand your business, collaborate with major partners, or enter international markets.
- Personal assets need to be protected against business risks.
- Businesses in industries that require complex legal procedures or VAT invoices.
- The installation process of from 10 or more workers.
- Intended to raise capital or employ a large workforce.
3. FAQ - Frequently Asked Questions about Sole Proprietorships
After establishment, household businesses must register for tax, be issued a tax identification number, and declare and pay taxes according to regulations.
Checking your business tax identification number is essential to see if your tax information has been updated online. The steps for this lookup are as follows:
Step 1:
Access the General Department of Taxation's link: http://tracuunnt.gdt.gov.vn/tcnnt/mstdn.jsp
Step 2:
Enter one of the following four pieces of information:
- Tax code
- Name of the organization/individual paying the tax
- Business address
- The representative's ID card or national identity card number.
Note: To accurately look up the tax identification number for a business household, please enter information that is easy to find and accurate.For example, ID card numbers are easier to be accurate than addresses.) or enter two or more fields of information.
Step 3:
Enter the verification code accurately, and you will receive complete tax registration information for your business, including your business's tax identification number.
Sole proprietorships do not have legal personality.
According to the regulations on seals, household businesses currently do not have a legal seal (round seal) like other forms of enterprises.
Household businesses can use alternative methods such as square seals, signature and title seals, or business logo seals to provide information to partners and customers.
Some information you can engrave on a business seal includes the logo, the name of the business owner, etc., however, there are three basic pieces of information to include.
- Name of the business registered by the household.
- The business household has been issued a tax identification number.
- Address of the business.
Previously, Circular 23/2014/TT-NHNN allowed business households to open accounts at banks; but after being amended by Circular 32/2016/TT-NHNN, only legal entities are allowed to open payment accounts at banks.
However, according to Circular 02/2019 (effective from March 1, 2019), organizations established and operating legally under Vietnamese law are permitted to open payment accounts and branches of foreign banks in accordance with the law.
Article 11. Eligible applicants for payment accounts
1. Individuals opening payment accounts at banks or branches of foreign banks include:
a) Persons aged 18 years and older who have full legal capacity as stipulated by Vietnamese law;
b) Persons aged 15 to under 18 who have not lost or had their civil capacity restricted;
c) Persons under 15 years of age, persons with limited legal capacity, and persons lacking legal capacity as defined by Vietnamese law may open payment accounts through their legal representatives;
d) Individuals with cognitive difficulties or impaired behavioral control as defined by Vietnamese law may open payment accounts through their guardians.
2. Organizations legally established and operating in accordance with Vietnamese law include: legal entities; private enterprises; household businesses; and other organizations permitted to open payment accounts at banks; and branches of foreign banks as prescribed by law.
According to the regulations in the aforementioned Circular, organizations allowed to open payment accounts are no longer limited to legal entities; they now include other types of organizations that are not legal entities, as was previously stipulated.
If organizations without legal personality do not want all members to participate in account transactions in particular, and civil transactions in general, they can authorize one person to act as a representative in these transactions.
Thus, household businesses are allowed to open payment accounts at banks or branches of foreign banks in accordance with the law.
According to the current Social Insurance Law and Health Insurance Law, employers, whether small businesses, cooperatives, or individual business households, must pay social insurance and health insurance for their employees.
Perhaps due to the large number of businesses currently operating, the aforementioned inspection agencies are focusing on businesses and not paying enough attention to inspecting and auditing household businesses. As a result, many people believe that establishing a new business requires paying health insurance and social insurance for employees, while household businesses are exempt from this obligation, thus discouraging them from establishing a business.
Following some press reports about household businesses no longer being eligible for bank loans under the State Bank of Vietnam's new regulations, a representative from the Ministry of Justice affirmed that the entity "household" has been removed from the 2015 Civil Code. Therefore, if banks continue to sign credit contracts with "households," these contracts become invalid.
The State Bank of Vietnam (SBV) has just issued Circular No. 39/2016/TT-NHNN regulating lending activities of credit institutions and branches of foreign banks to customers. Accordingly, there are only two types of borrowers: natural persons and individuals. Non-legal entities such as households, cooperatives, and other organizations without legal personality will no longer be eligible to borrow from credit institutions.
In fact, the laws of most countries stipulate that there are only two types of subjects of civil law: individuals and legal entities. Households, business households, or cooperatives are virtual entities, essentially one or a group of individuals, and therefore were removed from the 2015 Civil Code.
Removing the category of household (or business household) borrowers only changes the formal name; the core essence remains fundamentally the same.
The difference is that, from 2017 onwards, households and business households will conduct transactions in the capacity of one or more individuals, and the head of the household will no longer automatically represent the household as before.