Converting a Household Business into an Enterprise: New Procedure

Short answer: A household business converts into an enterprise by registering a new enterprise (a private enterprise, LLC, partnership, or joint-stock company) while terminating the household business. The dossier is submitted to the Business Registration Office under the Department of Finance; the household business enjoys conversion incentives under the Law on Support for Small and Medium-Sized Enterprises. This article provides detailed guidance on the dossier, procedures, and notes under Decree 168/2025/ND-CP (replacing Decree 01/2021/ND-CP, effective from 01/07/2025).

Legal basis

• Decree 168/2025/ND-CP on enterprise registration and household business registration (replacing Decree 01/2021/ND-CP, effective from 01/07/2025);
• The Law on Enterprises 2020 (as amended and supplemented by Law No. 76/2025/QH15, effective from 01/07/2025);
• The Law on Support for Small and Medium-Sized Enterprises 2017 (Article 16 — support for household businesses converting into enterprises);
• Resolution 198/2025/QH15: abolition of the presumptive tax for household businesses; termination of business license tax collection and payment from 01/01/2026.

Why convert a household business into an enterprise?

• Legal personality (except private enterprises): limited liability within contributed capital, separating personal and business assets;
• May open branches, representative offices, and business locations nationwide;
• Flexible capital raising: admitting new members/shareholders, issuing bonds (for permitted types), borrowing from banks as a legal entity;
• Issuing value-added invoices with deductible input VAT — advantageous when transacting with enterprises and foreign partners;
• Higher brand credibility in bidding and investment cooperation;
• Eligible for conversion incentives under the Law on Support for Small and Medium-Sized Enterprises.

Incentives for converting a household business into an enterprise

Under Article 16 of the Law on Support for Small and Medium-Sized Enterprises, a converting household business is entitled to:

• Free counseling and guidance on the procedures, dossier for enterprise establishment registration, and registration of certificates of satisfaction of business conditions (if any);
• Exemption from the enterprise registration fee and the first-time enterprise information provision fee;
• Exemption from appraisal, fees, and charges for first-time business licenses for conditional business lines;
• Free counseling and guidance on tax administrative procedures and the accounting regime within 3 years from the date of first issuance of the Enterprise Registration Certificate;
• Time-limited corporate income tax exemption/reduction under corporate income tax law;
• Time-limited land use fee exemption/reduction under land law.

Note: the former 3-year business license tax exemption policy no longer applies since business license tax collection and payment were terminated from 01/01/2026 under Resolution 198/2025/QH15.

Dossier for converting a household business into an enterprise

Under Decree 168/2025/ND-CP, the conversion dossier includes:

• The original Household Business Registration Certificate;
• A copy of the household business’s Tax Registration Certificate (if any);
• The dossier for enterprise establishment registration corresponding to the chosen type:
  • Private enterprise: application for private enterprise registration; a copy of the owner’s legal documents;
  • Single-member LLC: application for enterprise registration; company charter; copies of the owner’s and the legal representative’s legal documents;
  • Multi-member LLC: application for enterprise registration; company charter; member list; copies of members’ and the legal representative’s legal documents;
  • Joint-stock company: application for enterprise registration; company charter; list of founding shareholders (and foreign-investor shareholders, if any); copies of shareholders’ and the legal representative’s legal documents;
  • Partnership: application for enterprise registration; company charter; member list; copies of members’ legal documents.
• Where foreign investors or foreign-invested business organizations participate in capital contribution subject to registration under the Law on Investment: the investment registration authority’s written approval of the capital contribution, share purchase, or purchase of capital contributions.

Implementation steps

Step 1. Submit the dossier

Submit 01 set of the dossier to the Business Registration Office under the Department of Finance where the enterprise intends to locate its head office — in person or online via the National Enterprise Registration Portal.

Step 2. Appraisal and result

The Business Registration Office checks the dossier’s validity and issues the Enterprise Registration Certificate within 3 working days from the date of receipt of a complete and valid dossier. If the dossier is invalid, the registration authority notifies in writing the contents needing amendment or supplementation.

Step 3. Terminate the household business

After the Enterprise Registration Certificate is issued, the information is transferred to the commune-level business registration authority to complete the household business termination. The household business also settles outstanding tax obligations with its directly managing tax authority.

What to do after conversion

• Publish the enterprise registration contents on the National Enterprise Registration Portal;
• Carve a seal (if needed) and notify the seal specimen as prescribed;
• Open a bank account and register for e-tax payment;
• Register for e-invoice use;
• Hang a signboard at the head office;
• Register employees and social insurance for workers;
• Build an accounting books system under the enterprise accounting regime (much more complete than for household businesses).

Common barriers and how to reconsider them

Concern about compliance and governance costs

Enterprises must follow a full accounting and tax reporting regime at higher costs than household businesses. However, from 01/01/2026, household businesses have also switched to the declaration method (presumptive tax abolished), so the compliance cost gap between the two models has narrowed significantly.

Small-scale business habits

Many household businesses are used to the family model and hesitate to expand the apparatus. Conversion should be tied to a real development strategy: when you need to raise capital, sign large contracts, participate in bidding, or export, the enterprise model is the right choice.

No mandatory sanctions yet

Current law mainly encourages (with incentives) rather than mandates household businesses to convert. However, increasingly strict tax policy trends (declarations, e-invoices, cash-flow reconciliation) make the large household business model less advantageous.

Frequently asked questions

How long does it take to convert a household business into an enterprise?

For the registration procedure, the Business Registration Office processes it within 3 working days if the dossier is valid. Actual time depends on dossier preparation and settlement of the household business’s tax obligations.

Can the household business keep its old name when becoming a company?

You may name the new enterprise with a proper name similar to the old household business name, but must comply with enterprise naming rules (no duplication or confusion) and obtain the registration authority’s approval.

Do the household business’s assets automatically transfer to the company?

Not automatically. Assets intended as capital contributions to the company must go through the capital contribution procedure (valuation, ownership transfer) under the Law on Enterprises 2020.

Notes on applying current laws

This article is for general enterprise knowledge and is presented for reference, helping readers understand the legal issue at a general level before preparing dossiers or carrying out procedures. Legal regulations may change over time, by enterprise type, and depending on specific circumstances. To determine the exact legal basis applicable to your dossier, please contact an ANT Legal lawyer at 0966.475.966 for verification and advice before proceeding.

Common risks to watch out for

• Applying old guidance under Decree 01/2021/ND-CP, which has expired.
• Submitting the dossier to the wrong authority (household businesses: commune level; enterprises: Business Registration Office under the Department of Finance).
• Failing to settle the household business’s tax obligations before termination.
• Not building an enterprise accounting system after conversion.

How ANT Legal can help

ANT Legal advises on choosing a suitable enterprise type, reviews outstanding tax obligations of the household business, drafts conversion dossiers, and carries out enterprise registration and post-establishment procedures (tax, invoices, labor, insurance). For quick advice, please contact our lawyers at 0966.475.966.

Related articles

• Who May Not Register a Household Business in Vietnam?
• Must a Household Business Register for Tax?
• Procedure for Suspending an Individual Household Business
• Distinguishing Household Businesses from Enterprises
• Procedure for Registering a Private Enterprise in Vietnam