Should I establish a company or business household in Vietnam

Should you establish a company or business household is a question that many people preparing to start a business ask ANT Legal. Therefore, we have compared these two types of businesses in detail so that you can have the most general overview and make a choice to start a business.
You should establish a company or business
Should you establish a company or a business is a question that many people preparing to start a business ask ANT Legal. Therefore, we have compared these two types of businesses in detail so that you can have the most general overview and make the choice to start a business.

I. Overview of the company and business household

1. What is a company?

According to the Enterprise Law, a company is called an enterprise and is defined as an organization with its own name, assets, and transaction office, established or registered under the provisions of law for business purposes.

2. What is a business household?

A business household is registered by an individual or household members and is responsible for all of their assets for the business activities of the household. In case household members register a business household, one member shall be authorized to act as the business representative. The individual registering the business household, the person authorized by household members to act as the business household representative, is the business household owner (Decree 01/2021/ND-CP)

II. Compare whether to establish a company or a business household

1. Regarding legal status

Business Household Company
Has legal status Does not have legal status
Has legal seal No seal
You are allowed to open a bank account. You are not allowed to open a bank account but must use a personal account
Have private property and be responsible within the scope of that property. Without private property, the business household owner must take his/her personal property to bear responsibility.
The legal entity still exists when the owner, member, or shareholder of the company dies/misses. If the owner of the business household dies/misses, the business household will also be terminated.
Debts are paid within the company’s assets. The business owner must use his or her own assets to pay the debt. If the business owner dies or goes missing, the heirs can only inherit the assets if all debts are paid.

2. Business scale

Company Household business
Small or large scale is fine. Small scale, less than 10 employees

3. Investment capital

Business Household Company
There is no maximum or minimum capital limit, depending on the business scale, the company will register the appropriate capital amount. Except for some business lines with mandatory capital conditions. There is no maximum or minimum capital limit, but usually the capital for business households is very low.
Additional capital can be raised by increasing capital, accepting new members, issuing and offering additional shares, and borrowing from third parties. Do not raise capital in any form.

4. legal representative

Business Household Company
There can be many legal representatives. Only the business owner is the representative
5. Number of companies and business households allowed to open
Business Household Company
Can open many companies. Only one business can be opened.
Can open many branches, representative offices, and business locations. It is allowed to open multiple business locations but must notify the Tax Administration Agency and market management agency where business activities are conducted for the remaining business locations (Clause 2, Article 86 of Decree 01/2021/ND-CP). But in reality, this regulation has not yet been specifically guided, so it is very difficult to open this business location.
Can open branches, offices, business locations in other provinces. Each district can only open 1 business household and cannot open a business household in other districts/districts and centrally-run provinces/cities.

6. Business industry

Business Household Company
Can do business in all professions that are not prohibited. For conditional business lines, necessary and sufficient conditions must be met to be allowed to operate. Business households are entitled to conduct business in conditional business investment lines from the moment they meet the conditions prescribed by law and must ensure that they meet those conditions throughout the operation process (Clause 2, Article 89 of Decree 01/2021/ND-CP). But in reality, it depends on each locality that business households can register their business lines. Usually only allowed in industries such as (wholesale, retail, small-scale production of goods without conditions, food services, nail and hair services…)

7. Labor

Company Household business
Unlimited number of employees: Under 10 employees
Must declare and pay social insurance, health insurance, unemployment insurance, and pay personal income tax for employees. Not required to declare and pay social insurance, health insurance, unemployment insurance, and personal income tax for employees

8. Establishment procedures

Business Household Company
Quite complicated Simple
Submit to the Department of Planning and Investment Submit to the District People’s Committee

9. Tax obligations

Business Household Company
License tax (2,000,000 VND – 3,000,000 VND/year) License tax (300,000 VND – 1,000,000 VND/year)
VAT, Corporate Income Tax Presumptive taxes include personal income tax (about 0.5%-5% of business household revenue and VAT (about 1%-5% of business household revenue).
Tax calculation is based on company profits. Balanced, after deducting expenses, tax is calculated. Revenue is determined by tax administrators, based on household business expenses such as: renting premises, hiring employees, capital to purchase goods, and is more personal.
Collect VAT quarterly or monthly
Corporate income tax by fiscal year

Collection of VAT and personal income tax by month
VAT invoices are allowed to be deducted. VAT invoices are not issued with tax deductions
>> See more: Flat tax for business households – Latest flat tax calculation 2021

10. Operating maintenance costs

The minimum costs that the Company and business households must pay annually to maintain the company according to the law.

Business Household Company
License tax (2,000,000 VND – 3,000,000 VND/year) License tax (300,000 VND – 1,000,000 VND/year)
VAT: Can deduct input invoices and then resubmit to tax authorities
For example: In April 2021, the company has a total cost of 5,000,000 VND, VAT is 500,000 VND. The company’s total sales are 6,000,000 VND, VAT is 600,000 VND.

So: VAT payable = Output VAT – input VAT = 600,000 VND – 500,000 VND = 100,000 VND

CIT= 20% of final profit year of the enterprise

Presumptive taxes include personal income tax (about 0.5%-5% of the business household’s revenue and VAT (about 1%-5% of the business household’s revenue).
Fee for purchasing digital signature (about 1,000,000 VND/year) Not necessary
Buy paper invoices or electronic invoices (about 1,000,000 VND/300 numbers) Buy retail tax invoices (about 500,000 VND/roll of 100 invoices)
Hire an accountant to declare taxes (Minimum 500,000 VND/month if there are no invoices, if there are invoices, there will be an appropriate fee depending on the quantity) No need to hire an accountant because tax officials will come to your place to give receipts and collect taxes monthly
According to Pham Do Law’s point of view, if you start a business with an annual revenue of about 100 – 500 million, you should set up a business because with that level of revenue, the monthly tax you pay will be lower than establishing a company. Although setting up a company has more costs, rest assured that if all those costs have valid documents and invoices, you will be tax deductible. If this month/quarter/year costs more than revenue, the remaining tax after deduction will be transferred to the next month/quarter/year. So you can rest assured that if starting a business initially costs a lot and has not yet made a profit, you do not have to pay corporate income tax. Only when you have a profit do you have to pay tax (not to mention some industries that are exempted from taxes such as software production, technology companies, etc. If you are a business household, the tax law will not care whether you have a profit or not, they will still collect the tax rate that has been applied to you based on your revenue from the date of establishment. established.

11. Dissolution procedures

Business Household Company
Must wait for tax finalization and dissolution announcement before submitting application for dissolution.
In particular, when finalizing taxes, you must pay all outstanding tax amounts and fines if there are violations. The actual time for company dissolution is currently very long

Very simple, you just need to apply to terminate business operations. Return your business license, tax code certificate, and pay taxes for the last months if you have not paid them yet. Dissolution time is only 1 week.

The above are specific analyzes and comparisons to answer your question about whether to establish a company or a business household. To make the correct decision, ANT Legal recommends that you create a specific business plan, predicting the basic costs to maintain your company or business. From there, make wise choices and start a successful business.