Starting a Small Company in Vietnam: A Comprehensive Guide

Small company in Vietnam is an increasingly attractive business option for both local and foreign entrepreneurs. The country’s booming economy, young population, and favorable policies make it a hotspot for startups. In this article, we will guide you through the essential steps to start a small company in Vietnam, ensuring you understand legal requirements, potential challenges, and available incentives.

Why Start a Small Company in Vietnam?

Vietnam is one of the fastest-growing economies in Southeast Asia. It offers a variety of incentives for businesses, especially small and medium enterprises (SMEs). Whether you are a local or foreign investor, the country’s business-friendly environment is a major attraction. The small company in Vietnam setup allows for flexibility and minimal bureaucracy, making it ideal for new ventures.

Legal Forms of Small Companies in Vietnam

There are several legal forms of businesses that you can consider when starting a small company in Vietnam. These include:

1. Sole Proprietorship: This is a business owned and managed by a single individual. It is simple to establish but comes with unlimited liability, meaning personal assets are at risk.
2. Limited Liability Company (LLC): This is the most common structure for a small company in Vietnam. An LLC offers limited liability, meaning your personal assets are protected from the company’s debts and liabilities. It can be either a single-member LLC or a multi-member LLC.
3. Joint-Stock Company (JSC): This form of company requires a minimum of three shareholders and allows the company to issue shares. It’s ideal for larger businesses but may be overcomplicated for small companies.
4. Partnership: This type is less common and involves two or more partners who share responsibility for the business. Partnerships are ideal for professional services, such as law firms or consultancies.

For most foreign investors, an LLC is the preferred choice due to its flexibility and the ease of managing a small company in Vietnam​.

Steps to Start a Small Company in Vietnam

Starting a small company in Vietnam requires careful planning and understanding of the legal procedures. Here are the steps to get you started:

1. Business Registration: The first step in setting up a small company in Vietnam is registering your business with the Department of Planning and Investment. The application process requires several documents, including an application form, a draft of the company’s charter, and details of the company’s shareholders and directors​.
2. Choose a Business Name: Your company’s name must be unique and not conflict with existing business names. You can check this on the National Business Registration Portal before proceeding.
3. Get an Investment Certificate: If you are a foreign investor, you will need to apply for an investment certificate. This is an essential document that proves you are permitted to establish a business in Vietnam​.
4. Obtain a Business License: After obtaining the investment certificate, you need to apply for a business license. This document allows your small company in Vietnam to legally operate.
5. Open a Bank Account: You will need a local bank account to deposit your capital. For foreign companies, the capital must be transferred to Vietnam within 90 days of receiving the investment certificate.
6. Register for Tax: Once your business is registered, you must register for corporate tax, value-added tax (VAT), and personal income tax with the local tax authority. Companies are generally required to submit quarterly tax reports.
7. Employment Contracts: If you plan to hire employees, ensure that all employment contracts comply with Vietnam’s labor laws. This includes the registration of employees with social insurance​​.

Costs and Fees

Starting a small company in Vietnam requires several upfront costs. These include government fees for business registration, legal fees for preparing the necessary documents, and potential consultancy fees if you are hiring experts to help with the setup. Additionally, there are costs associated with office rent, initial capital, and employee salaries. It’s essential to budget these expenses carefully to ensure your business can operate smoothly from the beginning.

Common Challenges

While Vietnam is an excellent location for small businesses, there are some challenges you might face:

1. Language Barrier: Most official documents are in Vietnamese, so you will likely need a translator unless you are fluent in the language. This could add extra costs to your small company in Vietnam setup process.
2. Regulatory Changes: Vietnam’s business regulations are constantly evolving. It’s important to stay updated with changes that may affect your business. Consulting with a local legal expert can help you navigate these changes effectively​.
3. Tax Compliance: Vietnam’s tax system can be complex, especially for foreign businesses. Hiring a local accountant or tax advisor can help ensure that your small company in Vietnam remains compliant with local tax laws.

Incentives for Small Companies

Vietnam offers numerous incentives for small companies, especially those in certain industries such as technology, renewable energy, and manufacturing. These include:

• Tax Holidays: Some new businesses may qualify for tax exemptions or reduced corporate income tax rates during the initial years of operation.
• Simplified Procedures: The government has streamlined the process for registering a small business, making it quicker and easier to start a small company in Vietnam​.

Conclusion

Setting up a small company in Vietnam is an excellent opportunity for both local and foreign entrepreneurs. The country’s favorable economic conditions, supportive government policies, and growing consumer market make it a prime location for startups. However, it’s crucial to understand the legal and regulatory requirements to ensure your business can operate smoothly.

If you need more personalized advice on starting your business, feel free to contact Unilaw at +84 (091 226 6811) or via email at legal@unilaw.vn.

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