Tiếng ViệtIn today’s increasingly competitive business environment, many household businesses in Vietnam realize that small-scale operations are no longer sufficient to support expansion. Conversion of a household business into a company is not only a matter of legal compliance but also a strategic solution to enhance credibility, access capital, sign major contracts, and minimize legal risks.
However, this process often raises questions among business owners: What are the conditions for conversion? How are procedures, costs, taxes, and contracts handled during the transition? In this article, Lexconsult & Partners provides a comprehensive analysis of the concept, legal framework, benefits, costs, and step-by-step procedures to help you complete the conversion smoothly, efficiently, and in full compliance with Vietnamese law.
1. Definition and Legal Basis for Converting a Household Business into a Company
1.1. Definition of Converting a Household Business into an Enterprise
Converting a household business into a company is the process of transforming the legal structure from an individual household business into an enterprise (limited liability company, joint stock company, partnership, or private enterprise).
The main purposes of conversion include:
– Expanding business scale and improving access to capital sources;
– Enhancing financial and tax management capacity;
– Protecting the rights and interests of the owner and partners.
After completing the conversion procedure, the household business will officially cease operations, while the newly established company will inherit all or part of the rights and obligations of the former household business.
1.2. Legal Basis Governing the Conversion of Household Businesses into Companies
From July 1, 2025, the conversion procedure is governed by the 2025 Amended Law on Enterprises. (You may refer to the article “Law on Enterprises 2025: Key Updates Businesses Need to Know” for a detailed understanding of the new provisions.)
In addition, the conversion process is regulated by the following legal documents:
– Law on Enterprises 2020 (Consolidated Document No. 67/VBHN-VPQH 2025): provides regulations on legal representatives, disclosure of beneficial owners, and conversion procedures.
– Decree No. 168/2025/NĐ-CP on Enterprise Registration, effective from July 1, 2025 (replacing Decree No. 01/2021/NĐ-CP): provides detailed guidance on enterprise and household business registration.
– Circular No. 68/2025/TT-BTC: issued alongside Decree 168, guiding the forms and methods of completing registration documents.
– Law on Tax Administration 2019 (Law No. 38/2019/QH14): governs tax obligations during the termination of a household business and establishment of a new company.
Thanks to this clear legal framework, the 2025 household-to-company conversion procedure has become transparent, simplified, and facilitates the sustainable development of household businesses into formal enterprises.
2. Types of Enterprises and Conditions for Conversion of Household Businesses into Companies
When converting a household business into an enterprise, the business owner can choose the most suitable company type based on capital needs, scale, and development goals. Below is a detailed comparison:
| Type of Enterprise | Main Characteristics | Conversion Conditions | Best Suited For |
|---|---|---|---|
| Private Enterprise (DNTN) | One individual owner; no separate legal personality; owner bears unlimited liability | Household business has one individual owner | Small, low-risk businesses seeking simple procedures |
| Single-Member Limited Liability Company (LLC 1-Member) | One individual or organization owns 100% of charter capital; limited liability to capital contribution | Must have company charter and valid ownership documents | Sole proprietors wanting to separate personal and business assets |
| Multi-Member Limited Liability Company (LLC 2+ Members) | From 2 to 50 members contributing capital; limited liability proportional to shares | List of members, company charter, minimum capital as required by law | Groups of individuals jointly operating, seeking structured management |
| Joint Stock Company (JSC) | At least 3 shareholders; capital divided into shares; flexible capital mobilization | List of founding shareholders, company charter | Businesses seeking capital expansion, IPOs, or M&A opportunities |
| Partnership | At least 2 general partners with unlimited liability; may include limited liability partners | General partners must have legal capacity and agree to unlimited liability | Trusted groups of partners willing to share high business risks |
Thus, when converting a household business into a company in 2025, the owner can flexibly select the most appropriate business structure:
– For legal safety and limited liability, choose a Limited Liability Company (LLC).
– For capital expansion and large-scale operations, choose a Joint Stock Company (JSC).
– For small-scale, streamlined management, choose a Private Enterprise.
If you are still unsure whether to choose between an LLC or a JSC, refer to the article “Comparison Between Limited Liability Companies and Joint Stock Companies: Advantages and Disadvantages 2025.”
3. Procedures and Process for Converting a Household Business into a Company in 2025
3.1. Registration Procedure for Establishing an Enterprise from a Household Business
According to Articles 26 and 27 of Decree No. 168/2025/NĐ-CP, the procedure for converting a household business into a company can be carried out as follows:
| Type of Enterprise | Conditions | Required Documents | Process |
|---|---|---|---|
| Private Enterprise (DNTN) | – The household business owner becomes the owner of the private enterprise. – Only one individual is registered and assumes full liability with all personal assets. |
– Application for enterprise registration. – Copy of the Household Business Registration Certificate. – Copy of legal identification of the enterprise owner. |
– Submit the application to the Business Registration Office – Department of Finance. – After obtaining the Enterprise Registration Certificate → complete the procedure for terminating the household business. |
| Limited Liability Company (LLC) | May choose: – Single-member LLC: if the household business has one owner. – Multi-member LLC: from 2–50 capital contributors. |
– Application for enterprise registration (LLC). – Company charter. – List of members (for LLC with 2+ members). – Copy of Household Business Registration Certificate. – Copy of legal identification of owner/member(s). – Written approval from the investment registration authority (if foreign capital is involved). |
– Submit the application to the Business Registration Office – Department of Finance. – Receive the Enterprise Registration Certificate. – Complete the termination procedure for the household business and post-registration formalities. |
| Joint Stock Company (JSC) | – Minimum of 3 founding shareholders. – Suitable for businesses intending to raise capital, conduct IPOs, or M&A. |
– Application for enterprise registration (JSC). – Company charter. – List of founding shareholders. – Copy of Household Business Registration Certificate. – Copy of legal identification of shareholders. – Written approval from the investment registration authority (if foreign capital is involved). |
– Submit the application to the Business Registration Office – Department of Finance. – After obtaining the Enterprise Registration Certificate → file termination of the household business. – Complete post-registration procedures (enterprise disclosure, company seal registration, tax registration, etc.). |
| Partnership | – At least 2 general partners with unlimited liability. – May include limited liability contributing partners. |
– Application for enterprise registration (Partnership). – Company charter. – List of general and limited partners. – Copy of Household Business Registration Certificate. – Copy of legal identification of partners. |
– Submit the application to the Business Registration Office – Department of Finance. – After receiving the Enterprise Registration Certificate → terminate the household business. – Register tax, labor, and insurance information for the new company. |
In addition to direct submission, the business owner may opt for online registration via the National Business Registration Portal to save time and costs.
3.2. Procedure for Terminating the Household Business After Company Establishment
After the new company receives its Enterprise Registration Certificate, the former household business must officially terminate its operations in accordance with the following steps:
Step 1: Notification from the Provincial Business Registration Authority
Within 02 working days from the date of issuance of the new company’s Enterprise Registration Certificate, the Business Registration Office will send information to the commune-level People’s Committee where the household business was located.
Step 2: Updating the Legal Status
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The commune-level authority transfers the information to the tax authority for verification of outstanding tax obligations.
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At the same time, it publicly announces on the National Business Registration Portal that the household business is in the process of termination.
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Step 3: Confirmation of Tax Obligations
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The tax authority issues confirmation once all taxes and fees of the household business have been settled.
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Within 03 working days from the receipt of tax confirmation, the commune-level authority updates the household business status to “terminated.”
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Accordingly, the procedure for converting a household business into a company in 2025 consists of two key stages:
– Registering the establishment of the new company according to the chosen enterprise type.
– Terminating the household business to ensure legal compliance, transparency, and proper tax management.
4. Benefits and Costs of Converting a Household Business into a Company
4.1. Legal, Financial, and Branding Benefits of Conversion
Converting a household business into a company helps elevate operations and offers numerous advantages:
Enhance Credibility and Brand Reputation:
– A company has legal entity status, enabling it to sign large contracts and participate in bidding.
– Officially registered on the National Enterprise Registration System, creating a more professional image.
Access to Diverse Capital Sources:
– Companies can obtain bank loans, attract investor funding, or issue shares/bonds.
– Supports business expansion and sustainable development.
Reduce Legal and Financial Risks:
– Owners/shareholders are liable only within their capital contribution.
– Minimizes the risk of having to use all personal assets to cover liabilities as in household businesses.
Improve Transparency and Professional Management:
– Enterprises are required to maintain accounting, reporting, and internal control systems.
– Promotes transparency, making it easier to attract investors and business partners.
Leverage Government Support Policies:
– Companies often enjoy tax incentives, capital support, and access to programs promoting the growth of small and medium enterprises.
In addition, newly established companies may also benefit from tax incentives under the 2025 Amended Corporate Income Tax Law, reducing financial burdens and operational costs.
4.2. Conversion Costs Under the 2025 Regulations
According to the new 2025 regulations, the basic costs for conversion include:
| Expense Item | Estimated Cost |
|---|---|
| Enterprise registration fee | 25,000 VND (may be waived for online submission) |
| Publication of enterprise registration information | 100,000 – 300,000 VND |
| Company seal engraving | 300,000 – 500,000 VND |
| Legal service fees (if hiring lawyers/consultants) | 2 – 5 million VND depending on case complexity |
| Estimated total cost | 3 – 6 million VND (full-service package) |
Thus, the conversion cost is relatively modest compared to the substantial benefits, particularly for businesses seeking to expand operations and ensure full legal compliance.
If you wish to convert your household business into a company quickly and lawfully, contact Lexconsult & Partners for full-service support.
Hotline: 0938 657 775
Email: info@lexconsult.com.vn
5. Key Considerations for the Conversion of a Household Business into a Company
When conducting the conversion procedure, household business owners should pay close attention to the following important points:
– Prepare accurate documentation: Missing or incorrect documents (legal papers, member information, company charter) may cause the registration authority to reject the application, leading to delays.
– Complete tax settlement before conversion: The household business must fully fulfill its tax obligations to avoid outstanding liabilities that may delay the termination and new company registration process.
– Notify partners and clients: Existing contracts and ongoing transactions should be legally transferred to the new company to ensure continuity and prevent disputes.
– Re-register employees and social insurance: All existing staff must sign new labor contracts with the company and register for social insurance in accordance with regulations.
– Select the appropriate company type: Limited liability companies, joint stock companies, partnerships, and private enterprises each have different advantages and disadvantages — choose based on long-term business goals.
– Comply with legal deadlines: After receiving the Enterprise Registration Certificate, the household business must complete the termination procedure within the prescribed timeframe to avoid dual legal status.
6. Legal Consultation from Lexconsult & Partners on the Conversion of a Household Business into a Company
6.1. Why You Should Hire a Lawyer When Converting a Household Business into a Company
While the conversion process may appear simple, it actually involves multiple legal provisions, administrative procedures, and tax obligations. Without professional guidance, household business owners may encounter the following risks:
– Application rejection due to incorrect legal details, missing documents, or improper forms;
– Delays in terminating the household business, resulting in tax violations or dual legal entities;
– Difficulties in transferring contracts, employees, and assets previously registered under the household business;
– Time-consuming communication and repeated work with registration authorities.
A business lawyer can help you:
– Ensure the legality and accuracy of all documents;
– Advise on the most suitable company structure (LLC, JSC, etc.) aligned with your business goals;
– Handle issues related to tax, labor, and existing contracts;
– Save time, minimize effort, and prevent future legal risks.
6.2. Full-Service Legal Package for Converting Household Businesses into Enterprises
Lexconsult & Partners offers a comprehensive legal service package for converting household businesses into companies, including:
– Strategic legal consultation: Analyze the household business’s current situation and propose the most effective conversion plan.
– Document preparation and review: Draft and verify all necessary documents — enterprise registration application, company charter, member/shareholder list, and labor contracts.
– Representation and procedure handling: Work directly with the Business Registration Office, publish enterprise information, register company seals, tax codes, and social insurance.
– Post-establishment legal support: Transfer contracts, update sub-licenses (if any), and register employees and insurance information.
With the support of experienced corporate lawyers, the conversion process becomes faster, legally compliant, and cost-efficient, allowing household business owners to focus on operations and scale expansion.
Additionally, Lexconsult & Partners also provides comprehensive company formation services for individuals and organizations planning to start a business in Vietnam.
7. FAQ – Frequently Asked Questions on Converting a Household Business into a Company
Below are the most common questions from clients when carrying out the conversion procedure from a household business to a company:
Is it mandatory to convert a household business into a company?
→ No, it is not mandatory. However, if you wish to expand operations, raise capital, sign major contracts, and reduce legal risks, conversion is the inevitable trend for sustainable growth.
Does the household business still exist after conversion into a company?
→ No. Once the new company is granted an Enterprise Registration Certificate, the household business must complete its termination procedure to avoid dual legal status.
Which type of company should I choose when converting from a household business?
→ It depends on your goals and business scale:
– Single-member LLC: suitable for businesses with one owner.
– Multi-member LLC: ideal for 2–50 capital contributors.
– Joint Stock Company (JSC): best for raising capital, IPOs, or M&A activities.
– Private Enterprise: suitable for individuals who wish to maintain sole ownership under a formal enterprise structure.
How much does it cost to convert a household business into a company?
→ Basic costs include:
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– Registration fee: 25,000 VND
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– Publication fee: 100,000 – 300,000 VND
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– Seal engraving: 300,000 – 500,000 VND
If you hire a full-service corporate legal package, the total cost is usually around 3 – 6 million VND.
Is tax settlement required before conversion?
→ Yes. The household business must complete all tax obligations before termination to ensure the new company is legally established and to avoid tax-related disputes afterward.
Do contracts signed under the household business remain valid after conversion?
→ Yes, existing contracts remain valid if transferred to the new company. However, it is advisable to issue an addendum or a formal notice to partners to prevent legal risks.
How long does the conversion process take?
→ If the application is complete and compliant, the process usually takes 3–5 working days. In cases of errors or outstanding tax obligations, the processing time may be longer.
Should I hire a corporate legal service when converting a household business into a company?
→ Not mandatory, but highly recommended. A corporate lawyer will help you select the most suitable company type, prepare accurate documents, handle submissions, and complete procedures efficiently while minimizing legal risks.
To ensure a smooth, compliant, and cost-effective conversion process, it is best to consult a corporate lawyer. Lexconsult & Partners is ready to accompany you through every stage — from document preparation and submission to resolving any arising legal issues.
📞Hotline: 0938 657 775
📧 Email: info@lexconsult.com.vn
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