Consulting on Converting a Sole Proprietorship to the latest Limited Liability Company

Converting a Sole Proprietorship to the latest Limited Liability Company (LLC) is an administrative procedure in the business sector. This conversion not only changes the legal status but also impacts the scale, development, and strategic direction of the business. Therefore, to achieve the best results, using professional services to assist with the conversion process is an effective solution for businesses. For a clearer understanding of this issue, we invite readers to follow the article below.

 Converting a Sole Proprietorship to the latest Limited Liability Company

Forms of Converting a Sole Proprietorship

Currently, according to Clause 1, Article 205 of the Law on Enterprise 2020, a Sole Proprietorship can be converted into the following types of enterprises:

• A Sole Proprietorship can be converted into the LLC, including a Single-Member LLC and a Multi-Member LLC;
• A Sole Proprietorship can be converted into a Joint-Stock Company;
• A Sole Proprietorship can be converted into a Partnership.

Thus, a Sole Proprietorship can be converted into the above-mentioned types of enterprises if it meets the legal conditions.

Conditions for Converting to a Limited Liability Company

According to Article 205 of the Law on Enterprise 2020, to convert a Sole Proprietorship into a Limited Liability Company, the following conditions must be met:

• The enterprise to be converted must meet the conditions specified in Clause 1, Article 27 of the the Law on Enterprise 2020;
• The owner of the sole proprietorship must provide a written commitment to personally assume responsibility for all outstanding debts with their entire assets and commit to paying off all debts when they become due;
• The owner of the sole proprietorship must have a written agreement with the parties to any unresolved contracts regarding the company’s acceptance and continuation of those contracts;
• The owner of the sole proprietorship must provide a written commitment or have a written agreement with other investors regarding the acceptance and use of the current employees of the sole proprietorship.

Conditions for implementing business conversion

Process for Converting a Sole Proprietorship to the latest Limited Liability Company

Registration Documents

According to Clause 1, Article 26, Article 23, and Article 24 of Decree 01/2021/ND-CP dated January 4, 2021, by the Government on business registration (Decree 01/2021/ND-CP), the documents required for converting a Sole Proprietorship into the LLC include:

1. Application for business registration;
2. Company charter;
3. List of members (for a Multi-Member LLC);
4. Copies of the following documents:
   • Legal documents of the individual representing the enterprise;
   • Legal documents of the organization if the company owner is an organization (except for cases where the owner is a state entity);
   • Legal documents of the individual for authorized representatives and documents appointing authorized representatives;
   • For foreign organizational owners, copies of legal documents must be consular legalized;
5. Written commitment from the sole proprietorship owner to personally assume responsibility for all outstanding debts with their entire assets and to pay off all debts when due (if any);
6. Written agreement between the sole proprietorship owner and the parties to any unresolved contracts regarding the company’s acceptance and continuation of those contracts;
7. Written commitment or agreement between the sole proprietorship owner and other investors regarding the acceptance and use of the current employees of the sole proprietorship;
8. Transfer agreement or documents proving the completion of the transfer in cases of capital transfer from the sole proprietorship; Gift agreement in cases of gifting the sole proprietorship’s capital; Copy of the document confirming the legal inheritance rights of the heir in cases of inheritance according to legal provisions;
9. Document from the Investment Registration Authority approving the investment, purchase of shares, or capital contribution by foreign investors or foreign-invested economic organizations, if registration of capital contribution, purchase of shares, or capital contribution is required under the Investment Law.

Thus, to complete the conversion of a sole proprietorship into the LLC, the owner must prepare the documents as mentioned above.

Procedure

According to Article 32, Article 33 of Decree 01/2021/ND-CP and Article 26 of the the Law on Enterprise 2020, the procedure for converting a sole proprietorship into the LLC includes the following steps:

1. Prepare and submit the complete documents for the conversion to the Business Registration Office where the enterprise is headquartered:

Documents can be submitted either:

• Directly at the Business Registration Office under the Department of Planning and Investment;
• Online through the National Business Registration Portal.

2. The Business Registration Office receives the documents and performs the following tasks:
   • Issues a receipt for the submitted documents;
   • Accurately enters the information from the business registration documents;
   • Checks the validity of the documents and uploads the digitized documents into the National Business Registration Information System.
3. Issue the conversion results:
   • Within 3 working days from the date of receiving the documents, the Business Registration Office will issue a new business registration certificate (if the documents are valid);
   • If the documents are incomplete or invalid, the office will send a notification requesting corrections or additional documents for the conversion.

Benefits of Using Business Conversion Services

Converting a Sole Proprietorship to the latest Limited Liability Company offers numerous benefits for a business. However, the complexity of the documentation and procedure can pose challenges during this process. Therefore, utilizing consulting and support services for business conversion can be an effective solution.

The benefits of using such services include:

• Expert Consultation: With their experience and expertise, consultants will review the documents and advise on choosing the most suitable business form for conversion based on the company’s situation and strategic direction.
• Legal Compliance: Consultants ensure that the business complies with all legal regulations during the conversion process from a Sole Proprietorship to the LLC.
• Time and Cost Savings: By using these services, businesses can save time, effort, and costs associated with the conversion procedure and the necessary follow-up procedures.
• Risk Management: During the conversion process, consultants will analyze and assist in resolving potential risks, helping the business to smoothly transition to the new business form.

Conversion Services from Sole Proprietorship to Limited Liability Company

With a team of experienced experts in business consulting, Long Phan offers the following support to clients Converting a Sole Proprietorship to the latest Limited Liability Company:

• Consulting on legal regulations regarding business form conversion;
• Advising on the documentation and procedures for the conversion;
• Assisting in preparing documents and registration materials for the conversion;
• Representing clients in dealings with relevant authorities;
• Advising on methods to handle disputes that may arise;
• Providing post-conversion business management advice.

Consulting on converting private enterprises into LLCs

Converting a Sole Proprietorship to the latest Limited Liability Company offers many business advantages but involves a complex procedure. Therefore, using professional consulting services ensures legal compliance and optimizes the conversion process, thereby creating a solid foundation for future growth. If readers have any questions about this issue or need business consulting, please contact us via Hotline: 0906.735.386 for assistance.