Procedures for converting from household business to enterprise

Procedures for converting from household business to enterprise is an important step forward, opening up new development opportunities. This process requires careful preparation of documents and legal procedures. This article by Long Phan will provide detailed information about the procedure for converting from household business to enterprise, helping customers make the transition smoothly.

Benefits and limitations when converting from household business to enterprise

When converting from household business to enterprise, it will bring benefits and at the same time have the following limitations:

Benefit

• Enterprises have legal status, have a seal and can use invoices, improving their reputation and ability to transact.
• Businesses can easily mobilize capital from many different sources, expanding investment and development opportunities.
• Enterprises can operate in multiple industries and expand their scale through the establishment of branches and business locations.
• Limited liability mode helps minimize financial risks for owners.

According to the provisions of Articles 15, 16, 17, 18, 19 Decree 80/2021/ND-CP, small and medium enterprises converting from individual business households will enjoy the following incentives:

• Free consulting support, guidance on documents and procedures for establishing a business.
• Exemption from first-time business registration fees at the business registration agency.
• Free publication of business registration content for the first time at the National Business Registration Portal.
• Support procedures for registering conditional business lines.
• Exemption from license fees for a period of 03 years from the date of issuance of the first Business Registration Certificate.
• Receive free advice and guidance on tax administrative procedures and accounting regimes within 3 years from the date of issuance of the first Business Registration Certificate.

Limit

Besides the benefits, converting from a business household also comes with some limitations:

• Enterprises have more complex organizational structures, requiring high management and operating costs.
• Businesses must comply with more complex accounting regimes and submit periodic tax reports.
• Enterprises must pay many types of taxes at higher tax rates than business households.
• Enterprises must fully implement labor policies such as insurance, maternity, holiday and Tet bonuses.

>>> See more: Where to apply for a Household Business License?

Application for converting from household business to enterprise

Pursuant to Clause 2, Article 27 of Decree 01/2021/ND-CP, business registration dossier on the basis of conversion from a business household includes::

• Original business household registration certificate.
• Copy of Tax Registration Certificate.
• The documents specified in Articles 21, 22, 23 and 24 of Decree 01/2021/ND-CP correspond to each type of enterprise, which does not include the Investment Registration Certificate.
• In case there are foreign investors, written approval from the Investment Registration Authority is required according to the Law on Investment.

>>> See more: Establishing a One-Member LLC – Documents and Procedures

Procedures for converting from household business to enterprise

According to the provisions of Decree 01/2021/ND-CP, the procedures for converting from household business to enterprise are carried out as follows:

Step 1: Submit application

Submit an application to register an enterprise on the basis of conversion from a business household to the Business Registration Office where the enterprise intends to be headquartered.

Step 2: Review documents and issue business registration certificate

• The business registration agency fully and accurately enters information in the business registration dossier, checks the validity of the dossier and downloads digitized documents in the business registration dossier into the National Business Registration Information System.
• Issue the Business Registration Certificate within 03 working days from the date of receipt of valid documents.

Step 3: Terminate business operations

Within 02 working days from the date of issuance of the Business Registration Certificate, the business registration agency sends a copy of the Business Registration Certificate and the original Certificate of Business Household Registration to the District Business Registration Office where the business household is headquartered to terminate the business household’s operations.

Notes when converting from household business to enterprise

When converting from household business to enterprise, customers need to pay attention to the following issues:

• Choose a business type suitable to its scale and development orientation.
• Carefully prepare legal documents according to regulations.
• Understand tax and accounting regulations for businesses.
• Build an organizational and management structure appropriate to the scale of the business.
• Effective financial planning and risk management.

Consulting services and guidance on procedures for converting from household business to enterprise

Long Phan Consulting Company provides consulting services and guidance on procedures for converting from household business to enterprise professional. We have a team of experienced experts, knowledgeable about the law, ready to support customers throughout the conversion process, including the following services:

• Consulting on benefits and limitations of conversion.
• Consulting on choosing the appropriate type of business.
• Instructions for preparing documents and business registration procedures.
• Drafting documents and necessary legal documents.
• Representing customers in working with state agencies.
• Carry out post-establishment procedures such as seal engraving, opening a bank account, notification of invoice issuance,…
• Consulting on tax, accounting, labor issues…
• Support in building organizational structure and business management.
• Consulting and answering other related issues.

Frequently Asked Questions 

Below are frequently asked questions about procedures for converting from household business to enterprise:

How long does it take to convert from household business to enterprise?

Normally, the conversion time will range from 3-5 working days from submitting all valid documents.

Is it mandatory to hire consulting services when converting?

It’s not required, but hiring a consulting service will help the transition process go faster and more smoothly, especially for those without experience.

After conversion, will the business household’s tax code remain the same?

No, after conversion, businesses will be granted a new tax code.

What type of enterprise can be converted into an individual business household?

Can be converted into business types such as limited liability company (LLC), joint stock company (CP), partnership company or private enterprise.

Can the debts of a business household be transferred to an enterprise?

The debts of the business household will be transferred to the new enterprise after completing the conversion procedure.

Can the business household’s seal be used for businesses?

No, businesses will have to engrave a new seal.

Does converting to a business affect the business’s ongoing contracts?

In principle, the contracts are still valid. However, it is necessary to notify partners about the change in legal status.

What should you keep in mind about labor issues when converting?

Enterprises need to build an appropriate labor management system, ensuring the rights of employees according to the provisions of law.

After converting from household business to enterprise, which state management agencies do I need to notify?

It is necessary to notify tax authorities, social insurance agencies, and specialized management agencies (if any).

Conclude

Converting from household business to enterprise is an important decision, opening up many development opportunities. To make the transition process go smoothly, customers should carefully study the information and prepare all documents and procedures according to regulations. If you have any questions, please contact Long Phan Consulting Company immediately via the hotline: 0906735386 for the best advice and support.