Procedure for Temporarily Suspending a Sole Proprietorship

Understanding the procedure for temporarily suspending a sole proprietorship (often referred to as an “individual household business” or “hộ kinh doanh cá thể” in Vietnam) is crucial for business owners who need to pause their operations for a period. Correctly following this procedure allows the business owner to preserve their right to resume operations in the future, ensures transparency with state management agencies, and creates a favorable foundation for re-entering the market or transitioning to a different business model.

Is Notifying Authorities Mandatory When Temporarily Suspending a Sole Proprietorship?

According to Article 91 of Decree 01/2021/NĐ-CP, the requirement to notify a temporary business suspension depends on the duration of the suspension. Specifically, a sole proprietorship must notify the district-level Business Registration Office where it was registered and the directly managing Tax Authority if the business suspension is for 30 days or more.

Failure to notify a suspension lasting over 30 days can result in an administrative fine ranging from 5,000,000 VND to 10,000,000 VND, as stipulated in Point c, Clause 1, Article 63 of Decree 122/2021/NĐ-CP.

Furthermore, this notification must be submitted at least 03 working days before the intended date of business suspension.

>> Reference: How many business households can one person register?

Step-by-Step Guide to the Procedure for Temporarily Suspending a Sole Proprietorship

The procedure for temporarily suspending a sole proprietorship is outlined in Clause 2, Article 91 of Decree 01/2021/NĐ-CP and detailed in Section 3, Appendix II of Decision 1323/QĐ-BKHĐT issued by the Ministry of Planning and Investment on July 26, 2023. The process is as follows:

1. Step 1: Prepare the Dossier

The owner of the sole proprietorship needs to prepare the following documents:

• A Notification of Temporary Business Suspension using the form provided in Appendix III-4, issued with Circular 02/2023/TT-BKHĐT by the Ministry of Planning and Investment on April 18, 2023.
• A certified copy of the minutes of the household members’ meeting regarding the registration of temporary business suspension or the resumption of business before the notified deadline (applicable if the sole proprietorship is registered by household members).
• A letter of authorization (power of attorney) and a copy of the authorized person’s legal identification documents (if the procedure is carried out by an authorized representative).

2. Step 2: Submit the Dossier

The sole proprietorship can submit the dossier to the Business Registration Office where it was registered using one of the following methods:

• Direct submission: At the Finance and Planning Office under the district-level People’s Committee where the business is registered.
• Online submission: Access the online household business registration system, declare the information, upload electronic documents, and submit the dossier according to the online procedure.

3. Step 3: Dossier Reception and Processing by the Business Registration Office

• For direct submission:
  • Upon receiving the notification, the district-level Business Registration Office will issue a receipt of dossier submission to the business owner.
  • Within 03 working days from receiving a valid dossier, the district-level Business Registration Office will issue a Certificate of Confirmation of Business Suspension Registration to the sole proprietorship.
• For online submission:
  • Upon receiving the dossier, the district-level Business Registration Office will return a dossier receipt and the results of the household business registration procedure to the applicant via the electronic information system for household business registration.
  • Similar to direct submission, within 03 working days from receiving a valid dossier, the district-level Business Registration Office will issue a Certificate of Confirmation of Business Suspension Registration.

If the dossier is incomplete or invalid, the district-level Business Registration Office will notify the applicant to amend or supplement the dossier and will provide the results within 03 working days from the receipt of the subsequently valid dossier.

What is the Maximum Duration for a Sole Proprietorship’s Business Suspension?

According to Clause 1, Article 91 of Decree 01/2021/NĐ-CP, a sole proprietorship can temporarily suspend its business without a time limit. However, the business owner must follow the notification procedure if the suspension lasts for 30 days or longer.

If the business wishes to resume operations before the end of the previously notified suspension period, it must send a written notification to the Business Registration Office where it was registered at least 03 working days before resuming business, in accordance with Clause 1, Article 91 of Decree 01/2021/NĐ-CP.

Thus, current law does not limit the duration of business suspension for a sole proprietorship; the period is flexible depending on the circumstances requiring the suspension.

Frequently Asked Questions (FAQ) about the procedure for temporarily suspending a sole proprietorship

Here are some common questions related to the temporary business suspension procedure for sole proprietorships:

Does a sole proprietorship have to pay business license tax (excise tax) during the suspension period?

According to regulations on business license tax, specifically in Decree 139/2016/NĐ-CP and Clause 3, Article 4 of Circular 302/2016/TT-BTC (as amended by Clause 4, Article 1 of Circular 65/2020/TT-BTC), if a business suspends operations for the entire calendar year (from January 1st to December 31st), it is exempt from paying the business license tax for that suspension year, provided that:

• The written request for temporary suspension of production/business activities is sent to the tax authority or business registration office before the statutory deadline for paying the license fee (January 31st annually).
• The business license tax for the year of requested suspension has not yet been paid.

What are the sole proprietorship’s obligations to the tax authority during the suspension period?

The Law on Tax Administration and guiding documents like Article 4 of Decree 126/2020/NĐ-CP stipulate that during the notified business suspension period, the sole proprietorship is not required to submit tax declaration dossiers, unless the suspension does not cover a full tax period. However, the business must still comply with decisions and notifications from the tax management agency regarding obligations that arose before the suspension and must settle any outstanding tax debts.

How many times can a sole proprietorship temporarily suspend its business?

Current laws, particularly Decree 01/2021/NĐ-CP on business registration (which includes provisions applicable to sole proprietorships), do not specify a limit on the number of times a sole proprietorship can temporarily suspend its business. For each suspension lasting 30 days or more, the business owner must follow the notification procedure as per Clause 1, Article 91 of Decree 01/2021/NĐ-CP.

Who is authorized to sign the Notification of Temporary Business Suspension?

The Notification of Temporary Business Suspension, according to the form in Appendix III-4 issued with Circular 02/2023/TT-BKHĐT, must be signed by the owner of the sole proprietorship.

After the notified suspension period ends, does the sole proprietorship need to do any procedure to resume operations?

According to Article 91 of Decree 01/2021/NĐ-CP, if the sole proprietorship suspends its business for the duration specified in the notification and does not notify an earlier resumption, it can automatically resume business activities once that period expires. Business registration law does not require a formal notification of resuming operations in this scenario. However, to ensure tax matters are updated promptly, it is advisable for the sole proprietorship to proactively inform the directly managing tax authority about its return to activity.

Does the sole proprietorship have to settle debts or contracts with partners before suspending business?

Temporary business suspension, according to the principles of the Civil Code and related laws, does not terminate obligations arising from existing contracts or debts. The sole proprietorship remains responsible for paying due debts and fulfilling other obligations to customers, suppliers, and other relevant parties as per signed contracts, unless otherwise agreed upon by all parties.

Which agency issues the Certificate of Confirmation of Business Suspension Registration?

As per Clause 2, Article 91 of Decree 01/2021/NĐ-CP, the district-level Business Registration Office (usually the Finance and Planning Office under the district-level People’s Committee) where the sole proprietorship was registered will receive the valid dossier and issue the Certificate of Confirmation of Business Suspension Registration.

What should be done if the notification dossier for temporary business suspension is invalid?

Based on the dossier processing procedure for household business registration in Decree 01/2021/NĐ-CP, if the notification dossier for temporary business suspension is not valid, the district-level Business Registration Office will issue a written notification (or an online notification if submitted online) clearly stating the content that needs to be amended or supplemented. The sole proprietorship must then complete the dossier as instructed and resubmit it within the timeframe requested by the Business Registration Office for processing.

During the suspension period, is the sole proprietorship allowed to sign new contracts or issue invoices?

The nature of business suspension, as stipulated in Article 91 of Decree 01/2021/NĐ-CP, is the temporary cessation of activities that generate business-related rights and obligations. Therefore, during this period, the sole proprietorship is not permitted to enter into new economic contracts for profit-making purposes or issue invoices for sales of goods or provision of services that arise during the suspension phase.

What content is required in a letter of authorization (power of attorney) for someone else to submit the business suspension dossier?

According to the Civil Code’s provisions on authorization and the guidance in Clause 2, Article 91 of Decree 01/2021/NĐ-CP (allowing the founder or the sole proprietorship to authorize another organization or individual to carry out business registration procedures), the letter of authorization must clearly state the information of the principal (the business owner) and the attorney-in-fact (the authorized person), the specific scope of authorization, the duration of authorization (if any), and must bear the legal signature of the business owner.

Is it possible to dissolve a sole proprietorship while it is under temporary suspension?

Current laws, specifically the regulations on terminating the operation of a sole proprietorship in Article 92 of Decree 01/2021/NĐ-CP, do not prohibit a sole proprietorship that is under temporary suspension from carrying out the procedure for termination of operation (dissolution). Therefore, the sole proprietorship can proceed with the necessary steps to dissolve and terminate its operations in accordance with legal procedures.

Does the sole proprietorship need to notify any other agencies besides the Business Registration Office and the Tax Authority about the suspension?

Besides the mandatory notification to the district-level Business Registration Office and the Tax Authority as per Decree 01/2021/NĐ-CP and the Law on Tax Administration, if your business line falls under the management of other specialized agencies (e.g., Department of Industry and Trade, Department of Health, food safety management agency, fire prevention and fighting agency) and the specialized laws for that sector require notification upon temporary suspension, you must comply with those regulations to avoid unnecessary legal risks.

Conclusion

In summary, owners of sole proprietorships can temporarily suspend their business operations without a strict time limit but must adhere to the regulations regarding the temporary business suspension procedure and notification deadlines.