Regulations on private enterprises according to the Law on Enterprise

Article overview

A private enterprise is a type of business owned by an individual who has unlimited responsibility for all of his or her assets. According to the Law on Enterprise, private enterprises offer the advantage of flexibility in management, quick decision making and are not bound by complex regulations like other types of companies. This is a suitable choice for individuals who want to start a business with maximum control and efficient use of capital.

General regulations on private enterprises
General regulations on private enterprises

What is a private enterprise?

According to the provisions of Clause 1, Article 188 of the Law on Enterprises 2020, private enterprises are defined as a unique type of business in the Vietnamese legal system. This is a business owned by an individual who is responsible with all his or her assets for all activities of the business.

Basic features include:

  • The owner has unlimited liability with personal assets for the business’s debts.
  • A private enterprise does not have a separate legal entity, the owner is directly responsible.
  • Private enterprises are not allowed to issue any type of securities.
  • Each individual is only allowed to establish one private enterprise, ensuring concentration and limiting risks.
  • The owner of a private enterprise cannot simultaneously be the owner of a business household or a general partner of a partnership company.
  • Private enterprises are not entitled to contribute capital to establish or purchase shares or capital contributions in partnerships, limited liability companies or joint stock companies.

This content is prescribed in Article 188 of the Law on Enterprise 2020.

Current regulations on private enterprises

Regulations on investment capital

According to the provisions of Article 189 of the Law on Enterprise 2020, private enterprises do not have mandatory regulations on minimum capital levels. Business owners can flexibly determine the amount of capital appropriate to their industry and business scale.

Principles of investment capital:

First, the investment capital of a private business owner is registered by the business owner himself. Business owners are responsible for accurately declaring the total investment capital, including capital in Vietnam Dong, freely convertible foreign currencies, gold and other assets. For other assets, it is necessary to clearly state the type of asset, quantity and remaining value of each type of asset;

Second, all capital and assets, including loans and leased assets, used for business activities of the enterprise must be fully recorded in the accounting books and financial reports of the enterprise in accordance with the provisions of law;

Third, during operation, private business owners have the right to adjust investment capital, increase or decrease their capital. This adjustment must be recorded accurately in the accounting books. If investment capital is reduced below the registered level, the business owner must carry out registration procedures with the Business Registration Authority before reducing capital.

Regulations on investment capital sources
Regulations on investment capital sources

Regulations on forms of management

According to the provisions of Article 190 of the Law on Enterprises 2020, the form of private enterprise management for the owner is specified in detail, this aims to clearly define the authority, responsibility and method of organizing and operating the business activities of the private enterprise.

The form of management is prescribed as follows:

First, the owner of a private enterprise has the right to make complete decisions on all business activities of the enterprise, including the use of after-tax profits and performing other financial obligations according to the provisions of law;

Second, private business owners can manage themselves or hire a Director/General Director to run the business. However, the business owner is still responsible for all business activities of the business;

Third, the owner of a private enterprise is the legal representative of the enterprise, has the right to represent the enterprise in civil lawsuits, is the plaintiff, defendant, or person with related rights and obligations before the Court or Arbitrate, and exercises other rights and obligations according to the provisions of law.

Methods of managing private enterprises
Methods of managing private enterprises

Regulations on legal liability

According to the provisions of Article 188 of the Law on Enterprise 2020. The legal liability of a private enterprise owner is unlimited. This means that all personal assets, including non-business related assets, can be used to pay off the business’s debts.

Scope of responsibility:

  • Responsible for all assets;
  • There is no limit to the level of liability;
  • Responsibility is personal and not shared.

>>> Reference: Conditions for recruiting foreigners to work at private enterprises.

Current procedures for establishing private enterprises

According to the provisions of Article 21 and Article 32 of Decree No. 01/2021/ND-CP, establishment procedures include the following main steps:

Step 1: Prepare a complete application including the following documents:

  • Application for business registration;
  • Copies of personal legal documents for private business owners.

Step 2: Submit application: Individuals registering a private enterprise must submit the application at the Business Registration Office where the enterprise is headquartered.

Application form:

  • Submit application directly;
  • Submit your application online via the National Business Registration Portal;
  • Submitted via postal and telecommunications services.

Step 3: Evaluate documents and receive results:

The Business Registration Office issues the Business Registration Certificate, within 03 working days from the date of receipt of valid documents.

Note: In case the documents are not valid or the business name requested to be registered does not comply with regulations, the Business Registration Office must notify in writing the content that needs to be amended or supplemented to the business founder or enterprise within 03 working days from the date of receiving the application.

Enterprises are responsible for amending and supplementing documents within the time period required by the Business Registration Office. After submitting additional documents, within 3 working days, the Business Registration Office will return the results to the business.

Full package private business establishment service in Long Phan

At Long Phan, we have a team of experienced experts with deep understanding in supporting and consulting customers to register businesses, and will bring customers the fastest and most effective support service.

Long Phan provides a full package of services including:

  • In-depth consulting and support on private enterprise registration;
  • Support customers in preparing, drafting, reviewing and completing business registration documents;
  • Customer representative coordinates and works with competent registration authorities;
  • Support to answer all customer questions related to business registration activities;
  • Providing comprehensive consulting and support services on private enterprise registration;
  • Consulting after establishment.

If you are looking to establish a private business and need quick, professional support. Please contact Long Phan immediately at the hotline: 0906735386 for in-depth advice and comprehensive support during the business registration process. We are committed to providing the fastest, most accurate and effective solution for you.