Learning Outcomes

By the end of this section, you'll understand:

All five available business structure options in Vietnam
Key characteristics, advantages, and disadvantages of each
Registration requirements, costs, and timelines
Which structures are suitable for fashion startups

Business Structure Fundamentals: Your Five Options

Vietnam's legal framework offers five distinct business structure types. Understanding the fundamentals of each is essential before making your choice.

Decision Overview: Which Structure is Right for You?

Structure Type	Description	Best For	Complexity
Sole Proprietorship (Doanh nghiệp tư nhân)	One owner, unlimited liability, simplest enterprise form	Solo freelancers, service providers	Simple
Partnership Company (Công ty hợp danh)	Two or more partners, general + limited partners	Professional services (law, accounting)	Moderate
Limited Liability Company (Công ty TNHH)	1-50 members, limited liability protection	SMEs, fashion startups, retail businesses	Moderate
Joint Stock Company (Công ty Cổ phần)	3+ shareholders, shares tradeable, complex governance	Companies planning IPO, need many investors	Complex
Household Business (Hộ kinh doanh)	Individual Vietnamese citizens, NOT an enterprise	Very small operations (formerly), losing advantages in 2026	Simple

Important Distinction

The first four options (sole proprietorship through joint stock company) are formal enterprises governed by the Enterprise Law 2020. The household business is NOT an enterprise—it's a separate category with fundamentally different rules.

Sole Proprietorship (Doanh nghiệp tư nhân)

What is a Sole Proprietorship?

A sole proprietorship is the simplest form of enterprise in Vietnam, owned by a single individual who has unlimited personal liability for all business debts and obligations.

Key Characteristics

Single owner: Only one individual can own the business
Vietnamese citizens only: Foreign nationals cannot register sole proprietorships
Unlimited liability: Owner's personal assets at risk for business debts
No minimum capital: No charter capital requirement
Owner must be director: Cannot appoint separate management

✅ Advantages

Simplest enterprise registration process
Low establishment costs (~$20 in fees)
Direct owner control
Minimal governance requirements
Fast setup (3-5 working days)

❌ Disadvantages

Unlimited personal liability (biggest risk)
Cannot raise investment through equity
Vietnamese citizens only
Owner remains liable even after selling business
Limited credibility with suppliers/investors
No succession planning options

Registration Requirements

Documents:

Application for business registration
Valid ID card (CCCD/CMND)
Business location proof

Timeline:

3-5 working days

Costs:

~$20 government fees

For Fashion Startups: ❌ Not Recommended

Why? Unlimited liability is particularly risky for product-based businesses. If you sell 1,000 dresses and face a quality claim or lawsuit, your personal assets (house, savings) are at risk. Additionally, foreign nationals (including your partners) cannot participate in ownership.

Partnership Company (Công ty hợp danh)

What is a Partnership Company?

A partnership company has two or more partners, divided into general partners (with unlimited liability) and limited partners (liability limited to capital contribution).

Key Characteristics

Minimum 2 partners: At least one must be a general partner
Dual liability structure: General partners: unlimited; Limited partners: limited
General partner management: Only general partners can manage the company
Partnership agreement: Governs profit-sharing and decision-making

General vs. Limited Partners

Aspect	General Partner	Limited Partner
Liability	Unlimited (personal assets at risk)	Limited to capital contribution
Management Rights	Full management authority	No management role
Capital Requirement	No minimum	Must contribute agreed capital
Transferability	Requires all partners' consent	Easier to transfer interest

Why Partnerships are Rare in Vietnam

Partnership companies are uncommon in Vietnam's business landscape because:

General partners face unlimited liability (why not just form LLC?)
Complex governance structure adds administrative burden
Limited partners have no control but capital is at risk
LLCs provide similar benefits with simpler structure

For Fashion Startups: ❌ Not Recommended

Why? Partnership structure is designed for professional services firms (law, accounting) where partners want direct management involvement. For fashion retail, LLC provides all the benefits (multiple owners, investment capability) without requiring anyone to take unlimited liability. The complexity isn't justified for product businesses.

Limited Liability Company (Công ty TNHH) ⭐

What is a Limited Liability Company?

Two Types of LLCs

Single-Member LLC (Công ty TNHH một thành viên)

One owner (individual or organization)
Owner appoints director to manage
Simplest LLC structure
Popular for foreign investors starting solo

Multi-Member LLC (Công ty TNHH hai thành viên trở lên)

2-50 members
Members' Council governs major decisions
Director handles day-to-day operations
Ideal for co-founder teams

Key Characteristics

Limited liability: Members' liability capped at capital contribution
100% foreign ownership allowed: Foreign investors can fully own fashion retail LLCs
Minimum capital for foreigners: $10,000 charter capital (no minimum for Vietnamese-owned)
Maximum 50 members: Can accept new members but cannot issue shares
Membership transfer: Requires consent of other members

What "Limited Liability" Means in Practice

Scenario: Your fashion business owes $50,000 to suppliers and fails.

With LLC: You lose your $10,000 capital contribution. Your personal house, car, savings are protected.
Without LLC (sole proprietorship/household): Creditors can seize your personal assets to recover the $50,000 debt.

This protection alone justifies the higher setup cost for product businesses.

✅ Advantages

Limited liability protection for all members
100% foreign ownership allowed in fashion retail
Professional credibility with suppliers, banks, investors
Can accept new members (up to 50)
Unlimited employees and locations
Eligible for 3-year CIT exemption (new SMEs)
Can convert to JSC later if needed
Simpler governance than JSC

❌ Disadvantages

Higher setup costs ($5,000-8,000 for foreign investors)
Longer registration timeline (1-2 months)
Ongoing compliance costs ($320-800/month accounting)
Cannot issue shares (limited fundraising vs. JSC)
Member transfer requires consent
Mandatory audit for foreign-owned entities

Registration Process & Timeline

Preparation

Gather documents, choose name, prepare charter

1-2 weeks

Investment Registration

File for Investment Registration Certificate (IRC) if foreign-owned

15 days

Business Registration

Submit Enterprise Registration Certificate (ERC) application

3-5 days

Post-Registration

Tax registration, seal carving, bank account opening

1-2 weeks

Costs Breakdown (Foreign-Owned LLC)

Expense Category	Cost Range	Notes
Professional services (lawyer/agent)	$3,000 - $6,000	Handles IRC, ERC, compliance setup
Government fees	$50 - $100	Registration, licenses
Office lease deposit	$500 - $2,000	Required registered address
Charter capital deposit	$10,000+	Minimum for foreign investors
Notarization, translations	$200 - $500	Passport, documents
TOTAL FIRST-YEAR SETUP	$5,000 - $8,000	(excluding charter capital)

Ongoing Compliance Requirements

Monthly

VAT declaration (if applicable)
Personal Income Tax withholding (employees)
Accounting bookkeeping

Quarterly

Corporate Income Tax provisional payment
Financial reports

Annually

Finalized CIT settlement
Financial statement audit (foreign-owned)
Annual licensing fees

Monthly accounting costs: $320-$800 depending on transaction volume and complexity

Annual audit costs: $1,500-$3,000 (mandatory for foreign-owned)

For Fashion Startups: ✅ HIGHLY RECOMMENDED

Why? LLCs provide the perfect balance for fashion startups:

✅ Full liability protection for product-related risks
✅ Allows 100% foreign ownership (critical for international founders)
✅ Professional credibility with manufacturers and platforms
✅ Can scale to multiple locations and unlimited employees
✅ Eligible for 3-year tax exemption under 2026 reforms
✅ Can accept up to 50 investors without complex JSC structure
✅ Simpler governance than JSC, stronger than household business

The $5,000-8,000 upfront cost is an investment in scalability, protection, and credibility—critical for any fashion business with growth ambitions.

Joint Stock Company (Công ty Cổ phần)

What is a Joint Stock Company?

A Joint Stock Company is Vietnam's most sophisticated corporate structure, designed for companies planning to raise significant capital, issue shares, or eventually go public.

Key Characteristics

Minimum 3 shareholders: No maximum limit
Share-based ownership: Capital divided into transferable shares
Complex governance: Requires Board of Directors, Supervisory Board (if 11+ shareholders)
Free share transfer: Shares generally freely transferable (unless charter restricts)
IPO-ready: Can list on stock exchange

Governance Structure

General Meeting of Shareholders

Highest authority, major decisions

↓

Board of Directors

3-11 members, strategic oversight

Supervisory Board

Required if 11+ shareholders

↓

General Director

Day-to-day management

2025 Amendments to JSC Law

Law 76/2025 introduced important changes for JSCs:

Beneficial ownership disclosure: Must declare individuals with 10%+ voting rights or capital
Debt-to-equity cap: Total mobilized capital (bonds, loans) cannot exceed 5x equity
Enhanced transparency: More stringent reporting on related-party transactions

LLC vs. JSC Comparison

Feature	LLC	JSC
Minimum owners	1	3
Maximum owners	50	Unlimited
Ownership type	Membership interests	Shares
Transferability	Requires consent	Generally free
Governance	Simple (Members' Council or Owner)	Complex (Board of Directors + Supervisory Board)
Can issue bonds?	No	Yes
Can go public?	No (must convert to JSC first)	Yes
Setup costs	$5,000-8,000	$4,000-25,000

When to Consider JSC

Choose JSC structure if you need to:

✅ Raise capital from many investors (>50)
✅ Issue bonds or other debt instruments
✅ Plan eventual IPO on Vietnamese stock exchange
✅ Provide high liquidity for investor exits

For Fashion Startups: 🤔 Generally Not Needed Initially

Why? JSC structure is overkill for early-stage fashion businesses:

Governance complexity (Board of Directors, Supervisory Board) adds overhead
Higher ongoing compliance costs
Benefits (unlimited investors, share issuance) not needed until later stage

Better approach: Start as LLC, convert to JSC when you have concrete plans for:

Raising Series A+ investment with many investors
Issuing bonds for expansion capital
Preparing for eventual IPO

YODY started as LLC, Blue Exchange chose JSC from the start for its aggressive expansion plans. Your choice depends on capital needs.

Household Business (Hộ kinh doanh)

What is a Household Business?

⚠️ 2026 Changes Ahead

Critical: Not an Enterprise

Household businesses are NOT governed by Enterprise Law 2020. They are a separate category under different regulations with fundamentally different rules and limitations.

A household business is the simplest business registration available in Vietnam, designed for small-scale operations run by individual Vietnamese citizens and their family members.

Key Characteristics

Vietnamese citizens only: Foreign nationals cannot register household businesses
Personal liability: Unlimited, just like sole proprietorship
Employee limit: Maximum 10 employees
Single location: Cannot operate multiple branches
Simplified registration: Register with ward People's Committee

❌ Critical Restrictions for Fashion Businesses

No Foreign Ownership

Absolutely prohibited. If you're a foreign national or have foreign partners, household business is not an option. This includes Ivy if she's not a Vietnamese citizen.

10 Employee Maximum

Blocks scaling. Once you need 11+ employees for production, fulfillment, and sales, you must convert to enterprise.

Single Location Only

Cannot open pop-ups, retail stores, or warehouses in different locations. All operations must be at registered address.

No Equity Issuance

Cannot accept investment or give ownership shares. Only informal loans possible—high risk for investors.

Registration Process

Documents:

Application form
ID card (CCCD/CMND)
Location proof (if required)
Industry-specific licenses (if any)

Timeline:

3 working days

Costs:

~$50 total

The 2026 Tax Reform: Game Changer

January 1, 2026: Simplified Taxation Eliminated

Current system (until Dec 31, 2025):

Presumptive taxation: Pay fixed percentage of revenue
No need for detailed accounting
Much simpler than enterprise tax filing
Lower effective tax rate in many cases

New system (from Jan 1, 2026):

❌ Declaration-based taxation: Must maintain full accounting records
❌ Same filing requirements as enterprises
❌ Same complexity without corporate benefits
❌ No 3-year CIT exemption (only for new SME enterprises)

What This Means in Practice

Aspect	Household Business (Pre-2026)	Household Business (2026+)	LLC (2026+)
Accounting	Simple/None	Full Vietnamese Accounting Standards (VAS)	Full VAS
Tax filing	Minimal	Monthly VAT, Quarterly CIT	Monthly VAT, Quarterly CIT
Monthly costs	$0-100	$200-400 (accounting)	$320-800 (accounting + compliance)
3-year CIT exemption	❌ Not available	❌ Not available	✅ Available for new SMEs
Liability protection	❌ None	❌ None	✅ Full protection
Scalability	❌ Limited (10 employees, 1 location)	❌ Limited (10 employees, 1 location)	✅ Unlimited

The Math No Longer Works

Before 2026, household business made sense: much simpler taxes, lower costs, minimal compliance.

After 2026, household businesses face the same complexity as LLCs but get none of the benefits:

Same accounting requirements → but no liability protection
Same tax filing complexity → but no CIT exemption
Same monthly costs → but limited to 10 employees, 1 location
Same compliance burden → but no ability to raise investment

You're paying enterprise-level complexity without getting enterprise-level benefits.

For Fashion Startups: ❌ NOT RECOMMENDED (Especially After 2026)

Why household business doesn't work for Strawberry Sunday:

❌ Foreign partners excluded: If any founder is non-Vietnamese, household business is impossible
❌ Unlimited liability: Your personal assets at risk for product claims
❌ Can't scale: 10 employee limit blocks growth
❌ Single location: Can't open pop-ups or retail stores
❌ Can't raise investment: No equity, only risky informal loans
❌ 2026 tax advantage disappears: Same complexity as LLC without benefits
❌ No CIT exemption: LLCs get 3 years tax-free, household businesses don't
❌ Conversion costs later: $1,000-3,000 to convert + business interruption

The calculus has fundamentally changed. Before 2026, household → LLC conversion path made sense for some businesses. After 2026, starting with household business means paying enterprise complexity while being capped at household limitations. Start with LLC from day one.

Understanding the 2025-2026 Legal Reforms

The regulatory changes happening in 2025-2026 represent the most significant shift in Vietnam's business environment in years. Understanding these reforms is critical for making the right structure choice.

Three Major Reforms, One Clear Message

The Vietnamese government is systematically:

Raising compliance standards across all business types
Eliminating informal business advantages (household business simplified tax)
Rewarding formal corporate structures (3-year CIT exemption for new SME enterprises)

Corporate Income Tax Law 67/2025/QH15

Effective: January 1, 2026

Tiered Tax Rates

15% for revenue < VND 50 billion (~$2 million)
17% for revenue VND 50-100 billion ($2-4 million)
20% for revenue > VND 100 billion ($4 million+)

🎁 Critical Incentive for New Enterprises

New SME enterprises established in 2025-2026 receive:

✅ 3-year complete CIT exemption
✅ Government registration fee exemptions
✅ Simplified conversion from household business

This incentive applies only to formal enterprises (sole proprietorship, LLC, JSC) - not household businesses.

Decree 117/2025: E-Commerce Platform Regulations

Effective: October 1, 2025

Platform Seller Requirements

Enhanced seller verification and documentation
1.5% automatic withholding from unregistered sellers
Platforms jointly liable for seller tax compliance

Impact on Household vs. Enterprise Sellers

While platforms currently accept household businesses, enforcement is tightening:

Platforms incentivized to prefer registered enterprises (cleaner liability)
Withholding creates administrative friction for informal sellers
Trend toward requiring formal business registration

Law 76/2025: Amended Law on Enterprises

Effective: July 1, 2025

Key Changes

Beneficial ownership transparency: Declare individuals with 10%+ control
Enhanced governance standards: More rigorous reporting and compliance
Digital transformation: Mandatory electronic filing systems

For JSCs Specifically:

Debt-to-equity cap: Total debt cannot exceed 5x equity
Stricter related-party transaction disclosure

Key Takeaway: The Window is Closing on Informal Business

Vietnam's 2025-2026 reforms mark a deliberate shift toward formalization:

✅ Formal enterprises rewarded: 3-year tax exemptions, fee waivers, simplified conversion incentives
❌ Informal structures penalized: Household businesses lose tax advantages, face same complexity without benefits
⚖️ Compliance standards rising: All businesses face higher transparency and reporting requirements

The government's message is clear: If you're going to face enterprise-level complexity anyway (post-2026), you should get enterprise-level benefits. Start with formal structure from day one.