CONVERTING HOUSEHOLD BUSINESS INTO A ONE-MEMBER LIMITED LIABILITY COMPANY

In Vietnam’s dynamic legal landscape, converting a household business into a single-member LLC is an important strategic step, marking the maturity and professionalization of business operations. This conversion opens opportunities to access larger capital sources, strengthens reputation with partners and customers, and creates a solid foundation for expansion. However, this process requires strict compliance with the provisions of the Enterprise Law and related guided documents, from preparing documents, tax settlement to re-registering business licenses. Mastering the process and key legal notes will help business owners carry out this transformation effectively, legally, and optimize economic benefits. Let’s explore the important legal aspects of this conversion process with Pham Consult.

1. Notes when converting a business household into an enterprise

In the context of an increasingly developing and integrated economy, the business household model with its limitations on scale, scalability and legal responsibility is no longer suitable for the long-term vision of many business owners. Converting a business household into an enterprise is an inevitable and strong step, opening the door to access a larger market, enhancing reputation with partners and customers, and especially switching from unlimited liability to limited liability. However, this is not just a change of name or seal, but a comprehensive change in legal, tax, and operational aspects. Accordingly, when converting from a business household into an enterprise, business owners need to pay attention to the following issues:

1. Regarding tax codes

The enterprise will be granted a new code according to the business registration certificate;

The tax code of the old business household will cease to be valid; The personal tax obligations of the household owner continue to be managed according to the personal tax code of the business household representative.

2. Regarding tax obligations

Before converting into an enterprise, the business household is responsible for fulfilling its tax obligations with the tax authority. If the business household fails to fulfill its tax obligations:

– The newly converted enterprise will inherit all rights and obligations from the old business household.

– In case of conversion into a limited liability company or joint stock company, the business household owner (business household representative) must be responsible with all of his/her assets for the unpaid debts of the business household.

1. Registration dossier for conversion from a business household into a single-member

The registration dossier for establishment of an enterprise based on conversion from a business household is stipulated in Article 27 of Decree No. 168/2025/ND-CP of the Government on business registration, including the following types of documents:

(i) Copy of the Business Household Registration Certificate.

(ii) Registration documents for establishment of a single-member LLC (not including a copy of the Investment Registration Certificate), including:

– Application for business registration.

– Company charter.

– Copy of legal documents of participating individuals/organizations (except for the case of declaring personal identification numbers).

– List of beneficial owners of the enterprise (if any)

Note: In case the enterprise is converted from a business household with foreign investors, economic organizations with foreign investment capital participating in capital contribution, share purchase, capital contribution purchase in cases where it is required to carry out procedures for capital contribution registration, share purchase, capital contribution purchase according to the provisions of the Investment Law, the dossier must include a copy of the document of the Investment Agency.

Investment registration approval for capital contribution, share purchase, capital contribution purchase of foreign investors, economic organizations with foreign investment capital.

III. Procedures for converting from a business household into a single-member LLC

1. Registration for establishment of a single-member LLC

Registration for establishment of an enterprise based on conversion from a business household is carried out at the provincial-level Business Registration Office where the enterprise intends to locate its head office.

Step 1: Submit application for registration of establishment of a single-member LLC

Enterprises submit applications directly to the Business Registration Office where the enterprise locates its head office or submit application online on the National Business Registration Information Portal via a business registration account or public digital signature.

Step 2: Review application

Within 03 working days from the date of receipt of the application, the Business Registration Office is responsible for reviewing the validity of the business registration application and granting the business registration; In case the dossier is invalid, the Business Registration Authority must notify in writing the contents that need to be amended or supplemented to the business founder. In case of refusal to register the business, it must notify the business founder in writing and state the reason.

After being granted a Business Registration Certificate, the enterprise must publicly announce it on the National Business Registration Information Portal and must pay fees according to the provisions of law.

2. Termination of business household operations

Within 02 working days from the date of granting the Business Registration Certificate, the provincial-level Business Registration Authority shall send information on the establishment of the enterprise based on the conversion from a business household to the commune-level Business Registration Authority where the business household is headquartered.

The commune-level business registration authority shall send information on the termination of the business household’s operations to the Tax Authority and issue a notice on the National Business Registration Portal on the business registration, changing the legal status of the business household to the status of being in the process of termination of operations.

The tax authority shall be responsible for sending information to the commune-level business registration authority when the business household has fulfilled its tax obligations. Within 03 working days from the date of receiving information from the Tax Authority on the business household’s completion of its tax obligations, the commune-level business registration authority shall change the legal status of the business household to the status of having terminated operations in the Business Household Registration Database.

Note: The business household shall not operate from the time the enterprise converts from a business household and is granted a Business Registration Certificate.