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5 points to note when establishing a private enterprise

Setting up a sole proprietorship is a major step for any entrepreneur. To ensure success and sustainable growth, there are several important points to keep in mind. From choosing a business name, determining the business sector, to preparing legal documents, each step needs to be done carefully. This article will detail 5 points to keep in mind to help you get off to a smooth start.

1. Naming of private enterprise

The Vietnamese name of an enterprise includes two elements in the following order:

- Type of enterprise. The name of the type of enterprise is written as “DNTN” or “doanh nghiep TN” for private enterprises;

- Proper name. Proper name is written using letters in the Vietnamese alphabet, the letters F, J, Z, W, numbers and symbols.

Before registering a business name, businesses should refer to the names of businesses that have been registered in the National Database of Business Registration.

2. Private enterprise established by an individual

Unlike most other types of enterprises - individuals and organizations jointly contribute capital to establish, a private enterprise is owned by an individual (Article 183 of the 2020 Enterprise Law).

The investment capital of a private enterprise is registered by the business owner himself. Thus, the capital of the enterprise comes from the assets of a single individual. During the operation, the owner of a private enterprise has the right to increase or decrease his investment capital in the business activities of the enterprise.

3. The business owner decides all the company's operations.

Because a private enterprise has only one investor, the business owner has the right to decide all the company's operations.

Specifically, the owner of a private enterprise has full decision-making power over all business activities of the enterprise, the use of profits after paying taxes and fulfilling other financial obligations as prescribed by law.

In addition, the owner of a private enterprise can directly or hire someone else to manage and operate the business. In case someone else is hired as the business manager, he or she is still responsible for all business activities of the enterprise.

The owner of a private enterprise is also of course the legal representative of the enterprise.

4. Private enterprises have no legal status.

Assets of a legal entity include capital contributions of owners, founders, members of the legal entity and other assets that the legal entity has established ownership rights in accordance with the provisions of this Code and other relevant laws (Article 81 of the Civil Code 2-015).

However, according to Article 184 of the 2014 Enterprise Law, the investment capital of a private enterprise owner is registered by the enterprise owner himself. Assets used for the business activities of the private enterprise owner do not have to go through procedures to transfer ownership to the enterprise.

Thus, the assets of a private enterprise and the private enterprise owner are not clearly independent because there is no boundary. The private enterprise owner can increase or decrease the investment capital at any time. This means that the investment capital of the enterprise can also be used by the private enterprise owner as personal assets.

5. Private enterprises have unlimited liability for all debts.

Clause 1, Article 183 of the 2020 Enterprise Law affirms that the owner of a private enterprise is responsible for all activities of the enterprise with all of his/her assets.

As mentioned above, the capital of a private enterprise is the property of the business owner, and the private enterprise must bear unlimited liability with all of its assets.