Your comprehensive back-office solutions

  • English
  • Vietnam

WHY IT IS NECESSARY TO ESTABLISH A COMPANY IN VIETNAM SINCE JULY 1, 2020

The company establishment is to help expanding your own business and bringing certain benefits. For clients, you become more reliable; For partners, you become more equal and all of those mean making the management much easier and more convenient for you. So have you ever thought about the company establishment? When is the best time to start a business? To answer this question, please take some time to see the following article.

1. What is the company establishment?

The definition of establishing a company

The definition of establishing a company can be divided into two different perspectives, as follows:

An economic perspective: Establishing an enterprise or organization is the establishment of a business organization with all facilities conditions such as head office, human resources, material resources, production lines, factories, capital…

A legal perspective: Establishing an enterprise or organization is a legal procedure that individuals and organizations must carry out legal procedures at the competent authority.

Notes (*): The company‘s founder needs to clearly identify the consistency between the business lines of the enterprise and the type of business.

2. Why should we establish a company?

 

Benefits of establishing a company

As business investment must always be done under a certain legal basis, you cannot do business as an individual. If you do not comply, you will be fined in different levels ranging from warnings, fines and criminal prosecution. In addition, the business should also be registered on a legal basis to avoid fake products, piracy or trademark copying. The brand creation also shows the prestige, helping enterprises reach more potential customers, making it easier to commercialize products.

According to statistics, the company establishment also helps increasing the ability to raise capital and the stability of the business in the long run.

The company establishment is very important. It greatly affects the business operation of the enterprises. Besides that, there are many great benefits which cannot be obtained through a small business form.

3. Steps to prepare to establish a company

a) Identify the business lines:

Individuals and organizations need to clearly identify the business lines because these are the main activity of the enterprise when it comes into operation, as well as the mandatory requirement to declare when registering a company establishment.

b) Determine the company’s charter capital:

Firstly, the charter capital is the asset contributed by the enterprise’s capital-contributing members, which is used to assess the size of the enterprise.

Secondly, the charter capital is the basis for distributing profits as well as risks during business operations.

Finally, the charter capital is the basis for investors to evaluate when the enterprise decide to raise funds.

c) Determine the number of capital-contributing members and the type of enterprise:

The number of capital contributors affects profit distribution as well as voting rights and business orientation. Therefore, this needs to be clearly defined before starting a business. And the type of business also needs to be clearly defined.

d) Choose an enterprise name:

This is obviously necessary. Before the business operation starts, the enterprise must have an enterprise name. This name must not overlap with other enterprises of the same industry. And it should also be registered for business protection.

e) Determine the business location of the enterprise:

Determining the market and market segment of an enterprise in order to select the headquarter location so that it is suitable and convenient for production, business, transportation, discussion and upcoming cooperation.

f) Company establishment contract / agreement:

The contract / agreement on establishing a business is very important and necessary in case the enterprise has many investors participating.

4. Why establishing a company since July 1, 2020 is a good decision?

In 2020, the Government has made changes that offer many benefits to enterprises. According to statistics, in the first 5 months of 2020, there are 48,324 newly established enterprises in Vietnam, which shows a new trend needs to be caught.

In particular, on 01 July 2020, Tax laws will have many changes that offer more benefits to enterprises and employees, so establishing a company at this time will bring good opportunities.

According to the new regulation on Business License Fee, in 2020, License tax will be exempted for the first year of establishment (from January 1 to December 31) for:

– Newly established organizations (granted new tax code, new business identification numbers).

– Households, individuals or groups who carry out production and business activities for the first time.

– Branches, representative offices or business locations of the two above-mentioned subjects which are established during the exemption period.

According to the new regulations, from 01 November 2020, the State has started to enforce the application of electronic invoices, which will makes it much easier for enterprises to manage documents.

International trade agreements as well as partnership agreements between Vietnam and other countries are also gradually taking effect, which helps to make trading more and more convenient.

5. What should be considered after establishing a company?

After the company is established, in order to limit the legal risks during operation process, you should pay attention to some important issues as follows:

Business operation structure: Business operation structure is very important, is considered as the foundation of the business during the establishment and development process, so it need to be built in a very good and careful way.

Business activities: It is necessary to focus on developing partners, clients, effective business products. Eliminating bulky distribution channels. Streamlining business activities, and especially paying attention to build online business systems in the current digital age.

Management activities: promoting employees by scientific methods to increase efficiency in operation; build a company’s culture in a healthy manner in accordance with spirit of the business.

Marketing activities: In the current digital age, digital marketing is the top priority, so it is important to focus on this marketing channel.

Hopefully, through this article, VNC has partly helped you answer the question “Why is it necessary to establish a company since July 1, 2020?”. If you are planning to start a business, kindly do not hesitate to contact us via the Website www.vnc-os.com | Hotline (+84) 902 595 171 or  (+84) 8 88 77 66 00 for direct support.