Converting a household business into an enterprise brings numerous benefits in terms of legal status, taxation, incentives, and business expansion. Discover the detailed procedures and new regulations effective from July 1, 2025, with DNP Viet Nam Law Firm.
1. Why Should Household Businesses Be Converted into Enterprises?
The transformation of household businesses into enterprises is not only an inevitable trend but also delivers substantial practical benefits. In particular, the Law on Enterprises 2020 and the new regulations effective from July 1, 2025, entitle converted household businesses to various preferential policies.
1.1. Establishing a Clear Legal Status
- The law recognizes enterprises as legal entities and fully protects them.
- The law entitles them to conclude contracts and expand cooperation both domestically and internationally.
- Their legal status enhances credibility when dealing with banks, partners, and investors.
1.2. Expanding Opportunities for Access to Capital and Markets
- Enterprises are eligible to obtain financing from banks and to raise capital through the issuance of shares and bonds.
- Agencies and organizations place them in a better position to participate in bidding processes and conclude major contracts.
- Their legal status also enables them to broaden their business scope across multiple industries and provinces.
1.3. Benefiting from Tax Incentives and State Support
- Enterprises are subject to the corporate income tax regime instead of the presumptive tax system applied to household businesses.
- They may benefit from tax incentives when investing in prioritized sectors or geographic areas.
- They gain access to government support packages and programs designed to encourage entrepreneurship.
2. Key Benefits of Converting Household Businesses into Enterprises
The comparative table below between household businesses and enterprises clearly illustrates these benefits:
| Criteria | Household Business | Enterprise |
| Legal Status | Not recognized as a legal entity | Recognized as a legal entity |
| Capacity for Expansion | Limited to fewer than 10 employees | No limit on the number of employees |
| Taxation | Presumptive tax system, less transparent | Subject to corporate income tax (CIT), VAT, and other taxes with greater transparency |
| Access to Credit | Limited access to bank loans | Easier access to credit and eligible to issue securities |
| Credibility | Restricted when dealing with major partners. | Enhanced credibility and broader cooperation opportunities |
| Government Support | Limited | Eligible for SME incentives and support. |
3. Transitioning from Household Business to Enterprise
3.1. Place of Application Submission
The household business shall submit its application to the Business Registration Office – Department of Finance where its head office is located, in accordance with Article 27 of Decree No. 168/2025/NĐ-CP. Applications may also be submitted online via the National Public Service Portal.
3.2. Eligible Forms of Conversion
Under the Law on Enterprises 2020, a household business may be converted into one of the following types of enterprises:
- Private enterprise;
- Single-member limited liability company or multi-member limited liability company;
- Joint-stock company;
- Partnership.
3.3. Required Application Documents
As stipulated in Article 27 of Government Decree No. 168/2025/ND-CP, the application dossier includes:
- Application for enterprise registration;
- Copy of the Certificate of Household Business Registration;
- Company charter (if converted into a limited liability company, joint-stock company, or partnership);
- List of members or founding shareholders;
- Legal documents of individuals/organizations contributing capital (if electronic identification is not used).
3.4. Processing Time and Outcome
Within two (02) working days from the issuance of the Enterprise Registration Certificate, the Business Registration Office shall forward a copy to the Commune-level People’s Committee to terminate the household business and simultaneously update the status in the National Database (Clause 3, Article 27, Government Decree No. 168/2025/ND-CP).
Converting a household business into an enterprise delivers tangible legal, financial, and reputational benefits. It is a key step for business expansion and sustainable development. DNP Vietnam Law Firm stands ready to assist clients in completing the procedure promptly and in full compliance with applicable regulations.
