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Setting up a business in Vietnam is relatively straightforward, but it still carries various legal and procedural risks—especially for foreign investors unfamiliar with local regulations and administrative practices. Early-stage mistakes can lead to prolonged consequences related to taxation, corporate governance, capital contribution, and business licensing.
Choosing the Wrong Type of Legal Entity
A common error among investors is selecting an entity type that does not align with their business objectives. For instance, establishing a joint stock company (JSC) without multiple shareholders or fundraising needs may lead to unnecessary internal procedures and higher compliance costs. Conversely, setting up a single-member limited liability company (LLC) while having two capital-contributing investors violates Vietnamese law if not promptly adjusted.
Choosing the correct legal form helps simplify operations and facilitates capital raising, equity transfer, and participation in investment incentive programs. Therefore, the first step in company formation should be a careful assessment of shareholder structure, growth strategy, and long-term goals.
Incorrect or Incomplete Business Line Registration
Many enterprises doing business in Vietnam face licensing delays or difficulty obtaining sub-licenses due to registering incorrect business lines or failing to declare them according to Vietnam’s official economic classification system. Certain conditional sectors also require specific qualifications, minimum capital, or permits, which some investors overlook—resulting in rejected applications or unauthorized business activities.
To avoid this, companies should thoroughly review the latest classification codes and cross-check legal requirements applicable to each industry. For foreign-invested projects, it is also critical to examine ownership restrictions, sectoral conditions, and relevant notification or licensing procedures under the Law on Investment.
Failure to Contribute Capital on Time or in the Proper Form
Vietnamese law requires all shareholders or members to fully contribute their registered capital within 90 days from the date of business registration. However, many companies miss this deadline, fail to retain proof of contribution, or contribute via improper methods (e.g., cash contributions instead of bank transfers), which can lead to violations and administrative penalties.
Making capital contributions on time, through the legally required method, and maintaining proper documentation are essential for obtaining full legal status, participating in tenders, expanding operations, and avoiding risks during inspections. If a company cannot meet the contribution deadline, it should promptly adjust the capital amount or contribution timeline as prescribed by law.
Overlooking Tax Obligations and Periodic Reporting
After incorporation, many new businesses—especially startups—neglect their tax filing duties, financial reporting, or invoice usage declarations. This often results in being flagged as high-risk by the tax authority, tax code suspension, or financial penalties.
To prevent this, companies should establish a compliance plan from the outset. This includes engaging a reputable accounting service provider or hiring in-house accountants, implementing appropriate accounting software, and properly storing financial records. Timely compliance with tax obligations not only ensures smooth operations but is also a prerequisite for VAT refunds, investment incentives, and bank financing eligibility.
ASL Law is a leading full-service and independent Vietnamese law firm made up of experienced and talented lawyers. ASL Law is ranked as the top tier Law Firm in Vietnam by Legal500, Asia Law, WTR, and Asia Business Law Journal. Based in both Hanoi and Ho Chi Minh City in Vietnam, the firm’s main purpose is to provide the most practical, efficient and lawful advice to its domestic and international clients. If we can be of assistance, please email to [email protected].
ASL LAW is the top-tier Vietnam law firm for doing business in Vietnam. If you need any advice, please contact us for further information or collaboration.
