Q&A · Household business
When should or must a household business become a company?
Translated from the Vietnamese original; where they differ, the Vietnamese text and the law prevail.
Awaiting review by a lawyer. Each rule cites its source; where the texts are unclear, the page says so.
The law currently does not require a household business (hộ kinh doanh) to convert into a company (doanh nghiệp) once it reaches any level of revenue or number of employees. The old rule about 10 employees is no longer in Decree 168/2025/NĐ-CP (Nghị định 168/2025/NĐ-CP). You should consider converting when revenue is already large and you must pay tax on income, when your customers are companies that need invoices to deduct tax, or when you want to separate business risk from family assets.
Basic differences
| Household business | Limited liability company (công ty TNHH) | |
|---|---|---|
| Liability | With all assets of the household head and members (Article 82(1) and Article 84(1) of Decree 168/2025 (Đ.82 khoản 1, Đ.84 khoản 1 NĐ 168/2025)) | Limited to contributed capital (Article 46(1) and Article 74(1) of the Law on Enterprises 2020 (Đ.46 khoản 1, Đ.74 khoản 1 Luật Doanh nghiệp 2020)) |
| Where to register | Commune-level business registration office (Cơ quan đăng ký kinh doanh cấp xã) | Business registration office under the provincial Department of Finance (Sở Tài chính) (Đ.20 khoản 1 NĐ 168/2025) |
| Revenue up to VND 1 billion/year | No VAT (thuế GTGT) or personal income tax (thuế TNCN) (NĐ 68/2026) | Must still file tax returns periodically |
| Income tax | Personal income tax at a percentage of revenue or on income | Corporate income tax (thuế TNDN) 15% (annual revenue up to VND 3 billion), 17% (over VND 3 billion to 50 billion), 20% (the rest) (Article 10 of the Corporate Income Tax Law 2025 (Đ.10 Luật Thuế TNDN 2025)) |
| Books | Simple household business accounting books | Accounting and financial statements under the enterprise accounting regime |
When is converting worth it?
- Revenue above VND 3 billion/year. The household must already pay personal income tax on income (Đ.4 NĐ 68/2026; Đ.7 Luật Thuế TNCN 2025), and its books are already close to a company's, so it is worth comparing with corporate income tax and incentives.
- Your customers are companies. A household paying VAT at a percentage of revenue uses sales invoices (hóa đơn bán hàng), so the buyer cannot deduct input VAT (Article 8 of Decree 123/2020/NĐ-CP on invoices (Đ.8 Nghị định 123/2020/NĐ-CP)). A company paying VAT by the credit method (phương pháp khấu trừ) can issue VAT invoices (hóa đơn GTGT).
- You want to limit risk. The household's debts may have to be paid with the house, land and private assets of the household head and registered members.
- Investors from outside the family, or you need loans or to bid for contracts as a legal entity (pháp nhân).
When is it too early?
With annual revenue of VND 1 billion or less, the household pays no VAT or personal income tax and only reports its revenue (NĐ 68/2026, amended by NĐ 141/2026). As a company, you must keep accounting books, prepare financial statements and file tax returns periodically, usually with a hired accountant; for a small shop this cost can outweigh the benefits.
Incentives for converting
- Support under the Law on Support for Small and Medium-sized Enterprises if the household has been registered and operating continuously for at least 1 year: free advice on the incorporation procedure; exemption from the first enterprise registration fee; exemption from charges and fees for the first licence in a conditional business line (ngành nghề kinh doanh có điều kiện); free tax and accounting advice for 3 years (Đ.16 khoản 1, 2).
- 2-year corporate income tax exemption for a company newly formed from a household business, counted from when it has taxable income (Article 15(4) of the Corporate Income Tax Law 2025 (Đ.15 khoản 4 Luật Thuế TNDN 2025)). Detailed conditions are set by an implementing decree; ask the tax office before counting on this.
- 3-year corporate income tax exemption for small and medium-sized enterprises from the date of the first enterprise registration certificate (Article 10(4) of Resolution 198/2025/QH15 (Đ.10 khoản 4 Nghị quyết 198/2025/QH15)). Whether this adds to or replaces the 2-year incentive above should be asked of the tax office.
- The business licence fee (lệ phí môn bài) was abolished for both households and companies from 1/1/2026 (Đ.10 khoản 7 Nghị quyết 198/2025/QH15).
Conversion procedure
- File an application to register a company with the provincial business registration office (Cơ quan đăng ký kinh doanh cấp tỉnh) where the head office will be. The file includes a copy of the household business registration certificate and the documents for the company type set out in Đ.24 NĐ 168/2025 (Đ.27 khoản 1, 2).
- The provincial office notifies the commune-level office within 2 working days to terminate the household business; the household is fully terminated only after its tax obligations are fulfilled (Đ.27 khoản 3).
- The household business may not operate from the time the company receives its certificate (Đ.27 khoản 4).
The company inherits the household's rights and obligations. If you set up a limited liability company or a joint stock company (công ty cổ phần), the household head remains liable with all of their assets for the household's unpaid debts, unless otherwise agreed (Đ.16 khoản 3 Luật Hỗ trợ doanh nghiệp nhỏ và vừa).
When to ask a lawyer
- The household has large debts, long-term contracts or disputes that need to move to the company.
- You need to choose between a single-member limited liability company, a multi-member one or a joint stock company when others contribute capital.
- Revenue is close to VND 3 billion and you want to compare the household's personal income tax with corporate income tax plus incentives.
- You need to obtain conditional business licences again in the company's name.