Private enterprise (also known as sole proprietorship) is the simplest form of business in Vietnam. Unlike limited or joint stock company, private enterprise does not form a separate legal person from the owner and thus makes them liable for all of its operations with their own property.
Private enterprise can be registered by only one person – the owner – however, a general director can be appointed to take over the enterprise’s management.
Advantages of establishing a private enterprise are its simple set up process and full decision-making power that comes with being the owner of such entity. Moreover, paying corporate income tax on behalf of the enterprise eliminates the the owner’s legal obligation to pay personal income tax. Private enterprise may also extend its presence by opening an unlimited number of business locations and/or representative offices.
On the other hand, the cons of this legal entity are owner’s full liability for all business operations whether the business is managed by themselves or an appointed director. Should the enterprise fail, the owner has to use their personal assets to pay back the debts of the private enterprise.