A business household is a quite common form of business that many people choose when operating on a small scale. So, is a business household considered an enterprise? This article explores the distinction between business households and enterprises under Vietnam’s current legal framework.
1. What is a Business Household?
Current laws do not provide a specific definition for a business household. However, Clause 1, Article 79 of Decree 01/2021/ND-CP defines it as follows:
“A business household shall be registered for establishment by an individual or household members who shall take responsibility for the household’s business operations with all of his/her/their property.”
According to Clause 1, Article 79 of Decree 01/2021/ND-CP, the head of a business household can be one of the following:
- An individual who registers the business household;
- A person authorized by the family members to represent the business household if the family members are the ones registering the household.
An individual or family member, who is a Vietnamese citizen with full legal capacity as prescribed by the Civil Code, has the right to establish a business household, except for the following cases:
- Minors, individuals with limited legal capacity, individuals who have lost their legal capacity, or individuals who have difficulty in recognizing or controlling their behavior;
- Individuals under criminal investigation, detention, serving a prison sentence, undergoing administrative measures at compulsory rehabilitation centers, compulsory education centers, or those prohibited by the Court from holding certain positions, practicing certain professions, or working in certain fields;
- Other cases as prescribed by related laws.
Thus, a business household is a form of business where an individual or family members register and are fully responsible for the household’s business activities with all of their personal assets.
2. Characteristics of a Business Household
According to the regulations mentioned above, a business household has the following characteristics:
– The business registration entity is an individual, a group, or a family. According to Article 50, Clause 1, Decree 43/2010/ND-CP, all Vietnamese citizens aged 18 and above, who have full legal capacity, are eligible to conduct business in this form.
– A family, as defined by the Civil Code, can also register a business as a business household. However, households engaged in agriculture, forestry, fisheries, salt production, street vending, hawking, itinerant trading, low-income services, or those selling goods on the move are not required to register a business, unless they engage in businesses that are subject to conditions.
– Due to the incentive nature of the above regulations, business households currently represent the largest number of business entities in Vietnam, with approximately over 2 million households. Business households are restricted in terms of the number of workers and the business locations. A business household is only allowed to have one business location within the country.
– A business household can employ regular labor, but not more than ten workers. This regulation allows business households to hire regular workers, which benefits both employees and employers. If the business employs more than ten workers or operates from multiple locations, it must register under an appropriate business entity type (such as a sole proprietorship or a company).
– A business household is fully responsible with all of its assets for its business activities (unlimited liability).
– Additionally, a business household is not allowed to use a seal.
3. Does a business household have legal person status?
An organization is recognized as a legal entity when it meets the conditions set out in Article 74 of the 2015 Civil Code:
- Established according to the provisions of the Civil Code 2015 and relevant laws;
- Have an executive body, with the duties and powers of the executive body defined in the entity’s charter or establishment decision;
- Have assets independent of individuals or other legal entities and is fully responsible for its obligations with its own assets;
- Participate in legal relationships in its own name and independently.
According to Clause 1, Article 79 of Decree 01/2021/ND-CP, the business household is regulated as follows:
- A business household is established by an individual or family members, who are fully responsible for the business’s activities with their entire personal assets.
- In the case that family members register the business household, one member is authorized to represent the household.
- The individual who registers the business household, or the person authorized by family members to represent the household, is considered the head of the business household.
Since a business household is fully liable with the personal assets of its owner(s), it does not meet the conditions to be recognized as a legal entity. Th
4. Is a Business Household an Enterprise?
According to Clause 10, Article 4 of the 2020 Enterprise Law:
“10. Enterprise means an organization which has its own name, assets and a transaction office, and is lawfully established or registered for establishment for the business purpose.”
Thus, it can be seen that an enterprise is an organization with a unique name, its own office and assets, and is established in accordance with the law.
Currently, our country’s law only recognizes five types of enterprises as follows:
- Joint-stock company
- Single-member limited liability company
- Multi-member limited liability company
- Partnership
- Sole proprietorship
Therefore, in order for an organization to be recognized as an enterprise, the entity must be established as one of the five types listed above. Establishing an enterprise provides numerous opportunities for business growth and helps solidify the organization’s position in the market.
On the other hand, according to Article 79 of Decree 01/2021/ND-CP, a business household is a form of business established by an individual or family members, who are fully responsible for the household’s business activities with all their personal assets.
Thus, it can be concluded that a business household is not considered a type of enterprise.
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