How much capital does it take to start a sole proprietorship?

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How much capital does it take to start a sole proprietorship?

Setting up a sole proprietorship is slightly different from other types of enterprises because it does not have the same capital contribution as in multi-owner companies. Instead, the capital of a sole proprietorship comes mainly from the assets of a single individual. So, how much capital does it take to set up a sole proprietorship?

Conditions for setting up a sole proprietorship

To establish a sole proprietorship, the business owner must meet the following conditions:

• A sole proprietorship can only be owned by one individual.

• The owner of a sole proprietorship must be a person who has full civil act capacity and is not prohibited from being a legal representative or prohibited or restricted from establishing an enterprise in accordance with the law.

• Sole proprietorships are not allowed to conduct business lines that are not allowed or prohibited according to the provisions of Vietnamese law.

Dossier for registration of establishment of a sole proprietorship

According to Article 19 of the Enterprise Law 2020, the application for registration of establishment of a sole proprietorship must contain the following basic documents:

1. An application for enterprise registration.

2. Copies of legal documents of the sole proprietorship’s owner.

How much capital does it take to start a sole proprietorship?

The investment capital of a sole proprietorship is registered by the business owner. The minimum capital required when setting up a sole proprietorship will depend on the industry in which the business owner is registered.

If the business enterprise does not require legal capital, then there is no need to worry about the amount of capital needed to establish the business and the business owner will not have to declare finance or prove assets. Thereby, business owners can register charter capital of 1 million, 10 million, 200 million, 500 million, 2 billion, 10 billion VND, etc.

However, it should be noted that when registering a charter capital that is too low, potential partners and other businesses will not respect that business and will reduce the reputation of the business in the eyes of customers, leading to difficulties in future operations of the business. 

In case enterprises conducting business lines that require legal capital and margin capital, the minimum capital when establishing a sole proprietorship will have to comply with the regulations on capital of the industry.

For example:

• If an enterprise operating in the security service industry has a legal capital of 2 billion VND, it will have to declare a minimum charter capital of 2 billion VND.

• Or if an enterprise operating in the film production industry requires a legal capital of 1 billion VND, it will have to declare a minimum charter capital of 1 billion VND.

Usually, businesses will have to prove this capital by providing bank account verification documents.

During the operation, the owner of a sole proprietorship has the right to increase or decrease their investment capital in the business activities of the enterprise. The increase or decrease in the investment capital of the owner of a sole proprietorship must be fully recorded in the accounting books. In case the investment capital is reduced to less than the registered investment capital, the owner of the sole proprietorship may reduce the capital only after having registered with the Business Registration Authority.

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