Set up a business with minimum capital

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Set up a business with minimum capital

Setting up a business is a must-do object if one wants to be successful in the market and earn great profits, extending their reputation worldwide and gaining more and more opportunities for their career. However, when setting up a business, one of the most frequently asked questions is that what is the charter capital and what is the minimum capital to set up a business. So, how does one set up a business with minimum capital?

Charter capital in Vietnam

For many startups, they think that the charter capital is only the initial capital when the business is registered for establishment. 

Although this is true, it is incomplete and the business owner shouldn’t interpret the charter capital in such regard. 

In fact, charter capital in Vietnam should be understood as the capital of the business from the time of establishment registration and throughout the period of operation of the business.

More precisely, charter capital is the amount that shareholders contribute within a prescribed time limit, as stated in the business articles of association.

Charter capital can be used as working capital to operate the business. It can constitute 100 percent of the total investment capital of the business, or be combined with loan capital to form the total investment capital of the business.

The minimum capital required to start a business

The minimum capital required to start a business will depend on what business lines the business will register:

+ If a business registers for a normal business line that does not require legal capital, the law does not stipulate a minimum capital level to establish a business. 

Accordingly, many business units have registered the company’s charter capital of 1 million VND as this is not prohibited by law.

However, it should be noted that when registering such a low charter capital, when going to transactions and working with partners, banking, and tax authorities, they often don’t trust this business and offer very limited transactions.

Consequently, it is imperative that the business owner registers to establish their business at a relatively neutral level.

+ If a business registers a business line that requires legal capital to operate, the minimum capital required to establish a business is equal to the prescribed level of that business line.

Methods to assess the necessary charter capital of the business

Pursuant to the provisions of the Enterprise Law 2020, besides the business line that requires legal capital to operate, the law does not stipulate a specific capital level for businesses in general. 

Accordingly, depending on the economic ability of the members of the business and the purpose of operation of the business, the charter capital is decided specifically. 

Set up a business with minimum capital

Therefore, when deciding to establish a business, members of the business should determine the charter capital based on the following principles:

  • Their financial ability;
  • The scope and scale of operation of the business;
  • Actual operating expenses of the business after its establishment;
  • The projects or potential projects signed with the business’s partner;

Form of capital contribution

When registering to establish a business, members can contribute capital in cash or by property.

  • For the form of capital contribution in cash, members can make a direct contribution in cash or by transfer to the company’s account (after the company registers an account at a commercial bank).
  • For the form of capital contribution with assets, members of the company must carry out the procedures for contributing capital with assets to the business in accordance with the provisions of law. 

Note: 

Vietnamese law stipulates that the time limit for fully contributing capital for newly established enterprises is 90 days from the date of issuance of the business registration certificate. In case the business has not fully contributed the registered capital by the expiration of the above time limit, it must notify the business registration agency.

If the business has any changes in charter capital during operation such as increasing charter capital, reducing charter capital, they must carry out procedures for changing business registration at the business registration office.

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