First, it is necessary to clarify what is meant by a “business enterprise” and a “household business”.
Regarding the concept, current Vietnamese law does not provide an official definition of a household business. However, Clause 1, Article 82 of Decree No. 168/2025/ND – CP stipulates that: “A household business is registered for establishment by an individual or by members of a household and is liable for its business activities with all of its assets. In cases where a household business is registered by members of a household, those members shall authorize one member in writing to act as the representative of the household business during its operation. The authorization document appointing a household member as the representative must be notarized or authenticated in accordance with the law.”
Meanwhile, pursuant to Clause 10, Article 4 of the Law on Enterprises 2020, an enterprise is defined as “an organization with its own name, assets, and transaction office, established or registered for establishment in accordance with the law for the purpose of conducting business activities.”
In addition, under the current provisions of the Law on Enterprises 2020, Vietnam recognizes four basic types of enterprises, including: Joint-stock companies; Single-member limited liability companies; Multi-member limited liability companies; Partnerships; and Private enterprises.
From these provisions, it can be seen that a household business is not legally recognized as a type of enterprise. This distinction is also reflected in the way tax identification numbers are issued to these two entities. Specifically, under Point e, Clause 3, Article 30 of the Law on Tax Administration 2019, the tax identification number issued to a household business is the tax identification number of the individual who represents the household business. In other words, the tax code of a household business is directly associated with the individual owner or representative.
By contrast, according to Clauses 1 and 2, Article 8 of Decree No. 168/2025/ND – CP, each enterprise is assigned a unique number known as the enterprise identification number, which simultaneously serves as the enterprise’s tax identification number. This number exists throughout the entire operational life of the enterprise and cannot be reassigned to another organization or individual. When the enterprise terminates its operations, the enterprise identification number also ceases to be valid.
From these regulations, it is clear that household businesses and enterprises are two different business models, governed by different legal frameworks and possessing distinct identifying characteristics.
So, what is “conversion of enterprise type”?
Currently, the law does not provide a specific definition of the conversion of enterprise type. However, according to Clause 31, Article 4 of the Law on Enterprises 2020, the conversion of enterprise type is considered a form of enterprise reorganization, including:
- Conversion of a limited liability company into a joint-stock company;
- Conversion of a joint-stock company into a single-member limited liability company;
- Conversion of a joint-stock company into a multi-member limited liability company;
- Conversion of a private enterprise into a limited liability company, joint-stock company, or partnership.
From these provisions, it can be understood that conversion of enterprise type refers to the transformation of an existing enterprise into another legally recognized enterprise form while maintaining the enterprise as the original legal subject.
Because a household business is not a type of enterprise, the transformation of a household business into any type of company is not legally regarded as a “conversion of enterprise type”. Instead, in legal terms, this process is generally understood as terminating the household business and subsequently carrying out procedures to register a new enterprise in accordance with the Law on Enterprises. Therefore, when implementing this transition, the business owner must comply with the relevant legal procedures for enterprise establishment and registration as prescribed by law.
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