Sole proprietorship is a subject that is no longer strange to each of us. The appearance of sole proprietorship has diversified the types of enterprises, contributing to promoting business development. However, in addition to the regulations on the establishment of sole proprietorship; rights and obligations of sole proprietorship; procedures for converting sole proprietorship; Another problem about sole proprietorship leasing is not very common. So, in this article, LSX legal firm provides: “Sole proprietorship leasing in Vietnam”
Legal ground
- Law on Enterprise 2020
The concept of sole proprietorship
According to Article 188 of the Law on Enterprise 2020, a sole proprietorship understood as follows:
- A sole proprietorship means an enterprise owned by a single individual whose liability for its entire operation equal to his/her total assets.
- A sole proprietorship must not issue any kind of securities.
- An individual may only establish one sole proprietorship. The owner of a sole proprietorship must not concurrently own a household business or hold the position of a general partner of a partnership.
- A sole proprietorship must not contribute capital upon establishment or purchase of shares or stakes of partnerships, limited liability companies, or joint stock companies.
Characteristics of a sole proprietorship
A sole proprietorship established and owned by an individual
The sole proprietorship’s owner also plays the role of a legal representative who will represent it during civil proceedings, as the plaintiff, defendant, or person with relevant interests and duties before the court and arbitral tribunals, and in the performance of other rights and obligations prescribed by law. The sole proprietorship’s owner has total authority to decide all of its business activities, use of post-tax profit, and fulfillment of other financial obligations as prescribed by law. In addition, the owner of a sole proprietorship must not concurrently be the owner of a business household or a general partner of a partnership.
The owner may directly or hire another person to hold the position of Director/General Director. In the case of a hired Director/General Director, the owner still has the responsibility for every business activity of the enterprise.
Legal status
A juridical person must have its own property, which means having a separation between the assets of that juridical person and the creators of the juridical person. A Sole Proprietorship is not independent of its assets because the assets of a Sole Proprietorship are not independent in relation to the assets of the owner of the Sole Proprietorship. So, a sole proprietorship does not have legal status.
Capital mobilization
- Sole proprietorships may not issue securities of any kind.
- Sole proprietorships do not have the right to contribute capital to establish or buy shares; capital contribution in a partnership, limited liability company, or joint-stock company.
Charter capital
- The capital of a sole proprietorship registered by its owner. The sole proprietorship’s owner shall register the accurate amounts of capital in VND, convertible currencies, gold, and other assets, types, and quantities of assets.
- All the capital, including loans and leased assets serving the sole proprietorship’s operation fully recorded in its accounting books and financial statements as prescribed by law.
- During its operation, the sole proprietorship’s owner has the right to increase or decrease its capital. The increases and decreases in capital shall be fully recorded in accounting books. In case the capital is decreased below the registered capital, the decrease may only be made after it has been registered with the business registration authority.
Leasing of sole proprietorships
The sole proprietorship’s owner has the right to lease out the entire sole proprietorship, provided a written notification and certified true copies of the lease contract are submitted to the business registration authority and tax authority within 03 working days from the effective date of the contract. During the lease term, the sole proprietorship’s owner still takes legal responsibility as its owner. The lease contract shall specify the rights and obligations of the owner and the lessee to the sole proprietorship’s business operation.
Exercising the owner’s rights in special cases
Article 193 of the Law on Enterprises in 2020 stipulates:
- In case the sole proprietorship’s owner is detained, serving an imprisonment sentence, or serving an administrative penalty in a correctional institution or rehabilitation center, he/she shall authorize another person to perform his/her rights and obligations.
- In case the owner dies, this/her hair or one of the legal heirs or designated heirs shall be the owner under an agreement among the heirs. In case such an agreement cannot be reached, the sole proprietorship shall be converted into a company or dissolved.
- In case of the owner dies without an heir or the heir refuses the inheritance or is disinherited, the owner’s assets shall be handled in accordance with civil laws.
- In case the owner is incapacitated, has the limited legal capacity, or has difficulty controlling his/her behaviors, his/her rights and obligations shall be performed through his/her representative.
- In case the sole proprietorship’s owner is banned by the court to do certain jobs in the enterprise’s business lines, the owner shall suspend or stop doing business in the relevant business lines shall be suspended or stopped or transfer the sole proprietorship to another organization or individual.
Conversion of a sole proprietorship into a limited liability company, joint stock company or partnership
The owner of a sole proprietorship may convert it into a limited liability company, joint stock company, or partnership if the owner fully satisfies the following conditions:
- Firstly, the sole proprietorship satisfies the conditions specified in Clause 1 Article 27 of the Law on Enterprise 2020;
- Secondly, the owner makes a written commitment to take personal responsibility for all unpaid debts and pay them when they are due with all of his/her assets;
- Thirdly, the owner has a written agreement with the parties of ongoing contracts that the new company will take over and continue executing these contracts.
- Fourthly, the owner has a written commitment or agreement with other limited partners to continue hiring the existing employees of the sole proprietorship.
Legal service of LSX Legal Firm
LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:
- Legal advice related to new regulations;
- Representing in drafting and editing documents;
- We commit the papers to be valid, and legal for use in all cases;
- Represent to submit documents, receive results, and hand them over to customers.
With a team of experienced, reputable, and professional consultants; The firm is always ready to support and work with clients to solve legal difficulties.
Furthermore, using our service, you do not need to do the paperwork yourself; We guarantee to help you prepare documents effectively and legally.
Also, you will not have to waste time preparing the application, submitting application, or receiving results. At those stages, we will help you do it smoothly.
After all, LSX provides the service with the desire that customers can experience it the best way. Additionally, we guarantee the cost to be the most suitable and economical for customers.
Contact LSX
Finally, hope this article is useful for you to answer the question about “Sole proprietorship leasing in Vietnam”. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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Related questions
– Because there is only one owner, he/she has full rights to decide on everything related to the operation of the company.
– A sole proprietorship has a simple and compact organizational structure.
– Easy to manage
– Since a private enterprise has unlimited liability with the entire owner’s assets, it will be easy to create trust for partners and customers as well as promote business cooperation.
– Owners of sole proprietorships are subject to high risk because they have unlimited liability with all their assets for all business activities of the business.
– The owner is always responsible for every business activity of the business.
– A sole proprietorship does not have the right to contribute capital to the establishment, purchase shares, or contributed capital in a partnership, limited liability company, or joint-stock company.
– This type of company does not have legal status. As a result, the problem of raising capital will also face difficulties.
According to Clause 1, Article 192 of the Law on Enterprise 2020; Owners of sole proprietorships have the right to sell their businesses to other individuals or organizations
Conclusion: So the above is Sole proprietorship leasing in Vietnam. Hopefully with this article can help you in life, please always follow and read our good articles on the website: lsxlawfirm.com
