Starting a Business in Vietnam

Dear Hadrien,

My Vietnamese girlfriend and I want to open a coffee shop here. We are very excited about the plan and really can’t wait to get started. However, I have little knowledge about the administrative procedures that we will need to go through. Can you give me some advice please?

Congratulations on your startup plans! If you want to set up a business in Vietnam, one of the first questions you should ask is whether you, as a foreign investor, are allowed to conduct business in the economic sector in which you want to implement your project and, if so, whether you can do it by yourself or whether you would need to partner up with a Vietnamese investor.

When Vietnam became a member of the WTO on January 11, 2007, the government committed to gradually opening numerous service markets to foreign investors. Relevant to your plans of opening a coffee shop, Vietnam has agreed that for a period of eight years from the accession date, foreign service providers will only be allowed to supply food and drinks if they do so in parallel with an investment in hotel construction, renovation, restoration or acquisition.

I don’t believe it is your intention to take on any of those projects, so you may want to wait until January 11, 2015 (the eighth anniversary of Vietnam’s accession to the WTO), when these restrictions will, in principle, be automatically lifted.

The next issue that you need to decide on is the form under which you want to establish your business. The Vietnamese Law on Enterprises is a good starting point to learn about the different options that you and your girlfriend have. Until foreigners will be allowed to open a coffee shop in Vietnam, your girlfriend could solely develop the project and there are two suitable options for Vietnamese citizens establishing and operating a small business.

The first available option is the so-called “private enterprise.” On the positive side, the management structure of such a private enterprise is fairly simple and the owner has full autonomy in making all business decisions. In terms of financial risks and legal liability, however, the owner of a private enterprise is liable for all activities of the enterprise with his or her (private) assets. Furthermore, in order to establish a private enterprise, you would need to follow the sometimes burdensome rules under the Law on Enterprises to apply for a business registration certificate.

Fortunately, there is another option available for small businesses that is commonly used, and which could be a good solution for your girlfriend, the so-called “business household.” One important advantage of this model is that the registration procedures are relatively easy. Please keep in mind though, that your girlfriend may only register a business household in one location, that she is not allowed to employ more than 10 people and that she will be liable with all her (private) assets for the business operation.

If you decide to wait for the food & beverage sector to open to foreign investors at the beginning of next year, Vietnamese law offers a corporate form that is especially suitable for small-scale foreign investments – the limited liability company. This option would offer you safety in terms of financial risk and legal liability but the registration process is, as for any foreign investment, more complicated and time consuming than the process applicable to domestic investment.

Now let’s talk about the location, which is obviously very important! Unless you already have your own place where you can start serving coffee, you will need to find premises that are suitable for your purpose. In practice, when you apply for business registration, the Vietnamese authorities may require written evidence that you have ensured suitable premises. In practice, a lease agreement, or a so-called “Memorandum of Understanding” to be signed by you and your future landlord will do.

If you want to redesign and/or renovate the premises, you will obviously need to obtain the approval from your landlord, preferably in writing. Unless your building plans will not fundamentally change the premises, you will also need to apply for a construction permit with the district’s People’s Committee. Furthermore, you may need a food safety and hygiene certificate and you must ensure to meet the legal requirements on fire safety.

I hope the above will not discourage you from pursuing your plans. I would advise you to invest some time in working out your business plan first. Once you know what you want and how you want to do it then reserve some more time to go through the various administrative procedures. Keeping in mind the great satisfaction of serving ca phe sua da in your own coffee shop, I am sure you will manage. Cheers!

A member of the Paris Bar, Hadrien Wolff has been practicing law in Vietnam for more than seven years, currently as a partner of Audier & Partners based at its HCMC office. Having gained extensive legal experience in the Netherlands and Cambodia, Marijn Sprokkereef is an associate at the Hanoi office of the same firm. Audier & Partners is an international law firm with presence in Vietnam, Myanmar and Mongolia, providing advice to foreign investors on a broad range of legal issues.

Every month, Hadrien and Marijn answer legal questions from Oi readers. If you have any legal questions you want answered, send them to legal@oivietnam.com.