Legal issues that newly established businesses need to pay attention to

In the context of increasingly developing business, legal compliance plays an extremely important role in the existence and sustainable development of each enterprise, especially newly established enterprises. Failure to master legal regulations can lead to serious consequences such as administrative penalties, loss of reputation with customers and partners, and even cessation of operations.

This article G Office sent to you for the purpose of providing information about Legal issues that newly established businesses need to know, to have an overview of important legal issues to note, from choosing the type of business, business registration, to regulations on tax, labor and insurance. Thereby, businesses can prepare and implement business activities legally and effectively, limiting legal risks right from the first steps.

Types of businesses and establishment procedures

1. Choose the right type of business

When starting a business, choosing the right type of business is the first and most important step, as it affects many factors such as management structure, legal responsibilities and rights of business owners. Below are some common types of businesses in Vietnam:

Limited Liability Company (LLC):

• Can be a single member LLC or a LLC with two or more members.
• Owners have limited liability for the company's debts and property obligations within the scope of the charter capital.
• Flexible management structure, suitable for small and medium enterprises.

Joint Stock Company:

• Allowed to raise capital easily through issuing shares.
• Shareholders are liable to the extent of their contributed capital.
• Suitable for large businesses that need to raise capital from many investors.

Private enterprise:

• The business owner has unlimited liability with all his assets for business activities.
• No legal status, easy to manage and make business decisions but high financial risk.

2. Business registration procedures

After choosing the right type of business, the next step is to register your business. Below are the procedures and documents you need to prepare:

Documents required:

• Business registration application.
• Company charter (for LLCs and Joint Stock Companies).
• List of members/shareholders (for LLCs and Joint Stock Companies).
• Identity card/Citizen identification card/Passport of legal representative and members/shareholders.

Where to submit application:

• Enterprises submit their applications at the Business Registration Office of the Department of Planning and Investment where their headquarters is located.
• Applications can be submitted directly or via the national business registration portal.

Processing time:

• Normally, the processing time is 3-5 working days from the date of receipt of valid documents.

3. Register seal and bank account

After receiving the Certificate of Business Registration, the enterprise needs to carry out other related procedures such as registering a seal and opening a bank account:

Seal registration:

• Enterprises have the right to decide on the form, size and content of the seal, but must ensure that it contains information about the name and enterprise code.
• After making a seal, the enterprise needs to notify the seal sample to the National Business Registration Information Portal.

Open a bank account:

• Businesses need to open commercial bank accounts to serve business transactions.
• Account opening documents include Business Registration Certificate, seal, and identification documents of the representative.

Completing these procedures helps your business get ready to operate legally and smoothly.

Required licenses and certificates 

1. Business license

Once established, every business needs a legal business license to be allowed to operate in the industry it is registered for. Depending on the business sector, specific licenses may be required. Here are some common licenses by industry:

General Business License:

• This is the basic license that a business receives when completing business registration procedures at the Department of Planning and Investment.
• This license allows businesses to operate in general business lines and does not require special conditions.

Conditional business license:

• Some industries have conditions that require a separate business license such as real estate, finance, transportation, e-commerce, travel and tourism, etc.
• Businesses must comply with the specific requirements and conditions of each industry before being licensed.

Environmental license:

• For manufacturing and processing enterprises that affect the environment, an environmental protection license is required.
• The dossier includes environmental impact assessment and measures to mitigate negative impacts.

2. Certificate of practice

For some occupations that require highly specialized skills or are of a specific nature, individuals or businesses must have a valid practicing certificate to be allowed to operate. Some typical examples include:

Medical industry:

• For doctors, pharmacists or medical facilities, a medical practice certificate is a mandatory requirement to ensure service quality and patient safety.
• This certificate is only granted to those who meet the requirements of professional qualifications and work experience in the medical field.

Construction industry:

• Engineers, architects or construction companies need a construction practice certificate if they are involved in large-scale or specialized projects.
• This certification is based on experience, qualifications and meeting construction industry standards.

Law:

• Lawyers and notaries must have a law practice certificate to perform legal services.
• This requirement is to ensure professionalism, professional ethics and responsibility to customers.

3. Other certificates and licenses

In addition to the above licenses and certifications, there are many other legal requirements depending on the specific industry, for example:

• Education sector: Private educational institutions need a license from the Ministry or Department of Education and Training to ensure teaching quality.
• Food industry: Enterprises that produce or distribute food must have a food safety certificate from a competent authority.

Complying with and ensuring full compliance with licenses and practice certificates not only helps businesses operate legally but also builds trust from customers and partners.

Tax regulations

1. Taxes to be paid

When starting operations, businesses in Vietnam must comply with tax regulations, including paying the following important taxes:

Corporate income tax (CIT):

• This is a tax applied to taxable income of enterprises from production and trading of goods, services and other income.
• The current tax rate in Vietnam is 20% for most businesses. Some preferential sectors may have reduced tax rates, for example in the high-tech sector or in special economic zones.

Value Added Tax (VAT):

• VAT is applied to most goods and services when consumed in the market.
• The current common tax rate is 10%, however there are some cases where preferential tax rates of 5% or 0% are applied to special products and services.
• Businesses collect VAT from customers and pay it back to the state.

Business license tax:

This is a tax that businesses must pay annually to maintain their business license. The amount of business license tax depends on the registered capital of the business:

• Enterprise with charter capital over 10 billion dong: 3,000,000 VND/year.
• Enterprise with charter capital under 10 billion dong: 2,000,000 VND/year.
• Branches, representative offices, business locations: 1,000,000 VND/year.

2. Tax declaration and payment procedures

Businesses need to comply with regulations on tax declaration and payment procedures to avoid penalties and ensure legal operations. Here are the basic steps:

Register for tax code:

• After being granted a Business Registration Certificate, the enterprise needs to register a tax code with the local tax authority. Normally, the tax code of the enterprise is also the business registration code.
• The tax code registration process is performed automatically when a business submits its registration application through the national business registration portal.

Quarterly and annual tax declaration:

• VAT declaration: Enterprises must declare VAT monthly or quarterly, depending on the scale and conditions of the business. Enterprises need to summarize sales invoices and input invoices to declare the amount of tax payable.
• Corporate income tax declaration: Enterprises must provisionally calculate and pay corporate income tax quarterly based on actual revenue and expenses. At the end of the fiscal year, enterprises will finalize and submit tax finalization dossiers.
• Business license tax declaration: Business license tax is usually paid only once at the beginning of the fiscal year or when a business is newly established.

Tax payment method:

• Enterprises can pay taxes electronically through the General Department of Taxation's Electronic Information Portal. This is a quick and convenient form of tax payment, helping enterprises easily track and manage tax payments.

3. Tax payment deadline and penalties

Tax payment deadline:

• VAT and provisional corporate income tax must be declared and paid before the 30th of the following month or quarter.
• Corporate income tax settlement must be submitted before March 31 of the following year.
• Business license tax must be paid no later than January 30 of the fiscal year.

Penalties for violations:

• Enterprises that pay taxes late or fail to file tax returns on time will be subject to penalties as prescribed. The penalty depends on the length of the delay and may include penalties and interest on late taxes.

Understanding tax regulations and properly implementing tax declaration and payment procedures helps businesses avoid legal risks and maintain stable and legal business operations.

Social and labor insurance 

1. Register social insurance for employees

When a business recruits employees, registering and implementing social insurance policies for employees is a mandatory legal requirement under the Law on Social Insurance of Vietnam. Social insurance, health insurance and unemployment insurance are the three main types of insurance that businesses need to pay attention to:

Social insurance (SI):

• Social insurance provides benefits such as pensions, maternity benefits, sickness benefits, and death benefits.
• The current social insurance contribution rate is 25.51% of total income, of which employers pay 17.51% of total income and employees pay 81% of total income.

Health insurance (HI):

• Health insurance helps employees pay for medical expenses.
• The health insurance contribution rate is 4.51% of income, of which the employer contributes 31% and the employee contributes 1.51% and 3% respectively.

Unemployment Insurance (UI):

• Unemployment insurance provides financial assistance to workers when they lose their jobs and helps them find new jobs.
• The unemployment insurance contribution rate is 2%, in which the employer contributes 1% and the employee contributes 1%.

Social insurance registration procedures:

Enterprises must register social insurance for employees within 30 days from the effective date of the labor contract. The registration file includes a list of employees and related documents.

After successful registration, the enterprise must fulfill its obligation to pay monthly insurance to the insurance agency.

2. Labor contracts and employee policies

Signing a labor contract is mandatory when a business employs workers according to the provisions of the Labor Law. In addition, businesses must also comply with policies related to employee salaries and benefits.

Types of employment contracts:

Fixed term employment contract:

• Contract period from 12 to 36 months.
• Suitable for short term projects or jobs.

Indefinite term employment contract:

• Indefinite term contract, providing long term stability for employees.
• Enterprises and employees can only terminate the contract by agreement or for reasons prescribed by law.

Probationary labor contract:

• Usually lasting 30 to 60 days, used to evaluate the employee's ability before signing an official contract.

Salary and benefits:

Salary:

• Enterprises must pay the regional minimum wage, which cannot be lower than the level prescribed by the government for each locality. Wages include basic salary, allowances, and bonuses if any.

Overtime mode:

• If an employee works outside of regular working hours, the enterprise must pay overtime wages at least equal to 150% the normal wage on a working day and 200% on a weekly day off.

Vacation mode:

• Employees are entitled to at least 12 days of paid leave per year (for those who have worked for 12 months). For dangerous jobs or working in special environments, the number of days off may be more.

Maternity leave:

• Female employees have the right to 6 months of maternity leave and receive social insurance benefits.

Other benefits:

• Other benefits include birthday allowance, additional medical insurance, annual travel, and employee skill enhancement training programs.

Collective labor agreement:

• This is a written agreement between an employer and an employee on better working conditions than those provided for in the Labor Code, such as higher wages, flexible working hours or additional benefits. This agreement must be agreed upon by the employee and employer representatives.

Compliance with regulations on labor contracts, wages and insurance helps businesses maintain a healthy working environment, build trust from employees and minimize labor disputes.

Intellectual Property Regulations 

1. Registering for trademark and brand protection

Brands and trademarks are important factors that help businesses build their reputation and commercial value. To ensure ownership and avoid disputes, businesses need to register for brand and trademark protection in accordance with the law.

What are brands and trademarks?

• A brand is a name, symbol, or image that represents a business or product.
• A trademark is a visible sign in the form of words, images, logos or a combination of these, used to distinguish the goods and services of one business from those of other businesses.

How to register for trademark and brand protection:

Registration form:

• A trademark application includes a trademark sample, a list of accompanying goods/services, and related legal documents.
• Enterprises must submit trademark registration applications to the National Office of Intellectual Property (Ministry of Science and Technology of Vietnam) or through the online registration system.

Registration process:

• Formal examination: The Intellectual Property Office examines the validity of the application.
• Publication of application: If the application is valid, the trademark will be published in the Industrial Property Gazette for 2 months.
• Content examination: The trademark will be examined for protection within 9-12 months from the date of publication.
• Issuance of Certificate: If the trademark does not violate any regulations, the enterprise will be granted a Certificate of Trademark Registration, valid for 10 years and renewable multiple times.

Brand and trademark protection:

• After successful registration, the enterprise has the exclusive right to use that trademark for the registered goods/services. Any act of copying or illegally using the trademark will be subject to administrative penalties or compensation for damages.
• Businesses should also monitor and prevent trademark infringement through legal measures such as complaints, lawsuits or requests for market management agencies to handle.

2. Copyright and patent protection

For creative products such as literary works, artistic works, and scientific inventions, businesses need to ensure intellectual property rights to avoid unauthorized copying and use. Intellectual property rights in this field include copyright protection and patent protection.

Copyright protection:

• Copyright protects literary, artistic, musical, computer software and other works created by individuals or organizations.
• Businesses can register for copyright protection at the Copyright Office (Ministry of Culture, Sports and Tourism). Copyright will be automatically protected from the moment the work is created, however, registration will help create a clearer legal basis in case of dispute.
• Duration of protection: Copyright is protected for the lifetime of the author and an additional 50 years after the author's death for individual works, or 75 years from the date of publication for works owned by an organization.

Patent protection:

• An invention is a new, creative and practically applicable technical solution, including inventions of products and processes.
• To obtain patent protection, businesses need to submit an application to the Intellectual Property Office, including a description of the invention, protection requirements and related information.

Patent registration process:

• Formal Examination: Check the validity of the application.
• Publication of application: After the application is accepted as valid, the invention will be published in the Industrial Property Gazette.
• Substantive examination: Consideration of the possibility of granting a patent for an invention, based on the novelty and inventiveness of the invention.
• Grant of Certificate: After successful content examination, the invention will be granted a patent, valid for 20 years from the date of application.

Intellectual property protection:

When detecting intellectual property violations, enterprises have the right to request competent authorities to handle, file lawsuits or claim compensation for damages.

In addition, monitoring and tracking intellectual property infringements through media channels and the market is necessary to protect rights.

Compliance and proper implementation of intellectual property regulations will help businesses preserve their brands, protect inventions and avoid unnecessary legal disputes.

Legal issues related to contracts

1. Signing a business contract

Signing a contract is an important step in the process of establishing and maintaining business relationships between a business and its partners and customers. The contract not only ensures the rights of the parties but also avoids future legal disputes. To ensure the legality and validity of the contract, businesses need to pay attention to the following important terms:

Important terms to note when signing a contract:

Information of the parties to the contract:

• The contract must clearly state the full names, addresses, tax identification numbers, and legal representatives of the parties involved. This information helps to clearly identify the responsible parties and avoid confusion during the implementation process.

Subject of the contract:

• This is a detailed description of the goods, services or obligations that the parties are committed to perform. The subject matter of the contract must be clear, specific and legal. If the contract is not clear, this can lead to misunderstandings or disputes.

Price and payment method:

• This clause should clearly state the contract value, payment method (bank transfer, cash), payment time and currency used. Businesses should note the penalty clauses for late or late payment.

Time and place of contract performance:

• The contract should clearly state the start time, duration and place of performance. The more specific the performance time, the easier it is for the business to control compliance with the commitment.

Rights and obligations of the parties:

• The rights and obligations of the parties should be clearly defined, including the provision of services, delivery, warranty, maintenance, or other related obligations. Fully recording the rights and obligations helps to minimize risks during the contract implementation process.

Penalties and compensation for damages:

• Businesses should include provisions for penalties and damages in the event that one party fails to perform or does not perform as promised. This helps protect the interests of the parties and encourages compliance with the contract.

Dispute Resolution:

• The parties should agree in advance on the method of dispute resolution (negotiation, mediation, arbitration or court). Specific regulations on the dispute resolution agency as well as the location of the trial will help the dispute resolution process take place more quickly and effectively.

Effective date and termination of contract:

• The contract should clearly state when it comes into effect and when it will be terminated (such as upon completion of work, material breach by one party, or by mutual agreement). This helps to define the parties' rights and obligations up to what point in time.

2. Office lease and goods purchase contracts

During the course of operations, businesses may have to execute many different types of contracts, of which office lease contracts and goods purchase contracts are two common types of contracts. For these contracts to be legally valid, businesses need to comply with regulations on the legality and conditions of the contract.

Office lease agreement:

Legality of the lease:

• Office lease contracts must be made in writing and signed by the relevant parties, including the lessor (usually the building owner) and the lessee (business).
• The contract should clearly state information about the office location, rental area, rental period, rental price, and additional services (security, cleaning, maintenance, electricity and water). In addition, the terms of contract guarantee, deposit fee, and contract termination rights should also be clarified.
• If the office lease term is longer than 6 months, the contract must be notarized according to the law on property leasing. Notarization helps increase legality and protect the rights of the parties in case of disputes.

Rights and obligations of the parties:

• The lessor is obliged to deliver the office on time and maintain the office in good condition. The lessee is obliged to pay on time and use the office for the purpose specified in the contract.
• The parties should agree on the maintenance and repair of the office in case of breakdown or damage during the lease period. This clause helps to avoid conflicts and maintain a long-term cooperative relationship.

Contract for the sale of goods:

Legality of the contract for the sale of goods:

• The contract for the sale of goods must ensure that the goods are permitted for trading and comply with the provisions of law.
• The contract should include full terms of quantity, quality, price, delivery method and delivery time. Specifying these terms helps avoid wrong delivery, insufficient delivery or poor quality delivery.
• Payment methods and terms of inspection of goods before delivery should also be clearly stated in the contract.

Terms of Ownership and Risk:

• In a sales contract, ownership of the goods is usually transferred from the seller to the buyer upon delivery and receipt of payment. However, businesses should clearly define the time of transfer of ownership and related risks to avoid disputes if problems arise during the transportation or delivery of goods.

Signing business contracts, office rentals or purchasing goods must ensure legality and detailed terms to avoid legal risks. Good implementation of contract terms helps businesses operate effectively and maintain sustainable relationships with partners and customers.

Other regulations by industry

Each industry has its own specific characteristics and legal requirements. For businesses operating in specific fields such as technology, food, and pharmaceuticals, compliance with industry regulations is essential to ensure legal operations, protect reputation, and avoid legal penalties. Below are important regulations that businesses need to pay attention to for each industry.

1. Information technology industry

The information technology (IT) industry is one of the fields with many specific regulations, related to information security, privacy, and cybersecurity.

Cybersecurity regulations:

• According to the Law on Cyber Security (2018), businesses providing network services, telecommunications, or online platforms in Vietnam must comply with requirements on security, data storage, and protection of users' personal information.
• Businesses need to build security measures, prevent cyber attacks and report cyber security incidents to regulators.

Protection of personal data:

• Businesses must comply with regulations regarding the collection, storage, and use of personal information of customers and users. This includes ensuring that personal information is only used for purposes approved by customers and is not disclosed to third parties without the consent of users.

Regulations on software intellectual property rights:

• Software development companies need to register copyrights for their products to avoid being copied or infringed. In addition, businesses also need to comply with the law on the legal use of third-party software.

2. Food and beverage industry

The food and beverage industry is strictly regulated by authorities to ensure food safety and protect consumer health. Some important regulations include:

Food safety certificate:

• Enterprises that produce, process, or trade food must have a food safety certificate issued by a competent authority. To obtain this certificate, enterprises must comply with regulations on infrastructure, equipment, production processes, and food preservation.

Product labeling regulations:

• By law, all food products sold on the market must have clear labels showing information about ingredients, production date, expiry date, instructions for use and storage, along with manufacturer information.
• Enterprises must also comply with regulations on product conformity declaration for processed foods before putting them on the market.

Regulations on food advertising:

• Food businesses must comply with regulations on food advertising, especially products that have a direct impact on health such as functional foods and weight loss products. Advertisements are not allowed to exaggerate the effects or mislead consumers.

3. Pharmaceutical industry

The pharmaceutical industry is one of the most heavily regulated sectors, with regulations governing the production, distribution and advertising of drugs.

Pharmaceutical manufacturing and trading license:

• Businesses operating in the pharmaceutical manufacturing or trading sector must obtain a license from the Ministry of Health. This requires businesses to meet standards regarding facilities, personnel, and quality control processes.

Drug registration:

• Before a new drug can be marketed, a company must register and obtain a marketing authorization from the Ministry of Health. Registration includes providing detailed information on the ingredients, uses, dosage, and relevant clinical trial results.

Regulations on drug labeling and instructions for use:

• All pharmaceutical products must have labels that clearly state information about ingredients, uses, dosage, directions for use, contraindications, and warnings. In addition, instructions for use must be clear and easy to understand, helping users avoid risks during use.

Pharmaceutical advertising:

• Drug advertisements must be censored and licensed by the Ministry of Health before being broadcast on the media. Businesses must comply with this regulation and avoid misleading advertisements about the effects of drugs.

4. Construction industry

The construction industry also has many legal regulations to ensure construction quality and labor safety.

Building permit:

• Before starting any construction project, a business must obtain a building permit from the local construction authority. This ensures that the project meets technical standards and does not violate urban planning.

Labor safety regulations:

• Businesses in the construction industry must comply with occupational safety regulations, including worker safety training, providing protective equipment, and complying with fire prevention and fighting rules at construction sites.

Regulations on construction quality assurance:

• After completing the project, the enterprise must conduct a quality inspection of the project and be responsible for the warranty according to the provisions of law. This helps protect the interests of both the enterprise and the investor in the long term.

5. Education industry 

The education sector is a field that requires many special regulations regarding curriculum, teaching staff and facilities.

Educational Operation License:

• Educational institutions such as schools and training centers must have an operating license from the Department of Education and Training. The licensing process requires businesses to meet standards for training programs, teaching staff, and facilities.

Regulations on education quality:

• Training programs must be reviewed and approved according to regulations of the Ministry of Education. Ensuring the quality of education not only helps build reputation but also creates a good learning environment for students.

Compliance with industry regulations helps businesses ensure legal operations, limit legal risks and enhance their reputation in the market. Each industry has specific regulations that businesses need to master for sustainable development.

Conclude

Compliance with legal regulations is a key factor to ensure businesses operate effectively and sustainably in the market. Understanding and properly implementing regulations not only helps businesses avoid legal risks but also builds reputation and trust with partners and customers.

For newly established businesses, it is important to thoroughly understand legal issues. However, to ensure accuracy and full compliance with legal regulations, it is necessary to seek support from legal experts or lawyers. In-depth legal advice will help businesses focus on their business operations without worrying about potential legal issues.

With careful preparation and support from experts, businesses will have a solid foundation to develop safely and sustainably in an increasingly complex and competitive business environment.