A lot of foreign investors find Vietnam to be a desirable location because of its rapidly expanding economy. But not everyone should open a business in Vietnam. There are a number of things you’ll need to take into account before getting started, from high costs and a lengthy registration process to sector-specific restrictions and regulations.
In this article, we’ll look at some of the difficulties you can face while opening a new business in Vietnam and who should reconsider this option. Understanding the potential and challenges of doing business in Vietnam is essential to your success, whether you’re an experienced entrepreneur or a first-time business owner.
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Opening a new business in Vietnam can be expensive for small businesses, as you’ll need to invest in a variety of resources and infrastructure. This could include legal fees, business registration fees, business licenses, permits, and other fees in order to operate legally.
All of these costs of starting a business in Vietnam can add up quickly. This can prove to be a challenge for small businesses/start-ups that don’t expect to make large profits.
To open a business in Vietnam as a foreigner, you must go through a complicated and time-consuming registration process. Obtaining a business license, registering with local authorities, and dealing with a variety of other restrictions may be required.
The process of registering a company in Vietnam can be especially difficult if you don’t speak Vietnamese or have prior experience dealing with local authorities. To succeed, you must be patient and persistent, and it is advised to seek the assistance of a local lawyer or business advisor for the setup of your business. For compliance when running your business, you may wish to have a Vietnamese partner to help with some of these challenges or hire a good tax and accounting firm to support you.
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While Vietnam is generally open to foreign investment, some sectors are restricted or subject to conditions for foreign investors. This includes businesses in education, media, and certain types of retail. If you want to open a business in Vietnam in one of these industries, you’ll need to be prepared to deal with additional regulations and restrictions.
For example, in order to operate, you may need to obtain a special license or permission, or you may be required to partner with a local company or individual. Understanding the restrictions and regulations in place will help you determine whether starting a business in Vietnam is a viable option for you.
Given all of these disadvantages, you should carefully consider your decision to open a business in Vietnam. And if you fit into the following category, you might want to rethink your decision and explore your other options.
While Vietnam provides a variety of visa options for foreign investors, authorities do not want small businesses to be established solely for the purpose of obtaining an investor visa. As a result, the initial investment required to launch a business in Vietnam is relatively high. If you are unwilling to make a significant financial investment, you may want to consider other options for obtaining a long-term visa in Vietnam.
One possible solution is to buy equity in an existing company. By purchasing a stake in an established company, you can benefit from the work that has already been done to set up the business and obtain the necessary licenses while also bringing your own expertise and resources to the table. This can be a good way to enter the market in Vietnam without having to make a large upfront investment, and it can also help you establish a long-term presence in the country.
The amount of capital needed to open a business in Vietnam is determined by your business plan and the location in which you wish to register your company. In general, the recommended minimum investment for investors is the amount of money that your company will require in the first 9 to 12 months to pay bills, grow, and survive during a period when revenue may be limited.
In major cities such as Ho Chi Minh City and Hanoi, the initial investment capital for businesses with more flexible lines of foreign investment, such as IT, consultancy, import and export, and wholesale, is typically around USD 10,000 to USD 15,000 USD. This figure is usually much higher in other cities, such as Da Nang and Hoi An.
The high investment capital and operating costs in Vietnam can make running a small business difficult, especially if you only expect to generate a small income. For example, if you’re only starting a business without big expectations to make lots of revenue, your overhead costs (such as rent, accountant, and tax employee/company, social insurance/health insurance for employees, other legal services, and taxes on top of all your operational costs) may exceed your revenue, resulting in a monthly loss.
You can learn more about the costs of running a business in Vietnam in one of our guides here.
If you’re thinking about opening a business in Vietnam with the intention of retiring or running a non-active business, you should think twice. Authorities in Vietnam expect businesses to be active and generate cash flow. While authorities typically understand that a business may not be making a large profit for the first few years, if there is no cash flow or no long-term prospects for profits, authorities may investigate or audit your business. In some cases, this could lead to the closure of your company.
If you want to retire or generate passive income in Vietnam, you should think about other options. One option is to purchase a business for sale in Vietnam. With a business for sale, you can buy 100% of the business or just a partial investment receiving an amount of equity in the business. This opportunity may allow you to legally retire in Vietnam and earn a passive income without actively working for the business.
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In short, there are several reasons why you should not open a business in Vietnam. The difficulties of doing business in Vietnam can be significant, ranging from high costs and a lengthy registration process to sector-specific restrictions and regulations. Furthermore, if you want to open a small business with low investment capital and operating costs, or if you want to retire or run a non-active business, Vietnam might not be the best option.
However, this doesn’t mean that you should completely rule out doing business in Vietnam. Vietnam can be a rewarding and profitable place to do business if you are willing to invest the time and resources required to succeed. Just make sure to carefully consider your objectives, resources, and challenges.