Common Mistakes When Setting Up a Business in Vietnam
Starting a business in Vietnam can be an exciting and profitable venture, especially for those seeking exposure to one of Southeast Asia’s fastest-growing economies. However, for foreign entrepreneurs, the journey from idea to execution often involves running through a complex web of regulations, accounting requirements, and cultural nuances. From choosing the right legal structure to staying compliant post-registration, there are critical decisions at every turn.
Too often, new investors or business owners are caught off guard by seemingly small missteps - mistakes that can lead to costly fines, operational delays, or long-term reputational damage. This guide from United Consulting highlights the 12 most common mistakes foreign entrepreneurs make when setting up a business in Vietnam - and more importantly, how to avoid them through proper planning, due diligence, and expert support.
So, Why is Setting Up a Business in Vietnam so Complicated?
While Vietnam remains an attractive destination for foreign direct investment, the process of establishing a business is not as simple as filling out a few forms. Even experienced entrepreneurs can find themselves tripped up by local administrative quirks, overlooked compliance steps, or sector-specific requirements that aren’t immediately obvious. From our conversations with clients, we've narrowed down some of the most common mistakes first-time entrepreneurs face when setting up in Vietnam.
Mistake #1: Underestimating and Misunderstanding Vietnamese Bureaucracy
Many foreign founders walk into Vietnam’s business environment with the wrong expectations. Instead of approaching the regulatory system with curiosity and respect, they assume it is broken, chaotic, or something to be bypassed.
Assuming regulations are flexible or negotiable leads to critical errors:
- Misjudging the process as irrational causes investors to overlook key dependencies and sequencing steps.
- Attempting to “shortcut” procedures without understanding the underlying logic increases compliance risks.
- Dismissing paperwork or zoning rules as technicalities leads to long-term legal or operational obstacles.
- Treating local advisors as optional instead of essential weakens your ability to interpret Vietnam’s layered approval systems.
Vietnam’s bureaucracy isn’t (completely) arbitrary. Yes, it requires a lot of forms to be stamped and signed, but the bureaucracy is also deeply structured and heavily tied to national development plans, sectoral priorities, and internal control systems.
Every form, requirement, and licensing stage exists for a reason - even if that reason isn’t immediately visible to outsiders.
Instead of fighting the system, take time to study it. Work with professionals who know how to navigate it. You’ll find that what initially looks like complexity is often just structure - and structure can be mastered.
Mistake #2: Choosing the Wrong Business Structure in Vietnam
At the early stage, many entrepreneurs are often too excited that they rush into registering a company without fully understanding the differences between types of companies in Vietnam. Understanding the appropriate structure (such as an LLC when a JSC or Representative Office might be better) can help your operations move forward quickly, and for the long term.
Some restrictions of each company type include:
- LLCs restrict share transfers and fundraising.
- JSCs offer flexibility but require complex governance.
- Representative Offices can't earn revenue.
Quick Fix:
- Study all available business structures in Vietnam.
- Seek expert advice based on your industry and goals.
- Choose structures like 100% foreign-owned companies or joint ventures for better control.
Mistake #3: Incomplete or Incorrect Registration Documents
Foreign Direct Investment (FDI) enterprises in Vietnam must follow a defined registration path (as per the Law on Investment 2020). Submitting incomplete or out-of-order documents can stall or nullify your setup entirely.
Consequences of non-compliance:
- Fines up to 30 million VND
- Rejection of the application
- Delays of several weeks or more
- Potential revocation of already issued licenses
Key documents include:
- Valid investor passport or enterprise registration
- Application forms and declaration letters
- Company charter
- Proof of capital or bank guarantee
- Investment proposal or feasibility study
Best practice: Prepare and cross-verify every required form, ideally using a bilingual checklist, and have local experts review submissions before filing.
Mistake #4: Skipping Business Licenses & Permits
Depending on your industry, a general company registration may not be enough. Sectors such as F&B, healthcare, education, e-commerce, logistics, fintech, and advertising all carry extra licensing requirements.
What you may need:
- Retail trading license
- Food safety certificate (for food prep/sale)
- E-commerce notification or registration with the Ministry of Industry and Trade
- Import/export codes
- MOH (Ministry of Health), or MOET (Ministry of Education and Training)-specific sector permits
Operating without proper licensing can result in:
- Inspection fines and forced shutdowns
- Inability to hire or transact legally
- Delays in launching services
Mistake #5: Vague or Invalid Business Lines
Registering unclear or incorrect business lines in Vietnam can create serious obstacles. Choosing the wrong line and operating outside your registered scope can block future expansion and expose your company to unnecessary legal risks. These risks can include:
- Administrative fines: up to 30 million VND under certain provisions of Decree 122/2021/ND-CP.
- Denial of required sub-licenses for conditional business activities
- If violations are serious or persistent: potential suspension or revocation of business registration.
Avoid it by:
- Using the correct VSIC code for each business activity.
- Confirming if your business line requires special permits.
- Keeping your scope of operations updated and accurate.
Mistake #6: Registering with an Invalid Business Address
Did you know that using an incorrect address can lead to license rejection?
Now you do! Vietnamese Law on Enterprises 2020 prohibits using addresses that are not properly zoned, such as individual homes in purely residential areas.
This can result in your application being denied, or sanctions including forced relocation or fines.
Therefore, be sure to choose a legal business location zoned for commercial use, obtain landlord consent letters if needed, and avoid addresses not approved by local planning authorities.
Mistake #7: Misunderstanding Ownership Rules for Foreigners
Many first-time investors assume they can own any type of business in Vietnam outright. In reality, foreign ownership is restricted or conditional in several sectors (medical, crypto, logistics all come to mind), and the rules can vary depending on your business activity, licensing category, and investor profile.
The good news is that many business lines do allow full foreign ownership, particularly in high-interest sectors such as technology, consulting, manufacturing, and export services.
Misunderstanding these rules can lead to rejected applications, costly restructuring, or even the need to re-register your company entirely.
- Assuming a local partner is always required: In reality, 100% foreign ownership is allowed in most sectors. Partnering without necessity can lead to profit-sharing disputes and limited control. Registering as a Local Company and Transferring Ownership
- Registering under a local name and transferring ownership later: This is a risky workaround: it may not be legally enforceable and can backfire if not properly processed.
- Assuming one rule applies across all provinces or authorities: Vietnam’s investment approvals are handled at the provincial level. Some local departments may interpret the same rule differently, making consistency a challenge. This often leads to surprises during the application or amendment process.
- Failing to check if the business line is conditional or restricted: Some sectors such as logistics, advertising, travel services, real estate, and e-commerce platforms require specific licenses or joint ventures. Foreign investors in Vietnam need pre-approval or must meet certain ownership limits under Vietnam’s WTO commitments or local decrees.
Mistake #8: Failing to Meet Charter Capital Requirements
Vietnam requires charter capital to be fully contributed within 90 days of receiving your ERC. Many businesses miss this window, which may result in:
- Penalties and forced capital adjustment.
- Liability for obligations if capital is not paid.
- Risk of business suspension or dissolution.
If capital is not fully contributed, the company must register a change in charter capital within 30 days from the deadline, and the members/owners who failed to contribute are liable for financial obligations incurred during the period before the change is registered
Pro Tip:
- Setting realistic capital based on your business needs.
- Researching minimum capital rules for your business lines in Vietnam.
- Depositing capital on time and keeping official records.
Mistake #9: Ignoring Post-Establishment Tax & Compliance Duties
Receiving your ERC is just the beginning. There are many post-establishment tasks like opening a bank account, making company seals, tax registration, and registering employees for social insurance that startups must not overlook.
Missing tax registration or social insurance setup can paralyze your operations and leads to penalties, which include:
- Locked tax codes.
- Inability to issue VAT invoices.
- Fines of 10–30 million VND.
Business owner should void this by:
- Registering for VAT and corporate tax in Vietnam immediately.
- Filing initial tax declarations and maintaining accounting records.
Need more instruction about compliance? We discuss this extensively in our post about Annual compliance in Vietnam
Mistake #10: Neglecting to Appoint a Qualified Chief Accountant
Vietnamese law requires every business to appoint a chief accountant, who is responsible for financial compliance. If you skip this, you risk audit failure and financial penalties, and reports may not be accepted by the tax authority.
Solution:
- Appoint a certified Vietnamese chief accountant.
- Or engage a firm offering accounting services outsourcing in Vietnam, including chief accountant representation.
Mistake #11: Skipping Internal Governance Documents
Bylaws and internal regulations are not mere formalities, they help prevent disputes and ensure operational clarity. Risks of skipping this step include possible management confusion, shareholder disputes, and legal grey areas in responsibilities.
Get it right by:
- Drafting a comprehensive company charter.
- Creating internal regulations and shareholder agreements.
- Updating governance documents after any structural changes.
Mistake #12: Believing that foreign firms are exempt from Vietnamese laws
All companies must comply with Vietnam’s tax, labor, and licensing laws, regardless of ownership.
Avoid these traps by:
- Verifying if your industry allows full foreign ownership.
- Registering your business under a legal, compliant structure from day one.
Conclusion: Set Up Business in Vietnam the Right Way
Avoiding the common mistakes in business incorporation in Vietnam is much easier with the right local support. From choosing the right entity to staying compliant with corporate tax in Vietnam, every decision you make shapes your long-term success.
With constantly changing regulations, complex local procedures, and administrative risks, having a trusted partner is essential. United Consulting Vietnam is here to guide you through every step of the setup process.
Book a free consultation today and speak with our advisors for tailored, expert guidance on how to set up a company in Vietnam.
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Disclaimer:
The information provided in this article is for general informational purposes only and does not constitute legal, tax, or investment advice. While every effort has been made to ensure accuracy at the time of publication, laws and regulations may change. Readers are encouraged to consult with qualified legal or financial advisors before making decisions related to foreign investment or share transfers in Vietnam. United Consulting is not liable for any actions taken based on this content.
Common Mistakes When Setting Up a Business in Vietnam and How to Avoid Them