The number of expats and foreigners who desire to conduct business in Asia has multiplied dramatically over the last few years. With plenty of reasons it has accounted for the large inflow of foreign investors within the Kingdom on Thailand. One advantage is that the strategic location of the country within the Asean region and with an abundance of cheap labor and also the abundance of expert employees makes the country – investment appealing. There’s additionally the friendliness and hospitality of the local population with its notable Thai cuisine which makes Thailand perfect for both expats and locals. Above all, doing business in an Asian country is comparatively straightforward despite the language and cultural barriers.
How to set up a business in Thailand?
If you are starting a business in Thailand then you first need to register a Thai company which is recognized as a ‘Juristic Person’ under Thai law. This will allow you register your business partners as well as the Thai company for purposes such as income tax, capitalizations and obtaining a Thai Business Visa and Thai work permit as a foreigner in Thailand.
There are a number of options when you are registering a Thai business. This can be a “Company Limited” which is the most popular business registration forms with foreigners and expats in Thailand for the following reasons:
- 1. Its easier to setup than others
- 2. The liability of the shareholder is limited to his/her unpaid shares.
- 3. This business format also allows the foreigner to engage in various business activities
- 4. The Thai company limited being a corporation can be seen as more credible
There is however other factors to consider when registering a business in Thailand. This would include the type and objectives of the business, the number of shareholders among other things. Speak to a lawyer in Thailand if you are not certain what is best for you.
Thai Business Set-Ups
If you look at Thai law then there are 5 categories of Juristic Person Registration possible which are as follows:
Setting up a Thai Company Limited has become much easier with the latest revision of the Civil and Commercial Code (CCC) B.E. 2551. These changes have made away with all the unnecessary procedures which had been needed before. To register a Thai company today takes about 1 day if all the documentation is correct. You only need 3 promoters which has been changed from 7 promoters or shareholders.
With this being a Thai Company Limited the shareholders in this type of company setup carry the least liability limited to the unpaid share values. Normally this has been viewed as one of the prime advantages of this type of company setup apart from having the ability to do various business activities which are restricted in another business formats. Once this has been registered and all the paperwork complete you can use this company to apply for your business visa and work permit.
The next option in Thailand is registering a Limited Partnership which is a more suitable option if you are looking for a form of Juristic Person registration or company setup that requires only 2 shareholders at the formation of the business. One note though is that of the two shareholders one of them must be appointed “Managing Partner” or also known as a “General Partner” to act on behalf of the company when the business is being registered.
There is however a catch compared to a Limited Thai Company – the general partner must assume an unlimited liability for the business. Many do not like the unlimited liability hence the popularity of a Thai limited company over a limited partnership. This type of registration tends to be mainly for small household businesses in Thailand.
This is a relatively new format in Thailand for non-profits. The objective of the foundation has to be for charitable causes. The foundation does not need any shareholders but it must have 3 founders when the foundation is registered. Note however that to register a foundation takes anywhere from 6 months to 12 months in Thailand.
If you are looking at starting a Representative Office in Thailand for your company then you will note that this is covered by the Foreign Business Act B.E. 2542 which specifies that the office may not generate any income in the Kingdom. The objectives and activities of a corporate representative office in Thailand are limited to the following:
- – You can report business developments in Thailand to your head office;
- – You can give advice on various aspects on distributed by the head office;
- – You can locate or source goods and/or services in Thailand for the head office;
- – You can inspect/control the quality of goods that the head office purchased in Thailand;
- – You can disseminate information in relation to new goods + services to the head office.
The legal process of registering a Representative Office in Thailand is rather complicated and also very time consuming because of all the documents needed. Note that it normally takes around 6 months before you will known if the office has been allowed.
Note that the Treaty of Amity in Thailand is a well known bilateral treaty between the United States and the Kingdom of Thailand. You would need to speak to a lawyer about this in Thailand as it is currently in conflict with the WTO rules. The Amity Treaty makes provisions for commercial privileges to all US Citizens and also to US companies who are considering starting a business in Thailand. The treaty allows them to register a Juristic Person in Thailand even though they do not have any shareholders or promoters who are Thai, given that they are qualified as:
Being a US Citizen; or, Being a US Juristic Person that:
- 2.1) was registered under the laws of the Kingdom of Thailand or the US, and,
- 2.2) the majority capital/shares belong to the shareholders who are American, and,
- 2.3) the number of the directors who are of Thai and/or American must exceed the half of the total number of the directors, and,
- 2.4) the director who is authorized to act on behalf of the company must be the person who is of Thai or the US nationality. However, in the case that there are more than one authorized director, the majority thereof must be the persons who are of Thai and/or the US nationality.
The treaty is very complex so for more detailed information on company registration formats in Thailand it is always best to speak to a Thai lawyer first. Call us toll-free or walk into out Phuket or Bangkok office today for more information about doing business in Thailand.