Starting a Business in Thailand the Easy Way – 16 Step Guide
Starting a Business in Thailand 2018: What You Need to Know Before Starting Your First Business in Thailand!
Establishing a Business in Thailand made easy with this 16 step guide. If your serious about starting a business in Thailand this article should make the whole process a lot easier to understand.
16 Step Guide to Starting a Business in Thailand for 2018
1. Do Some Research and Get Advice
Starting a business in Thailand is no different to any other country but you need to do the right amount of research and go about things in the correct manner. If you do things right, it can prove to be both enjoyable and lucrative.
There are many opportunities across a wide range of business sectors in Thailand. The wealth of choice should provide a good opportunity for you to create a business you are passionate about.
Thailand’s economy is thriving and is the second largest in Southeast Asia, behind Indonesia according to the World Bank.
Indeed, they even described Thailand as “one of the great development success stories”, a huge compliment and fair indication of how far the country has come in the last decade.
It is therefore no surprise that Thailand is an attractive business proposition, but that does that doesn’t mean that you should go striding in without conducting the necessary research.
If your serious about starting a business in Thailand you need to familiarise yourself with the basics at least of Thai business law and regulations as well as carrying out the due diligence that you would always conduct before starting a business in your home country.
We always advise people to seek advice from professionals or individuals with a wealth of experience in actually running and establishing a business in Thailand, rather someone you have just met in the local bar.
2. Make a Business Plan and Stick to it
Most frequent visitors or long stay residents in Thailand have dreams and aspirations of opening a bar business in Pattaya or Phuket, a seaside bungalow resort in Koh Chang and even a coffee bar in Bangkok. Whatever business you ultimately decide to start you have to seriously consider what you are going to be doing and most importantly have an exit plan if all fails. Sadly many businesses started by foreigners do fail at a high rate. Mostly due to unpreparedness in finances. But the potential rewards are great if you are up to the task and if lady luck smiles upon you with good fortunes.
While speaking to most bleary eyed travelers I come across who want to start a business in Thailand I can easily see within a few minutes that they really have no idea what they are getting into, especially when they don't have a business plan. But the most important plan they are lacking is the exit plan.
Starting a business in Thailand is not as hard as you would think since the country is very capitalistic and extremely receptive to foreign businesses. And with a nation of spenders on the heels of China's explosive growth, Thailand is on the receiving end of an exploding middle class with cash to spend.
Thailand has a lot of potential for a successful business if you:
- Have a strong idea and business plan
- Have ample supply of funds to start your business
- Willingness to understand Thai culture, mentality and be open minded with a huge dose of patience
3. Things to know before getting started
You can compare the administration needed for starting a business in Thailand, with that in other countries, on the website of the World Bank's 'Doing Business' report. This helpful site summarises some of the main legal and bureaucratic steps you'll need to take when starting your new venture.
If you're interested in registering a company, you need to know that there are registration fees payable. These are THB 50 per million baht invested in the case of a private company, and THB 1000 per million of capital for a public company. A private company must always have at least seven shareholders, while a public company needs 15. Private companies are regulated by the Civil and Commercial code, while public companies fall under the Public Companies act.
There are rules which set out the ways in which foreigners can register and operate businesses in Thailand. In some cases, businesses can be registered in the names of non-Thai nationals, but in certain business areas the company must be at least 51% Thai owned. If you want to set up a public company, at least half of your directors should be Thai.
A major hurdle for many foreigners looking to set up a business in Thailand is that most forms you'll submit to the government must be completed in Thai. This language barrier means that it can be very difficult for foreigners to set up a business alone without having local help. As a result there are many agencies who can support foreigners setting up their business, but for a fee. Take recommendations from others before selecting an agency to help you.
4. What is the company registration process in Thailand?
Registering a company in Thailand can take some time - expect it to take around seven days for a private company and up to 30 days for a public company. The first step is to select and reserve a company name, which is then valid for 30 days.
You'll then need to prepare and submit important documents such as:
- Articles of Association
- Memorandum of Association
- Application form and list of shareholders
- New director form signed by each director
- Declaration of Business Operation form
- Company name reservation
- Details of the offices and branches of your business
- Before you can register your business you'll also have to pay at least 25% of the initial investment capital into a corporate bank account.
You'll need a company chop (stamp), which acts as the signature to certify company documents. These are produced by specialist chop makers, and will cost between THB 400 and 800 depending on exactly what you choose.
Because the documents required vary slightly depending on the type of business, it's important to take local advice before proceeding to register your company. You may also need to have some documents certified before presenting them.
The Thai Board of Investment offers useful guidelines in English to help you navigate the company registration process.
5. What are the laws governing businesses in Thailand?
All foreign owned businesses are governed by the Foreign Business Act 1999 and it should be noted that the laws are strictly enforced. Failure to comply can result in fines of between THB100,000 and THB1 million with also the possibility of being imprisoned for up to three years – not something that should be taken lightly.
Some business activities are not permitted to be conducted by foreigners as they would provide too much competition for the local labour market. These activities are clearly outlined in Foreign Business Act. These activities include:
- Media – newspaper publishing, radio and TV broadcasting
- Farming – rice, arable and orchid as well as rearing livestock
- Anything connected to forestry
- Fishing in Thai waters or anything connected to the fishing industry
- Extraction of Thai medicinal herbs
- Trading of Thai antiques
- Manufacturer and casting of Buddha images
6. What types of business are available?
When you are considering starting a business in Thailand you will need to understand what options are available to you in the same way that you would if you were in your home country. These include:
- A Registered Ordinary or Limited Partnership
- Representative Office, Regional Office or Branch Office
- Limited Company
A Limited Partnership involving a foreigner is very different to that of a Thai Partnership. In this case one partner will have limited liability whilst the other, usually the foreigner, will have unlimited liability.
Another difference is that Limited Partnerships MUST be registered, whereas this is not the case with a Thai Partnership.
Representative Office, Regional Office or Branch Office
Representative Offices, Regional Offices and Branch Offices are popular with larger, overseas companies who are looking to have a presence in Thailand although for many people that are not appropriate due to the restriction that are placed upon them.
All three have slightly different structures but as a general rule of thumb are restricted from earning an income in Thailand.
As with pretty much every other country in the world, there are two forms of Limited Company. The first is a Private Limited Company and the second is a Public Limited Company.
A Private Limited Company will have a limited number of shareholders who, in most cases at least, will know each other. The company will need a minimum of three “promoters” in order to be formed and they will need to complete a Memorandum of Association and Articles of Association.
A Public Limited Company will require a minimum of 15 promoters who must hold the shares for a minimum of 2 years. Once again the Articles of Association will need to be completed.
A board of at least five directors will need to be formed and at least half of them should be Thai nationals. The cost of registering a Public Limited Company is THB2,000 per million baht of capital.
7. What are nominee shareholders and majority shareholders?
“Nominee Shareholder” is a term that is often used when companies are discussed in Thailand. In effect, they are a shareholder in name only have no financial interest in the business.
They are often used so some foreigners can establish businesses without the need for ‘proper’ Thai partners. Under the Foreign Business Act 1999, nominee shareholders are illegal and the practice is punishable by imprisonment and/or fines.
Majority shareholders are those who own 51% or more of the shares. This is the general way in which foreigners become involved in businesses in Thailand.
The foreign associate will own 49% of the shares whilst the other Thai nationals will own the 51%, split between them.
8. Isn’t having a smaller stake in MY company dangerous?
It is natural to be concerned about being the minority shareholder in your own business but so long as everything is correctly setup, you won’t face any problems.
There are lots of advantages to having a Thai majority company as opposed to a registered foreign company such as greatly reduced paperwork and lower requirements in terms of capital. A Thai majority company can also purchase land if the necessity arises.
Buying property in this manner is common practice although it should be noted that the company should not be setup purely for this purpose as this is illegal.
Regardless of the purpose of the company a financial statement should be prepared, audited and submitted to the authorities on an annual basis. Failure to do so can lead to the company being delisted.
9. If I am the minority shareholder, could I be overruled in the running of MY business?
It is possible to use preferential voting rights and a ‘super majority of shares to votes’ in order to assume control of voting rights. This will ensure that you retain control of the business and cannot be overruled.
Another common feature is for lawyers to create companies whereby the “assigned” Thai majority shareholders have no active interested in the company, usually they will have signed away their voting right when the company was formed.
However, it should be noted that the income needs to be fairly distributed amongst shareholders although that is normally distributed through expenses such as salaries and rent – leaving nothing available should a coup be staged.
10. Do I actually ‘need’ all the physical capital to open the business in the first place?
The minimum amount of capital required for a Thai majority company is THB 1 million. Unless you are legally married in Thailand, the amount of capital will need to be double that amount if you require a work permit. Capital of THB2 million would entitle the business to have ONE work permit.
If your business is operating under a FBL the minimum requirement would be THB 3 million per work permit and for each business activity. 25% of this share capital in both cases must be “fully paid up”.
11. Can I own or buy assets through the business?
It is now possible to buy property and assets as part of your company thanks to the laws being relaxed back in 1997.
It should once again be noted that there are strict laws in place forbidding the company being setup with the sole purpose of purchasing land or property and once again potentially brings into play the fact that nominee shareholders are illegal.
Obtaining a 30-year lease is the preferable way to obtain land or a property that isn’t in foreign ownership.
12. Can I own 100% of Thai Company?
It is a myth that foreigners can’t own 100% of a Thai Limited Company although it is quite rare and difficult.
Trying to achieve this can be time-consuming and in many cases the outcome is unknown at the start of the process. In reality, there are three ways in which a foreigner can take 100% ownership of a Thai company. These are:
By obtaining a FBL
In its crudest sense, a FBL is a work permit for a business. It is only permissible for certain professions, the same as the case with a work permit.
This allows the Thai government to closely monitor who is doing business and also to ensure that the local labour market is not threatened.
Board of Investment (BOI) promotion
The BOI is a division of the Thai government that has been established to try and promote overseas investment in the country.
Generally, the businesses that are set up are start-ups and they are usually businesses that are deemed to be of benefit to the Thai economy.
Often the businesses are located in areas that are in need of a financial injection. Check out the benefits or being BOI registered in this article.
Via the Treaty of Amity (US Nationals only)
A special agreement is in place between the Thai and US governments that allows American companies or individuals to maintain a majority shareholding in a Thai company.
This is great if you are a US national, but not so good if you are from elsewhere!
13. What Visa do i need for Operating a Business?
Anyone who has the intention of doing business in Thailand, in any form, will be required to have a Non-Immigrant B (business visa).
It is recommended that you apply for these at the Thai embassy or consulate in your home country prior to travel. The visa fee is THB2000 for a single entry visa that last 3 months or THB5000 for a one-year multi-entry visa.
14. Is it possible to employ other foreigners in my business?
The simple answer to this is yes, but it is down to the amount of registered share capital that your business has as well as the number of Thai employees.
It is also possible to obtain another work permit for every THB5 million paid in tax.
15. Can I open a Thai bank account?
Before starting a business in Thailand you will need to open a Thai bank account for the business. If you are in possession of a work permit you can open one for yourself.
The chances are you will only receive an ATM card as the bank will not grant you a cheque book. If is also possible to withdraw funds over the counter.
It is highly unlikely that you will be able to obtain a loan as a foreigner.
16. What tax will I need to pay?
Corporate Income Tax
Corporate Income Tax (CIT) is a direct tax levied on a juristic company or partnership carrying on business in Thailand, or not carrying on business in Thailand but deriving certain types of income from Thailand.
- Tax will be withheld on interest paid to associations or foundations at the rate of 10%.
- Royalties paid to associations or foundations are subject to 10% withholding tax.
- Government agencies are required to withhold tax at the rate of 1% on all types of income paid to companies.
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