How to Set Up a Business in Thailand: Legal Considerations

Foreigners looking to establish a company in Thailand must know certain procedures and legal considerations during the setup stage. Depending on the type of business, developing a company from scratch can be a long and complex process, especially for non-Thais. Understanding the legal requirements and steps involved is vital to ensuring your business is set up for success from the beginning.  

Continue reading to learn more about the intricacies of establishing a business in Thailand, the legal conditions you must meet, and ways to streamline the process. 

Choosing a Business Structure

To start, you need to choose a business structure. This is an essential part of every business as it defines how the company will function, how it will be registered, and the roles of stakeholders. There are three major types of Thai business structures typically opened by foreigners in Thailand: 

Partnership

A Thai business partnership is established through an agreement between two or more partners. The agreement must clearly outline the business objectives, the role of each partner, financial obligations, and conditions for dissolving the company. Partnerships are split into two categories:

• Ordinary partnership: Two or more individuals agree to conduct business activities and share the income earned. If the partnership is registered, it will operate as a legal entity independent of the partners involved. 
• Limited partnership: These are registered partnerships in which one partner’s liability is limited to the capital invested, while the other (the Managing Partner) has unlimited liability.

Ordinary partnerships are often not recommended due to the financial risks involved. This type of partnership offers little to no protection in terms of legal liability as all partners are held liable for the partnership’s obligations and debts.

Limited Company

As the most common type of company established, a Thai limited company exists as a separate establishment from its owners and is controlled by a director. There are two kinds of limited companies:

• Private limited company: The company is owned by a few shareholders whose liability is restricted to the amount of shares they invest and who are not permitted to trade them on the stock market. 
• Public limited company: A larger number of shareholders are included. They have the right to sell their shares to the general public via the Stock Exchange of Thailand (SET). 

Joint Venture

These are joint-owned businesses where two or more individuals or entities agree to pool their resources and profits for a business activity or project. Each owner is considered a distinct legal entity but collaborates to achieve a mutual goal. There are two types of joint ventures: 

• Registered: Also known as an incorporated joint venture, this is registered as a legal company and operates as a separate entity.
• Unregistered: Also known as an unincorporated joint venture, this type of venture is launched through a contract between two individuals or entities. 

Company Registration in Thailand

After deciding on a structure, foreign business owners can prepare to register their company. Each type of company has a different registration process to go through, but in general, this consists of 3 steps: 

Step 1: Reserving the company’s name

The first step is to reserve and register the company’s name. As some names may be taken, reserving at least 2-3 just in case. Be aware that name reservations expire, so you must form your company within the time limit, or you will have to reserve the name again.

Step 2: Assigning important roles for the company

Business owners must hire individuals to run the company and manage its operations. How many they need depends on the type of company being established. 

Foreigners seeking a limited company must find promoters, shareholders, and directors. Private limited companies require at least two promoters and shareholders, and a single director to manage them. A public limited company needs at least 15 promoters to help create the business.

For partnerships and joint ventures, at least two or more partners (or companies in the case of joint ventures) are required to run the business. For a limited partnership, a managing partner who is responsible for overseeing daily business operations and any debts involved is needed. 

Step 3: Register the business

The final step involves putting the company through the registration process to operate legally in the Kingdom of Thailand. Business owners will need to complete the following steps to register a limited company: 

1. A Memorandum of Association (MOA) must be filed with the Department of Business Development (DBD). This legal document includes the names of all business promoters, the company’s location, objectives, and more. 
2. A statutory meeting must be convened with the company promoters to approve the Articles of Association (AOA), appoint someone as an auditor, and establish a Board of Directors. 
3. Within 3 months of hosting the statutory meeting, the company directors must apply to register the company with DBD and pay the associated fees. 

Registration is only mandatory for limited partnerships. To create an ordinary partnership, all involved is a contract drafted between the partners overseeing the business. It can still be registered, in which case it will be considered a juristic person under Thai law. Partnerships are registered with the district registration office in the province of the company’s head office. 

Joint ventures can be registered as legal entities, especially if equity is involved. Foreign companies looking to register one may have to open a branch in Thailand. 

Tax and Licensing Requirements

Foreign business owners are responsible for paying corporate taxes in Thailand on any profits accumulated in a given tax year. Before business operations can begin, preparations need to be made to ensure taxes can be filed, which involves:

1. Acquiring a company registration number.
2. Applying for value-added tax (VAT) registration at the Thai Revenue Department.
3. Opening a corporate bank account at a major Thai bank.

Regarding joint ventures, the collaborators must file taxes separately if the business is unincorporated. With incorporated joint ventures, both owners must apply for a tax ID and file a single tax return for the joint venture, which is separate from their existing entity or projects.

Required Business Licenses

Foreign entrepreneurs may need to obtain a proper license. Whether a license is required depends on the industry in which the business will operate. Industry-specific licenses are often needed for the tourism, education, financial, and e-commerce industries. 

Under the Foreign Business Act (FBA), some business activities are restricted to foreigners, meaning they cannot own majority shares of companies in certain industries. However, business owners may gain permission to participate in some of these activities provided they apply for and receive a Foreign Business License (FBL). 

Role of Corporate Lawyers in Business Setup

To overcome the various regulations and legal constraints of opening a company in Thailand, it’s essential to consult a reliable Thai corporate lawyer when setting up a business. These lawyers have extensive knowledge of how to establish a company and have the qualifications necessary to ensure the process is swift and seamless. Here’s how a corporate lawyer can assist during the business setup stage:

• Reviewing business plans and ensuring that the company complies with local Thai regulations
• Drafting the required documentation (such as a Memorandum of Association) and filing it with the relevant Thai authorities
• Helping prepare the right documents and applying to register the business with the correct legal entities
• Assisting with opening a corporate bank account
• Offering support on how to comply with the legal regulations and legal counsel on avoiding issues with the government

Starting a Business in Thailand with Expert Legal Assistance

To ensure a swift company setup and minimal noncompliance risk, contact Siam Legal for professional assistance. As a full-service law firm with over 20 years of experience in Thailand, our corporate lawyers have the skills and experience to help you start a business free from legal issues and equipped for success. 

Our experienced and bilingual business lawyers will take charge of the company registration process so you can have peace of mind and focus on launching your venture. 

Contact Siam Legal today and book a consultation to give yourself the best chance at a highly profitable business venture in Thailand.

Category: Business in Thailand, Company Registration