Company Incorporation in Thailand

Challenges to Expect while incorporating a company in Thailand

1.Complex Regulations

Thai regulations can be complex for newcomers and may change over time. Staying informed about the latest legal requirements and ensuring compliance can be challenging for those unfamiliar with the local business environment.

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2. Minimum Capital Requirement

For certain business activities, Thai regulations mandate minimum capital requirements. Determining the appropriate amount of capital and fulfilling this requirement can be challenging, especially for businesses with varying capital needs.

3. Foreign Ownership Restrictions

There are restrictions on foreign ownership in specific industries. Understanding and navigating these restrictions can be challenging, particularly for businesses with significant foreign investments.

4. Work Permits and Visas

Obtaining work permits and visas for foreign employees can be a bureaucratic process. So, planning for the time and Paper works required for the visa and work permit application process becomes essential.

Different Types of Business Structures in Thailand

Following are the Different Types of Business Structures that can be adopted to set up business entities in Thailand:

1. Thai Limited Company

The Thai Limited Company is one of the most preferred forms of business structure among foreigners wanting to do business in Thailand. A Thai Limited Company is similar to a Limited Liability Company in the USA and a Private Limited Company in Thailand. A minimum of 3 shareholders and one director is required to incorporate a company. At least three persons should subscribe to the company's memorandum of association. There are two types of companies under this form of business structure

2. Thai Limited Company (Thai Majority)

A Thai Majority limited company is a limited company where Thai nationals own a minimum of 51% of the company's shareholding. As most shareholding is with Thai nationals, there is no requirement to have a Foreign Business License (FBL). These companies do not have any restrictions on their functioning compared to Foreign-Owned Limited Companies.

3. Thai Limited Company (Foreign Owned)

A foreign majority Thai Limited Company is a company where foreign nationals own more than 49% of the shareholding. Foreign-owned limited companies require a Foreign Business License for commencing their business operations in Thailand.

4. Companies registered in Thailand under the US-Thai Treaty of Amity

US-Thai Treaty of Amity is a treaty signed between the USA and Thailand where the US corporations and investors are given significant trade advantages to run their business in Thailand. As per this treaty, US-based investors have the following considerable trade advantages:

1. Thailand permits US nationals to hold either majority or all the shares of the Thai limited company or establish a Representative office or a branch office in Thailand without the need to apply for a Foreign Business License; and
2. US nationals are given the same privileges as Thai nationals. They are exempt from most foreign investment restrictions imposed in the Foreign Business Act of 1999.

5. Board of Investment (BOI) Thailand

A BOI Thailand provides business incentives to foreign and national entrepreneurs who wish to invest in the agency's promoted activities. BOI Thailand has set a criterion for projects to apply for incentives and privileges. So, to be eligible for BOI promotion, your business has to fall under one of the categories set by the Board.

6. Branch Office

A branch office is similar to that of a company limited. It is allowed to earn income in Thailand. Branch offices are governed by the rules applicable to the foreign-held company limited. However, the difference lies in the extent of their liability.

7. Representative Office

A representative office is an entity established to provide support to the head office and engage in activities such as acquiring information about the source of raw materials, doing market research and sending the information back to the head office, advising the head office about new products and services offered in the Thai market.

The following “non-trading” activities have to be undertaken by the representative office in Thailand to open a representative office:

1. Search and procure information from the overseas head office regarding the source of goods, services or raw materials in Thailand.

1. Report to the headquarters about the economic movement in Thailand
2. Check and ensure the quantity and quality of products required by the head office
3. Receive and pass on the news and updates to the head office and affiliated companies. The information and updates should be regarding new products, upgrades in formulas/versions, or services offered in Thailand.
4. Advise the head office or its affiliated companies about the goods offered by the head office to the local distributors and consumers where the product must have already been distributed in Thailand.

8. Regional Office

Like the representative office, regional offices in Thailand are disallowed from doing any commercial activities in Thailand. Regional offices cannot earn income in Thailand. The business entities are restricted to only specific functions undertaken on behalf of the overseas head office. The statute should designate a particular operation. Regional offices in Thailand have been allowed to perform only the following activities:

1. Consultancy and Management services;
2. Communicate, coordinate and direct, on behalf of the operations of the head office, the operation of branches and affiliated in the region;
3. Financial management services;
4. Training and personnel development;
5. Research and development services;
6. Produce development; and
7. Marketing controls and sales promotion and planning.

9. Thai Partnership

There are two types of partnerships, viz. ordinary partnerships and limited Thai partnerships:

1. Ordinary partnerships

   An ordinary partnership is a partnership where all the partners are jointly and unlimitedly liable for all the partnership obligations.

2. Limited Thai partnerships

   A limited partnership means a partnership where one or more partners have limited liability to the amount they have undertaken to contribute to the partnership, and one or more than one partner who are jointly and unlimitedly liable for all the partnership obligations.