Doing business in Thailand – Company formation
So, you are thinking of doing business in Thailand – company formation, work permit & visa will probably be required. Maybe buying some land or buying/making a house here in Koh Phangan maybe. Perhaps you are thinking of making a business here only. Some small type of cottage industry or maybe even a colossal import export business tapping into international trading. In any case you will most probably need to create a Thai limited liability company. Here I will attempt to illuminate some of the most often asked about and most important aspects of doing business in Thailand.
How do I work legally in Thailand?
In Thailand, as a non Thai national, you will need to make a work permit to work here legally. In order to get this work permit you will need a sponsoring company (think employer) with registered capital of two million baht per work permit. So for two work permits the company will need a registered capital of 4m Thai baht and so on. The only exception to this 2m baht registered capital rule is if you are the husband or wife of a Thai national. If that is the case then it is possible to make a work permit with only one million baht of registered capital. To make things more complicated Thai companies with registered capital of 5m and under are treated as SME’s. As an SME the company benefits from some tax incentives:
- Thai companies with 5m baht reg. capital and under –
- 0 – 300,000 Thai baht profit is tax free
- 300,000 to 3,000,000 Thai baht is taxed at 15% (Possibly reduced to 10% by end of the year)
- Thai companies with more than 5m baht registered capital –
- Tax is levied at 20% on the first baht of gross profit
When you come to Thailand in order to work and stay a long time for doing business in Thailand – company formation will be the corner stone of your legal existence.
What do I do if I have no employer or I want to be self employed?
Don’t worry, many people, myself included, are self employed and it is totally achievable to do this. In order to be self employed you will need to open your own Thai registered company. As mentioned above the usual route will be via a 2 million baht registered capital company per work permit required.
Do I need to pay two million baht to open a two million baht registered capital Thai company?
No you don’t. As mentioned before the two million baht amount is your limited liability. That means that should your company ever (unfortunately) be in the position to be sued, say someone slipped and fell on your premises, the maximum amount they can sue your company for is the two million baht. I should say that Thailand, unlike many other western countries, does not have a litigation culture.
The name, limited liability, means just that, separating the invested amounts from the owners personal finances. Many many years ago, before the use of the limited liability company, the assets of the company and the owner were one and the same. This meant that budding entrepreneurs could find themselves destitute, sued for all they owned, should they fall foul of a disgruntled customer. The creation in the law of the limited liability company stopped the owner from losing everything he owned in some situations.
So, I want to make a work permit and start doing business in Thailand – company formation, how do I do it?
The first step in doing business in Thailand – company formation will be the start of the process. For this you will need to:-
Think of a name – 3 names actually to see if they are available or not.
Many names may not be possible to be used as they may be taken already or be too close to a name that exists already. Any names that are required are sent to the head of the company registration department and are either given the go ahead or are advised to be altered – e.g. change spelling, etc.
A location for the head quarters/main office.
For this you will need to show the house registration book for the premises and also a hand drawn map – often this can be taken from a tracing or copying Google maps.
Names of a minimum of three shareholders.
In order for the company you are forming to be classed as a Thai company (being a juristic person it has the rights of a Thai person under the law) it must have 51% of its shares owned by Thai nationals. It’s common practice for the business department to check the finances of the Thai shareholders should the company have a mix of Thai and non Thai shareholders. This is to check that the Thai shareholders are making a real business and not just being shareholders in name only.
The name of a director or directors.
For directors of the company, the managers, it is possible to have one or many. Its also possible to make many different signing conditions to safeguard the company. Should you wish to have say, three directors for your company, then it is possible to make it necessary for all three to sign, 2 of the 3, 1 of the 3, only one stipulated named director to sign, and so on. This can be entered into the company documents as you wish to have it.
An area of trading – one or many.
This is mainly for the government to keep track of statistics I feel. One company may have many areas of business, e.g. bike rentals, restaurant and houses for rent all under one company. However, we still need to disclose the main business area of the company when we form the company.
Once the company is formed you have your sponsor for your work permit
After the company is formed, it may be the same day, you will have a sponsor/employer for your new work permit application. Current rules, in Suratthani at least, dictate that the signing director for a new work permit application must be a Thai national.
Great, now I have my Thai company, whats the next stage?
OK, so now you are a business owner, what comes next I hear you say. So the next step will be to make you able to work legally. For this you will need to make a work permit for yourself and any other non Thai employees that you wish to have.