A crucial decision in the business set-up process is which type of business structure to use . Foreign investors can choose from two main business structures : a Thai business entity or a foreign business entity .

1 . Thai Business Entity : A Thai business entity ( most often a Thai limited company ) with a majority Thai ownership .

2 . Foreign Business Entity : A foreign business entity does not require any Thai ownership but is governed by the Foreign Business Act and may be limited in business activity and scope .

The most common types of businesses in Thailand take on the following forms :

THAI LIMITED COMPANY

Thai limited companies are generally simple to set up . They are the most popular type of business structures in Thailand .

Key features of a Thai limited company are :

¬ ¬ Shareholder ( owner ) liability is limited to the investment in shares

¬ ¬ There is a separation between owners and management

The basic structure and requirements of a Thai limited company are :

¬ ¬ There must be at least three shareholders .

¬ ¬ There must be at least one director . ( There is no requirement for a “ local ” director .)

¬ ¬ There must be a minimum 51 percent Thai shareholding , which can be spread across one or more shareholders . The remaining 49 per cent can also be held by one or more foreign shareholders . Should the foreign shareholder wish to gain or become a controlling shareholder , there are some legal structures that provide increased control .

¬ ¬ The minimum value per share is five baht , so the absolute minimum capital can be as low as THB 15 , but it costs the same amount in government registration fees to register , for example , 1,000,000 Baht capital .

¬ ¬ Company objectives must be defined .

¬ ¬ There must be an Articles of Association ( company bylaws ).

¬ ¬ Must appoint an auditor .

REMEMBER

Nominee shareholders are illegal in Thailand . GPS Legal may be able to advise alternatives to suit your particular circumstances .

PARTNERSHIPS

Due to difficulties arising from the Foreign Business Act , expats do not normally choose to form partnerships in Thailand .

In a limited company , majority shareholding dictates whether the entity is considered “ foreign ” or “ local ,” irrespective of whether the director is a foreign national . But in a partnership , if the managing partner is a foreign national , then the partnership will be considered a foreign entity , even though it may be funded

with majority Thai capital investment .

Nevertheless , there are ways to operate a business via partnership as a foreigner in Thailand . Partnerships are possible if the Foreign Business Act does not restrict the business in question . It ’ s also possible to apply for a Foreign Business License or a Foreign Business Certificate . ( You ’ ll find more information on these documents in the “ Foreign Business Authorization ” section .)

If you do decide to form a business partnership in Thailand , there are three different types from which to choose :

1 . UNREGISTERED ORDINARY PARTNERSHIPS

This partnership arises from a contract and is not registered with the commercial registration office ; therefore , it does not constitute a juristic person . The partners are jointly and severally liable for all obligations and debts of the partnership and are bound to each other by the

terms of their partnership agreement .

2 . REGISTERED ORDINARY PARTNERSHIPS

This type of partnership is registered with the commercial registration office , constitutes a juristic person and is taxed as such . It is required to submit annual financial statements and pay corporate income taxes ; however , incomes may also be reported on individual partner ’ s tax returns . Nevertheless , the partners are still personally liable to third parties .

3 . LIMITED PARTNERSHIPS

A limited partnership must register with the commercial registration office . Limited partnerships constitute a juristic person , are taxed as such , and are required to submit annual financial statements and pay corporate income taxes . The partners in a limited partnership are classified into two types : general (“ managing ”) partners or limited partners .