Thailand, a traditionally agrarian country with more than half its population consisting of farmers, is on the path to industrialization and is currently focusing heavily on agribusiness, natural resource diversification, and exports (Prachimdhit, 1990). By following the Buddhist philosophy and policy of the Middle Way as its economic guideline, Thailand has successfully achieved and balanced its three goals: growth, economic stability, and equitable income distribution. It is considered one of the fastest-growing and most successful economies in the world. Its high GDP (measured as GDP per purchasing power parity) in Southeast Asia is remarkable compared to other emerging economies and is expected to maintain this growth rate in the coming generation (Prachimdhit, 1990). These impressive economic achievements have made Thailand an attractive location for businesses and investments.

If you want to start a promising business venture in Thailand, you need to follow these simple steps:

Choosing the appropriate legal form for your company

Thai law provides for four different business structures to suit your needs. Due to the complexity and time involved in setting up your desired business or investment, it may be advisable to consult a local lawyer. We can recommend a lawyer who offers in-depth expertise and professionalism. The business structures are:

Limited liability company

This is the most popular option among foreign investors. Shareholders are only allowed to own a limited number of unpaid shares. Thai law requires them to divide their capital into shares. At least three founders and shareholders must register the company. This includes a managing director, an auditor, and a registrar who drafts the articles of association. Each founder receives at least one share. The initial share payment must be at least 25% of the nominal value. A founder's duties include the accounting tasks stipulated in the Thai Civil and Commercial Code and the Tax Code, as well as the annual filing of financial statements with the relevant authority.

Foreign investors might be attracted to this type of company formation, but Thai law limits their share to 49%. 51% is owned by Thai nationals.

The company management can apply for work permits for foreign employees.

Investment Promotion Authority

Foreign entrepreneurs seeking full ownership of their companies can achieve this through membership in the Thailand Board of Investment (TB). The TB promotes selected foreign companies and assists them with visa and work permit applications. These companies are also exempt from corporate income tax. However, the TB applies strict criteria when selecting the foreign companies it supports.

Foreign companies must apply for BOI funding. If you are considering an application, please note that the complex process can take one to two months and requires you to contact the BOI. If selected, you will be required to submit regular status reports to the agency to maintain your status. It is advisable to seek the assistance of a corporate lawyer or an auditing firm for this purpose.

Sole proprietorship

This type of company is owned and registered in the name of a single individual. This individual also acts as the operator. Foreigners may encounter difficulties establishing such a company if their business does not meet the requirements.

Partnerships

The Thai Civil and Commercial Code provides for these three types of partnerships:

  • Unregistered partnership – The partners are equally liable for all adverse events. However, this type of partnership does not yet possess legal personality.
  • Registered ordinary partnership – This type of company must be registered with the relevant authority. It possesses a legal personality independent of its partners, as well as its own rights, obligations, and liabilities.
  • Limited partnership – This sub-form comprises two types of partners: the general partner and the limited partner. The general partner is liable without limitation and indefinitely, regardless of the amount of their capital contributions. In contrast, the liability of a limited partner is limited to the amount of their capital contributions.

    • While registering partnerships is simpler than registering other types of businesses, these three types of partnerships cannot apply for work permits. They also cannot use their company name to open bank accounts.

    Establishing your company

    You must register your business with the Department of Business Development (DBD), meet the relevant requirements, and submit the necessary documents to one of the DBD offices. These offices are centrally located in Bangkok to be convenient for most applicants. If you meet the requirements and are registered, but need to make changes later, please contact the DBD office nearest you.

    Registration of the different types

    The procedures for sole proprietorships and partnerships are quite simple, and the documentation requirements are minimal. Corporations, on the other hand, must adhere to a more complex and extensive process with significantly more documents. They must also reserve their company name in accordance with the DBD guidelines. Subsequently, the corporations must hold a meeting to establish themselves and prepare all the necessary documents, particularly the articles of association and the commercial register entry. Once all steps are completed, the documents must be submitted within the deadline specified by the DBD.

    Planning your company

    As with any activity, planning is the first step. And a smart plan begins with research that leads to identifying or finding your niche.

    Research and identification of your niche

    These are the most important first steps for successfully starting a business in Thailand. Businesses that fail often attribute this to taking the seemingly easy way out, shortcuts, or conforming to the mainstream. Avoid these mistakes at all costs. Thorough research is essential. Take ample time to gather information about high-selling products and services. Immerse yourself in the local community and understand its needs. Be sensitive and recognize how you can meet them. Don't limit your network. Include employees, business partners, service providers, and individuals. Learning Thai is always advantageous, even essential, for obtaining relevant information effectively. Other entrepreneurs are a valuable source of information and can provide valuable insights. Their opinions and market forecasts are invaluable. If you are in the IT sector, consult well-known and successful digital marketing agencies. They possess in-depth market knowledge and can provide you with important tips and advice on suitable strategies for maximizing profits. Your knowledge of the Thai market is not just a treasure, but essential. Equipped with maximum and optimal information, including forecasts, you have enough input to decide which business to start and which effective marketing strategies to implement.

    Consider how your business can differentiate itself from and outperform potential competitors. Build a strong network. Assess all risks and prepare for them as best as possible. Also, create a plan B for the off-season or in case of supply shortages. If you're opening a restaurant, for example, you could offer promotional gifts for the first guests or complimentary drinks on opening night. It's crucial that you research your planned business as thoroughly as possible before launching your venture.

    The search for a Thai partner

    If you plan to run a business in Thailand long-term, you need a competent partner. They know the country, speak fluent Thai, and can streamline your administrative and HR processes. They also know how to navigate the local authorities and most likely have contacts who can help you reduce costs. Service fees are higher for foreigners in Thailand, so locals pay less for services like cleaning, taxis, or handyman work. Your Thai partner can obtain quotes that are up to 50 or 75% cheaper than your own. They will continue to be beneficial even after your business is up and running. Thai laws change frequently, and a Thai partner who stays up-to-date with these changes will be far more helpful than trying to manage everything on your own.

    Some foreign businesspeople or investors make the unwise decision to partner with a straw man who owns 51% of the company shares but has no influence on decision-making or whose ownership structure is not legally sound. This practice is as widespread as it is risky and can lead to long-term disadvantages. It is therefore always advisable to consult a lawyer to avoid legal violations.

    It is advisable to look for a trustworthy Thai partner in your industry to support you in managing your business. Ideally, you should find such a partner who holds shares on your behalf and can sell them back to you if needed. With a trusted Thai partner by your side, you retain control of your company, as your shareholding is limited to a maximum of 49%.

    Define and clarify goals

    The next step is to clearly outline the company's objectives to the entire organization and all stakeholders. This includes salaries and a regular budget plan for personnel, rent, and other necessary expenses. Ensure you have sufficient funds to cover these costs for at least the first six months of operation.

    Business start-up in Thailand

    This is the most difficult step, as you have to deal with the legal requirements and circumstances associated with setting up your business. The struggle can be so tough that it might even deter you from starting.

    Registering your company in Thailand

    While the process can be demanding, it is easily manageable by following the guidelines. First, secure your company name to ensure it is not already taken in Thailand. Prepare all registration documents, including a list of shareholders, minutes of your meetings, and proof of share capital payment. Once everything is in place, you can register your company according to the DBD regulations. The forms are in Thai, so knowledge of Thai is helpful. Otherwise, you can consult a Thai lawyer or other qualified expert.

    Next, you will need to register for VAT and obtain the licenses required for your business.

  • Acquiring licenses: These licenses depend on the type and size of your company.
  • Applying for VAT: This is required if your company has an annual turnover exceeding 1.8 million baht. You must apply for VAT at your nearest tax office.
  • Applying for additional licenses: If you plan to operate a restaurant, you will need a license to serve alcohol and play music. Many restaurant owners overlook this requirement and risk a fine. To establish a shipping company, you will need an import and export license. Importing food and pharmaceuticals for your business in Thailand also requires approval from the Food and Drug Administration of Thailand (FDA). If you are unsure whether you have all the necessary licenses, you should consult a lawyer or tax advisor.

    • Businesses may require copies of your bank statements and a sketch or map of your business location. License processing times vary depending on the province, region, and type of license applied for. Thai bureaucracy is subject to change in its licensing times. The fee for each license ranges from 600 to 2,000 baht.

    Some licenses must be renewed annually. Examples include liquor and music licenses for restaurants and bars. The purpose of these licenses is to ensure that local and international artists receive their royalties for their work at your establishment. You also need an updated license if you use music by other artists. Furthermore, it protects you from legal repercussions.

    Looking for suitable office space

    You have the choice between a serviced office and a traditional office. A serviced office might be the better option if you want to avoid the hassle of setting up your own office space. This includes furniture, telephone and internet connections, installations, catering for employees, cleaning staff, and all necessary equipment. With a serviced office, you simply sign a contract, bring your basic and mobile equipment, and can start working the same day.

    A traditional office, by comparison, is significantly more complex, expensive, and costly to set up and operate. You need to invest in the building or premises, install telephone and internet connections, and hire a building manager to handle the day-to-day operations and affairs of your office building. This may be the preferred solution if your business is tied to office space or if your workforce is too large for a serviced office.

    Application for visas and work permits

    This is another delicate matter when setting up a foreign company and hiring foreign employees. Here too, it is advantageous to consult a lawyer to ensure the matter is handled correctly and smoothly for you and your company.

    Visa application

    An accounting firm can handle the paperwork for you, or you can do it yourself at the Thai embassy in your home country. To apply for a non-immigrant visa, you will need copies of your business registration, a letter from your local employment agency and your Thai partner company offering you a job, a list of documents available at the Thai embassy, ​​and a fee of US$20 for the agent who will review your documents and submit the application on your behalf.

    Application for work permits

    A non-immigrant B visa does not permit foreigners to work in Thailand. They require a work permit. After receiving the work visa, your employee must travel to Thailand to apply for a work permit. To obtain a work permit, four Thai workers per foreign applicant and capital of two million baht are required. You are exempt from this requirement if promoted by the Board of Investments (BOI). Applying for two work permits doubles the requirements.

    Your employee can begin work after submitting the application and awaiting approval, which typically takes a month. However, if all the applicant's documents are complete, it only takes a few days.

    Opening corporate bank accounts

    This can be done after registering your business. Choose the bank that best suits your needs and preferences. You may need someone, such as your tax advisor, to recommend a suitable bank and/or introduce you to a bank representative. Ask your bank to set up an online banking account for you. This is particularly convenient, secure, and easy to use.

    If you have been operating your business for several years, you can also opt for a credit card from your bank. Foreign companies that obtain a credit card within a few years of its validity period typically receive unsecured credit cards. In this case, they must deposit the entire amount as security with the bank.

    Diploma

    Thailand has established a global reputation as both an attractive travel destination and a lucrative business location. Foreign investors have experienced this firsthand and confirm the profitability of setting up a business in the country. This guide outlines the fundamental yet comprehensive steps to successfully establishing a company in Thailand – from choosing the right type of business to the intricacies of the incorporation process. It includes helpful tips for foreign investors to easily implement their ventures.

    For professional advice and legal support, please contact one of Siam Legal's Thai lawyers.