Written by Isaan Lawyers in June 2014.
Thailand is a very promising country. As a matter of fact, every year, more and more foreigners, and locals alike, are trying their hands at starting their own business in the country. All that, even if there are some political problems in Thailand since 2006.
According to reports, Thailand ranks 20th on a list of 145 countries that were surveyed on the ease of business transactions. On top of that, it is a country with a wonderful culture, great atmosphere, delicious food and beautiful weather.
Starting a business in Thailand is undoubtedly easier when it comes to the documents needed, the expenses, and the amount of time that will have to be invested in getting a new business off the ground, when compared to neighboring countries such as India, Vietnam, Malaysia, and even China. There is a low start-up requirement cost in Thailand, and good skilled workers are in abundance. Because of this, many entrepreneurs are able to effectively maximize all of their resources, and in turn generate a boost in overall productivity.
Selecting a Good Start-up Business in Thailand
Initially, you would be interested in knowing whether the business that you plan to set up would be eligible to receive promotional privileges from the BOI (Board of Investment) of Thailand. This board offers two different types of incentives which relate to different activities being promoted by the country itself, regardless of a business' location inside Thailand. The BOI offers tax and duty privileges to any business that is strategically located in areas known as “investment promotion zones” which are found throughout the country. Because of this, it is very important to make sure your business and related business activities occur within “established promotion zones” in Thailand. Bear in mind that the location of these zones along with the rules and regulations associated with them, might change in 2015 with the onset and full implementation of the ASEAN Economic Community (AEC).
Where someone interested in starting a business in Thailand should begin is to consider whether you will open a brand new company from scratch, a branch office perhaps, or a business which is opened by both Thais and foreigners. Once it is determined what type of business structure will be employed, the next step is that of applying for a business licence.
Application for a Business License
Of course, in order to operate legally in Thailand, one needs to apply for, and obtain, a business license. This license grants permission to operate your business legally in Thailand. To obtain a business licence, you should start by notifying the Department of Business Development about your intentions to have a business in Thailand, they will then provide you with a Certificate of Business Operation. This application process applies businessmen who are planning to start a Japanese, American, or Australian company in the country, because Thailand has signed treaties with these countries.
For example, if you are planning to setup a factory in a major metropolitan area of Thailand, it is very important to obtain a business license before starting any aspects of construction related to the factory. According to the Factory Act of Thailand, policies and regulations for factory operation and construction, as well as expansion, safety procedures, and environmental controls of industrial pollution are clearly stipulated. Additionally, you may want to visit the Ministry of Industry in order to have the clearest and most detailed information on application requirements needed for a factory license. At the same time, you might also need to have a TAX ID, and then register as part of the Value Added System in Thailand.
Leasing of an Office Space
If you are planning to setup a new business in Thailand, there are times when you will need to secure registration papers before you can sign a contract that allows you lease and/or an office building or factory space. However, this can prove difficult if you are plan on applying for a business licence to open a branch office of a foreign (non-Thai) company. In order have your application accepted, the address for the company needs to be in the country, and entered as part of the application. Hence the difficulty: a lease contract cannot be signed without first having a business registration, and registration cannot be completed without an address for the company inside Thailand.
However, the individuals who help you in setting up your company may also allow you use of a specially specified address, in exchange for a fee, during the registration process for your company. Afterwards, you are free to sign a lease contract, and then change the address registered to the company.
Foreigners wishing to start a small business in Thailand might consider setting-up the company in the form of a Thai limited company, in which the majority of shares in the company are owned by Thai people. This business structure allows the company to registered as a Thai company, and not as a foreign-owned company. This would allow you to avoid many of the licences and permits needed for a foreign business to legally operate in Thailand. To protect your investments against the majority of Thai shares, you can decide to setup preferred shares that will grant you the majority of votes inside the company. Therefore, you will control the company.
How We Can Help
By allowing us to assist you in starting your own business, you are guaranteed a good response from your customers and clients. All we need to start the process of registering your company in Thailand is, your name and a description of your project.
Should you decide to setup a company in Thailand, we normally can reserve a specific or corporate name in roughly 24 hours, although more time is required for the weekend. It is really quite simple, you need only provide the company's name, a physical address, information and name of the director, as well as the company’s main objectives.
Upon reservation of a corporate name, you still have 30 days to continue setting up your business, however it is also possible to extend this time period. The investment capital that is registered by the company, in theory, is the amount of money used by the founding members to initiate the business start-up. A quarter of that capital should be paid up front, in accordance to clause #1105 of Thailand's Civil Code. Law firms in Thailand often use the same 22 general objectives for companies. But of course, you can decide what specific objectives pertain to your company, and when that has been decided, they should be added to your company.
Be advised, all documents, regarding any and all areas of commerce in Thailand are writtem in the Thai language. Make sure to appoint one, or even more than one directors, with at least three shareholders. The director can be a shareholder or not.
A company can be completely owned by foreigners. However, you will need special licenses in order to legally operate as a foreign entity under the regulations set forth by the Foreign Business Act, the BOI, and by treaties between Thailand and other countries. Due to this, many foreigners have decided to start-up a limited company that comes with a maximum of 49% foreign shares. At certain times, they even select a maximum of 39% foreign shares to make things easier. When foreign ownership accounts for more than 40% of the shares, you might have additional checks and requirements from Thai authorities according to regulations.
Foreigners, in general, can also own most of the voting rights in their company through a method often termed as “preferred shares.” These types of shares need to be setup during the beginning stages of a company, however at any time when the capital investment of the company is increased, preferred shares can be created at that time as well. When you submit documents for the company, you must also provide a logo, as well as a sketch map of the address of your head office.
Often the paperwork that goes into simply registering a company can seem daunting, but keep in mind, that is what a good law firm is here for; making sure your new business gets off the right start, and helps makes sure it continues into the future. Upon completing all of the necessary legal documentation, you are ready to open your new business in Thailand, and we would be more than happy to help you get there.