Knowing the many kinds of businesses that are available is crucial if you’re thinking about setting up a company in Thailand. Choosing the appropriate business model will determine the legal frameworks and needs; long-term success depends on getting these aspects right from the start. Thailand has a variety of corporate structures to suit various purposes, and at Herrera & Partners, we assist our clients in establishing their companies while making sure they abide by local laws and regulations.
Types of Companies in Thailand
Thailand offers several distinct business structures for entrepreneurs and investors looking to establish their presence in the Kingdom. Below are some of the common types of business in Thailand:
1. Limited Company
The Limited Company is the most popular type of business in Thailand for foreigners wishing to launch an enterprise in the country. It resembles a private limited corporation, which is prevalent in several other legal systems.
A Limited Company necessitates a minimum of one director and two shareholders. Foreign ownership, however, may come with certain restrictions. For example, unless they request special licenses under the Foreign Business Act (FBA), the majority of enterprises must have at least 51% Thai ownership. Make sure the industry you choose allows your company to function within the restrictions; certain sectors are off limits to foreign ownership because they are vital to the nation’s economy or culture.
A versatile form that works well for a range of company sizes, from small business to huge corporations, is the limited company. A corporation must create articles of association, submit the relevant paperwork to the Ministry of Commerce, and pay registration costs in addition to meeting ownership criteria.
2. Branch Office
Establishing a Branch Office is an additional option for international businesses wishing to do business in Thailand. As a result, a foreign business may become established in the country without forming a new, distinct legal organization.
Revenue-generating activities may be carried out by Branch Offices, but they have to use the parent company’s name. All responsibilities will be borne by the parent company. Although the branch office does not require local shareholders, it is nevertheless required to adhere to Thai tax and accounting regulations. In addition, branch offices must apply for permits under the FBA in order to conduct certain kinds of activity. For foreign businesses looking to grow in Thailand but maybe not requiring a fully-fledged local corporation, this arrangement is the ideal choice.
3. Representative Office
For international businesses that want to represent their head office in a foreign country but do not need to generate income there, a representative office in Thailand may be used to carry out certain authorized tasks. Conducting market research, procuring goods, or facilitating communication between the parent firm and local agents are all made possible by this kind of framework.
Representative Offices are not allowed to generate revenue in Thailand, hence, they are unable to conduct direct sales of goods or services. Rather, they are restricted to tasks like liaison work, market research, product procurement, and quality control. Even if the application procedure is simple, it’s important to keep in mind that before a Representative Office can start operations, certain sectors could need special licenses and authorization.
4. Thailand BOI Promoted Company and Foreign Business Licensing
A business that is sponsored by the Board of Investment (BOI) can stand to gain substantial advantages, including reduced limitations on foreign ownership, assistance in obtaining visas and work permits, and exemptions from taxes, provided that they satisfy certain requirements. The goal of these incentives is to draw in foreign investment, especially in sectors like manufacturing, technology, and R&D that the Thai government considers important.
For foreign majority-owned companies seeking to operate in Thailand, a Foreign Business License (FBL) is required for restricted business activities under the Foreign Business Act. These activities are categorized into three lists:
- List 1: Businesses strictly prohibited to foreigners (except through special trade agreements)
- List 2: Businesses requiring Cabinet approval and a minimum of 40% Thai shareholding
- List 3: Businesses requiring permission from the Department of Business Development
However, BOI-promoted companies can receive special privileges to operate in restricted businesses by applying for a Foreign Business Certificate instead of an FBL, streamlining the process for foreign investors in promoted sectors. A minimum capital of THB 3 million is typically required for operating restricted businesses under Lists 2 and 3.
A thorough business plan must be submitted as part of the application process for BOI promotion, along with meeting certain industry standards. Benefits awarded to successful applicants draw investors to Thailand, particularly those aiming to create ambitious or ground-breaking enterprises.
Key Considerations When Setting Up a Business in Thailand
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There is more to starting a business in Thailand than merely picking the appropriate company structure. Ensuring adherence to local rules and regulations, such as employment legislation, tax obligations, and the Foreign Business Act, is crucial to a successful Thailand company formation. Several crucial actions consist of:
- Requirements for Shareholders
Foreign ownership may be prohibited according to the nature of the firm, particularly in sectors where the FBA has restrictions. It’s critical to know whether your company needs a Thai partner.
- Corporate Tax Obligations
Companies operating in Thailand are required to pay corporate income tax, and if their yearly turnover is above a certain level, they also need to register for value-added tax (VAT). Early awareness of your tax responsibilities might help you prevent unforeseen expenses.
- Licenses and Permits
Certain sectors of the Thai economy, like construction, food services, and tourism, call for specific permits. It is important to ensure that your business is functioning lawfully by obtaining the necessary permissions.
At Herrera & Partners, we have assisted several clients in navigating the difficulties of launching and expanding a company in Thailand. We provide an extensive array of services that streamline and expedite the company formation process, from assisting you in selecting the most suitable business structure to guaranteeing adherence to regional regulations.
We are here to assist you at any stage of your business journey, whether you’re thinking about establishing a Limited Company, Branch Office, or investigating BOI-promoted incentives.
How Herrera & Partners Can Assist You
At Herrera & Partners—your trusted law firm in Thailand, we are aware of the complexities involved in forming a business in Thailand and the need to get everything right from the beginning.
In addition to assisting with company registration, we provide comprehensive legal counsel about the various types of Thai businesses, help with compliance concerns, and make sure your company adheres to all applicable laws in Thailand. If you want to establish a company in Thailand, get in touch with us to find out how we can support you through the process and assist your company in reaching its objectives.
Contact us for further information and tailored legal support.
Email: [email protected]
Telephone: +66 22545600Office in Bangkok: Herrera and Partners Co., Ltd. 142 Two Pacific Place, 17th Floor, Sukhumvit Road, Klongtoey, Klongtoey, Bangkok 10110
