Thailand serves as a strategic gateway to Asia, attracting increasing interest from foreign investors seeking to establish or expand their businesses in the region. To gain a foothold in the Thai market and achieve foreign ownership, there are various business structures available for consideration.
Business Structures in Thailand for Foreigners
The business structures in Thailand that allow foreign ownership are:
- Sole proprietorship
- Partnership
- Limited Company
- Regional Office
- Representative Office
- Branch Office
Sole Proprietorship Business in Thailand for Foreign Investors
A sole proprietorship is a single-owner business structure and comes with unlimited liability. Such a type of business can engage in any legal business activity, except for businesses providing services. The owner can choose to be taxed as an individual or not.
Foreigners generally cannot operate a sole proprietorship in Thailand. However, exceptions are there for the U.S.–Thai Treaty of Amity. This treaty permits Americans to hold 100% foreign ownership of their business in Thailand. Furthermore, foreigners married to Thai nationals can register the business under their spouse’s name.
Although it is about a single owner, yet, the process is not simple. Contact us for professional consultation on registering a sole proprietorship company in Thailand.
Limited Partnership Business Structures in Thailand
In a limited partnership, there are two types of partners:
- Limited partners: Their liability is limited to their investment.
- General partners: They are personally liable for the debts and obligations of the partnership.
A limited partnership encompasses two types of partners: one with limited liability and the other with unlimited liability. Registration is mandatory for limited partnerships, and before registration, they are considered ordinary partnerships. Limited liability partners can only contribute money or other assets.
The managing partner solely resides within the unlimited partner’s capacity. Foreigners acting as managing partners must secure a valid non-immigrant business visa alongside a work permit. Limited partnerships permit up to 49% foreign ownership. However, surpassing this threshold necessitates the acquisition of a Foreign Business License by the foreign partner.
Limited Company Structure for Foreign Investors in Thailand
Private Limited Company
In Thailand, the most common business structure is a private limited company. To establish such a business, it involves a Memorandum of Association (MOA) and Articles of Association (AOA) in Thailand. The shares of such a company cannot be offered to the public.
A minimum of three shareholders is required for a private limited company, and shareholders enjoy limited liability. All shares must be subscribed, and at least 25% of those subscribed shares must be paid up.
Foreign investors are generally limited to owning up to 49% of the company. However, if a foreign investor seeks 100% ownership, they must obtain the following:
- Foreign Business License
- Promotion from the Board of Investment (BOI)
- Register through the Treaty of Amity (for U.S. citizens only)
Public Limited Company
Public limited companies in Thailand can offer shares, debentures, and warrants to the public. Additionally, they also can list their securities on the Stock Exchange of Thailand (SET). The Securities and Exchange Act B.E. 2535 (A.D. 1992) governs the rules and regulations regarding the procedure of offering shares to the public in Thailand.
A minimum of 15 promoters is necessary to register a public limited company in Thailand. Additionally, the board of directors must consist of at least five members, with at least half being Thai nationals.
Regional Office in Thailand
A regional office, established by a foreign head office, is a non-juristic entity. Regional offices are not separate legal entities and operate in Thailand on behalf of the foreign head office.
To operate in Thailand, a foreign company must have at least one active branch or affiliate in Asia. Regional offices cannot make purchases, propose sales, negotiate, or enter into business agreements in Thailand.
Foreign head offices wishing to establish a regional office in Thailand must apply for a Foreign Business License.
The Foreign Business Act (FBA) delineates seven distinct activities that regional offices can partake in, as outlined in List Three of the act:
- Communicating, coordinating, and directing, on behalf of the head office, the operation of branches and affiliates which are located in the region
- Financial management
- Marketing control and sales promotion planning
- Product development
- Providing services in consulting and management
- Services in research and development
- Training and personnel development
According to the second paragraph of section 14 in the FBA, a minimum capital of THB 3 million is required for establishing a regional office.
Representative Office in Thailand
A representative office in Thailand is a non-trading entity that does not generate income. It is a type of non-profit organization financially supported by its head office located in another country. Up to 100% foreign ownership is permitted.
The primary purpose of a representative office is to operate a service business in Thailand for its head office, an affiliated company, or a group company in another country. It provides non-revenue-raising services to the foreign head office by engaging in a limited range of activities, such as:
- Overseeing local procurement of goods and services in Thailand
- Inspecting and ensuring the quality and quantity of goods purchased by the head office in Thailand
- Relaying information to distributors and consumers about new products and services from the head office
- Communicating reports about local business developments and activities to the head office
- Advising on various aspects related to goods distributed by the head office to distributors or consumers
- Possessing limited signing authority for essential operational contracts, such as the lease of premises
- Facilitating exports of products ordered by the head office or its affiliated companies
Branch Office in Thailand
Foreigners seeking a physical presence often establish a branch office in Thailand, which permits full foreign ownership. This branch office can conduct business activities that generate income and serve as a trading entity.
Before commencing operations, the branch must secure a Foreign Business License. However, branches involved in manufacturing or exporting products from Thailand are exempt from this requirement.
Conclusion
When foreign investors seek foreign ownership of a company in Thailand, they can choose from available foreign business structures. It’s crucial to ensure compliance with the provisions of the Foreign Business Act to avoid legal violations during the process.
Contact us for a hassle-free experience of company registration in Thailand. To schedule an appointment, simply email us at [email protected].
