This is a complete list of the types of business structures in Thailand.
Individuals or companies who would like to undertake some form of business-related activity in Thailand have a number of options when choosing a legal structure. Each entity has its own characteristics and restrictions; therefore, you should choose the structure most suitable for your goals and objectives.
Let’s take a look at the trading business structures in Thailand and their characteristics.
Business structures in Thailand
There are three common types of business structures in Thailand, which are the:
- Partnership
- Ordinary partnership
- Limited partnership
- Limited company
- Private limited company
- Public limited company
- Joint venture
#1: Partnership
A partnership is a type of entity formed by the agreement between two or more individuals to conduct business as co-owners.
There are two types of partnerships in Thailand, which are:
- Ordinary partnerships
- Limited partnerships
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Ordinary partnership
According to section 1025 of the Thai Civil and Commercial Code, the ordinary partnership is that kind of partnership in which all the partners are jointly and unlimitedly liable for all the obligations of the partnership.
The ordinary partnership is set up by a minimum of two individuals, and each partner must contribute to the partnership, and the contribution may consist of money, other properties or of service. The partners agree upon themselves the amount of money, property or service to be contributed.
If a partner brings as the contribution the use of a property, relations between such partner and the partnership with regards to the delivery and repair, liability for defects, liability for eviction and the cause of non-liability are governed by the Hire of Property provisions in the Thai Civil and Commercial Code.
If the contribution of a partner consists of the ownership of a property, the relations between such partners and partnership with regard to delivery and repair, liability for defects, liability for eviction and the cause of non-liability are governed by the provisions of Sale under the Civil and Commercial Code.
The person who manages the partnership is called the managing partner and can only be removed by the consent of all the other partners.
An ordinary partnership may or may not be registered as a juristic person with the Department of Business Development.
A non-registered ordinary partnership has no legal status and is treated as an individual for tax purposes. All partners are jointly and wholly liable for all obligations of the partnership.
A registered ordinary partnership is considered as juristic persons and taxed as corporate legal entities in Thailand.
Limited partnership
A limited partnership is that kind of partnership in which there are:
- One or more partners whose liability is limited to such amount as they may respectively undertake to contribute to the partnership.
- One or more partners who are jointly and unlimitedly liable for all the obligations of the partnership.
The limited partnership provides two types of partners, one partner whose liability is limited and the other partner whose liability is unlimited. Limited partnerships must be registered, and until registration, the limited partnership is considered as an ordinary partnership. Contributions of the partners with limited liability must be in money or other properties.
Only the unlimited partner is able to act as the managing partner. If a foreigner is a managing partner, the foreigner must obtain a valid non-immigrant business visa and a work permit. Limited partnerships allow up to 49% foreign ownership. However, a Foreign Business License is required if the foreign partner makes more than 49% of the investment.
#2: Limited company
There are two types of limited companies in Thailand. These are the private limited company governed by the Civil and Commercial Code, and the public limited company governed by the Public Company Act.
Private limited company
A private limited company is the most popular business structure in Thailand and is formed through a registration process which includes a Memorandum of Association (MOA) and Articles of Association (AOA). The shares of a private limited company cannot be offered to the public.
The private limited company requires a minimum of three shareholders, and the shareholders enjoy limited liability. All shares must be subscribed, and at least 25% of the subscribed shares must be paid up. Both common and preferred shares of stock may be issued, but all shares must have voting rights.
Foreign investors can own only 49% of the company, but if the foreigner wants to achieve 100% ownership, they must obtain the following:
- Foreign Business License
- Promotion from the Board of Investment
- Register through the Treaty of Amity (for US citizens only)
The registration fee for a private limited company is THB 5,500 per THB 1 million of capital.
Public limited company
The public limited company can offer shares, debentures and warrants to the public and have their securities listed on the Stock Exchange of Thailand (SET). The rules and regulations concerning the procedure of offering shares to the public are governed by the Securities and Exchange Act B.E. 2535 (A.D. 1992).
A minimum of 15 promoters is required for the formation and registration of a public limited company. The promoters must hold their shares for a minimum of two years before they can be transferred, except with the approval of the shareholders at a meeting of shareholders. The public cannot be converted back to a private limited company. The board of directors must have a minimum of five members, and at least half of them must be Thai nationals.
There is no minimum amount of registered capital, and each share must have the same value and must fully pay the shares’ price at only one time.
The registration fee for a public limited company is THB 2,000 per THB 1 million of capital.
#3: Joint venture
Joint ventures are a setup commonly used by foreign investors engaging in business in Thailand. It is defined as a profit-seeking business carried on jointly by:
- A company and another company
- A company and a juristic partnership
- A juristic partnership and another juristic partnership
- A company and/or a juristic partnership with an individual, an ordinary partnership, a juristic person or a group of people
The Thai law treats joint ventures as a contract matter, and with the exception of filing for licenses and/or tax certificates, the parties in the joint venture remain separate legal entities.
If the joint venture has a majority of foreign shareholders, it must be registered under the Foreign Business Laws of Thailand.
Conclusion
The first decision to make when opening a business in Thailand is choosing the most suitable type of business structure for your operations and objectives.
If you need help deciding on the most suitable structure, schedule a free consultation with Acclime for advice.
