Streamline Your Business Dreams into Reality

Company Formation

Introduction

Closer Law offers a comprehensive suite of legal and accounting services, designed to streamline company registration in Thailand for foreign entrepreneurs. With over 15 years of experience, our team of Thai lawyers specializes in creating customized solutions that maximize control over your company and optimize tax benefits.

Our services are tailored to meet your specific needs and goals, covering all essential aspects required to successfully establish and manage your business in Thailand.

These include providing a registered office address, appointing directors and shareholders, managing accounting and registered capital, opening corporate bank accounts, and obtaining necessary business licenses, work permits, and visa services.

Operated by English-speaking lawyers across Thailand, Closer Law provides dedicated support, ensuring close client relationships and comprehensive assistance throughout the business setup process.

Our Services

We provide a full spectrum of services necessary for successful company registration and business management in Thailand, including:

  • Analyze Business Activity: Ensure your business activity complies with Thai laws and does not fall under restricted categories. Consulting with a legal expert at this stage is highly recommended.
  • Corporate Structure: Assistance with the appointment of directors and shareholders.
  • Financial Compliance: Accounting services, registered capital, and corporate bank account setup.
  • Legal Documentation: Handling of business licenses, work permits, and visa services.

For an initial consultation at no charge, feel free to contact us.

So Why Choose Thailand for Business?

Strategic Advantages

  • Heart of ASEAN: Thailand’s central location in Southeast Asia makes it a prime gateway to the region’s rapidly growing markets.
  • Free Trade Agreements: Access to 17 countries, including major economies, enhancing business opportunities in the Asia-Pacific region.
  • Infrastructure Investment: Extensive improvements to industrial parks, transportation, and logistics facilities, making Thailand a leading investment destination in Asia.
  • Economic Progress: Thailand has shown a remarkable increase of +21% in Foreign Direct Investment (FDI), significantly outpacing the global average of 0.7% during the same period, showcasing strong economic resilience, particularly during the COVID-19 crisis.
    This the link to the ASEAN Market snapshot for Thailand.
  • Export and Tourism Boom: With a thriving export sector and a bustling tourism industry attracting over 30 million visitors annually, Thailand recorded an unprecedented current account surplus of USD 48.2 billion in 2017—a figure expected to rise as the country continues to open up.
  • Cost and Quality of Life Advantages: Offering one of the most investor-friendly environments in the Asia-Pacific region, Thailand offers a low corporate income tax rate starting from 20% and competitively priced high-quality office spaces.
Thailand company registration

Registering a Company in Thailand: A Step-by-Step Guide

Closer Law provides expert guidance throughout the company registration process and before starting the company registration, it is important to make sure all information is available and requirements are clear:

  • Analyze Business Activity: Together we make sure your business activity complies with Thai laws, and before registration, we also need to make sure that your business activity is permissible and does not require specific authorizations or fall into categories prohibited to foreigners.
  • Reserve Company Name: The next step is to reserve your desired company name, check if it is unique and compliant with Thai regulations. After that we need to confirm this name plus the director’s name and signature with the Ministry of Commerce within 30 days.
  • Establish a Company Address: It’s mandatory to have a registered address for your company in Thailand. Obtain a suitable address for your company registration, noting restrictions on certain types of addresses like condominiums. Virtual office addresses are allowed and can be used for cost efficiency.
  • File Memorandum of Association: This document is crucial as it outlines the company’s objectives, registered capital, and liabilities. It must be submitted to the Department of Business Development.
  • Statutory Meeting: Convene a meeting to finalize company details such as share structure and appointments of directors and auditors.
  • Formal registration of the Company: Complete the formal registration within three months after the statutory meeting.
  • Tax and Social Security Registration: Register for a corporate tax ID and comply with social security requirements for any employees.
  • Visa and Work Permit Applications: Ensure legal work status in Thailand by applying for the necessary visas and work permits.
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Understanding Thailand’s Business Structures

Building relationships and respecting local customs are significant for success in Thailand. Understanding Thai business etiquette can greatly contribute to your venture’s success.

  • Shareholders: A Private Limited Company in Thailand requires a minimum of three shareholders. These shareholders can be individuals or entities, local or foreign.
  • Liability: Shareholders’ liability is limited to the amount of shares they hold which are not yet paid. This means that the personal assets of the shareholders are protected in case of company debt or legal actions.
  • Governance: The company is managed by a board of directors, whose members are not necessarily shareholders. Directors’ responsibilities and powers can be defined in the company’s articles of association.
  • Compliance and Reporting: PLCs are subject to annual financial reporting and auditing, ensuring transparency and adherence to financial regulations.
  • Capital Raising: This structure is ideal for larger businesses that intend to raise capital by offering shares to the public. After registration, a Public Limited Company can list its shares on the Stock Exchange of Thailand (SET).
  • Shareholder Requirements: There must be at least 15 shareholders at all times, and each shareholder’s liability is limited to the amount of shares held.
  • Management Structure: Governed by a board of directors, with rigorous requirements for directors’ duties and financial disclosures to protect public shareholders.
  • Regulatory Compliance: Subject to more stringent regulations and transparency requirements compared to private companies, including regular disclosure of financial statements.
  • Limited Partnership: In a limited partnership, there are two types of partners: general partners, who are liable for partnership debts and obligations, and limited partners, whose liability is restricted to their capital contributions. This setup is suitable for businesses where one partner will manage operations while others contribute capital.
  • Branch Office: A foreign company can establish a branch office in Thailand to engage in business activities. It operates as an extension of the parent company and not as a separate legal entity. It can generate income but its activities are restricted to those approved by the Thai government.
  • Liability and Taxation: The branch office’s liabilities are effectively liabilities of the parent company. Taxation is also an important consideration, as profits remitted abroad may be subject to withholding tax.
  • Market Exploration: A Representative Office is suitable for foreign companies looking to explore and understand the Thai market without engaging in direct sales or profit-generating activities.
  • Activities Allowed: Permitted activities include sourcing of goods or services in Thailand for the headquarters, checking and controlling the quality of products purchased in Thailand by the headquarters, providing advice related to products sold to distributors or consumers, dissemination of information about new products and services, and reporting on business trends in Thailand.
  • Financial Restrictions: Representative Offices are funded by the foreign head office and are not allowed to earn income in Thailand, limiting their operations to non-commercial activities.

100% Foreign Business Ownership

Individuals with some familiarity regarding business operations in Thailand are aware that foreign enterprises face stringent governmental regulations.

Enacted in 1999, the Foreign Business Act (FBA) categorizes business activities into three distinct groups, each subjected to specific restrictions. These primarily focus on the extent of foreign control and ownership permitted within these enterprises.

Foundation for Business in Thailand: Majority-Thai Private Limited Company.
Typically, a Thai limited company restricts foreign ownership to no more than 49%, limiting foreign stakeholders to less than half of the total shares. Novice or ill-advised investors might attempt to circumvent this limitation by utilizing Thai nominee shareholders to hold a 51% interest on their behalf. Nonetheless, such practices contravene the FBA and must be approached with caution.

Despite these ownership limitations, Thai companies offer numerous benefits compared to foreign-owned entities, including unrestricted business activity types, reduced initial costs, and the rights to purchase and own property. Understandably, this arrangement might not appeal to every foreign entrepreneur seeking more substantial control over their business, necessitating alternative strategies.

Legal Routes to 100% Foreign Ownership in Thailand.
Fortunately for international investors and business owners, there are lawful methods to secure majority or complete foreign ownership of a company in Thailand. Although these options can be lengthy and yield uncertain results, they are essential considerations for any firm aiming to establish foreign ownership.

The three primary legal avenues are:

  • Securing a Foreign Business License
  • Promotion by the Board of Investment (BOI)
  • Registration under the Treaty of Amity (exclusively for U.S. citizens)
    *Certain business sectors not subject to these restrictions include export-oriented or specific manufacturing sectors.

Ultimately, an enterprise where foreign ownership surpasses 50% is classified not as a Thai business but as a foreign-dominated company, which is then governed by a different set of regulations.

In the subsequent sections, we will delve into the advantages and disadvantages of owning a foreign company, examine all three lawful methods for attaining 100% foreign business ownership in Thailand, and offer guidance on how to proceed if your Foreign Business License application is denied.

Majority-Foreign Company & the Strict Regulations of the Foreign Business Act

An alternative to a Thai company is a foreign entity, which is defined by foreign shareholders owning the majority of shares (over 50%).

One of the primary distinctions between a Thai and a foreign company is that the operations of a foreign company are significantly restricted under the Foreign Business Act (FBA).

The FBA limits foreigners from participating in most business categories, with only a few open to foreign entrepreneurs who have acquired a Foreign Business License (FBL) from the Department of Commercial Registration. Moreover, foreigners might receive exemptions under certain agreements such as the US Treaty or through specific acts like those under the Board of Investment (BOI).

Beyond these restrictions, foreign companies are also subject to specific regulations and laws, for instance, the minimum registered capital requirement is set above 3 million THB, and such companies are barred from owning land.

However, entities with an FBL enjoy complete or majority business ownership and benefit from a more favorable work permit ratio compared to Thai companies.

Method #1: Securing a Foreign Business License

Currently, the FBA categorizes businesses into three lists —1, 2, and 3— of which only those in List 3 are accessible to foreigners. Companies aiming to operate in these permissible categories must apply for an FBL before starting operations and await the decision of the Foreign Business Committee.

This process is often protracted and rejections are not uncommon. Yet, if the business proposition is unique, does not directly compete with Thai enterprises, or involves transactions within affiliated companies, its likelihood of license approval increases.

The Foreign Business License serves as a sort of work permit for companies. Similar to how individual foreigners require work permits for specific occupations, foreign companies are limited to approved categories and must secure an FBL.

This regulatory measure allows the Thai government to manage the entry of foreign enterprises effectively and protect the interests of Thai nationals. Non-compliance with obtaining an FBL before business commencement may lead to fines ranging from 100,000 THB to 1 million THB and imprisonment for up to three years.

Business Categories Open to Foreigners

Typically, foreigners in Thailand are drawn to four main business sectors: manufacturing, trading, exporting, and services. While manufacturing, exporting, and trading activities (exclusively targeting the export market) face fewer restrictions under the FBA, allowing for full foreign ownership, service sector opportunities are considerably constrained.

The service sector is often viewed as an area where local competition is not yet ready to contend, and full ownership of a foreign company in this sector is typically achievable only through BOI promotion. Further details on this and the US Treaty will be discussed in a subsequent article.

Method #2: BOI Company Promotion

Achieving 100% foreign business ownership is also possible through business endorsement by the Board of Investment (BOI). The BOI, a segment of the Thai government, fosters business initiatives and projects in sectors deemed beneficial for Thailand’s economic landscape, aiming to boost the nation’s competitiveness across Southeast Asia and align it with leading economies like Hong Kong and Singapore.

The support from BOI can make establishing and operating a business in selected sectors much more manageable for foreign entrepreneurs. The advantages of being under this scheme are extensive and not solely financial, facilitating significant operational benefits.

Business Activities Eligible for BOI Promotion Include:

  • Agriculture and agricultural products
  • Mineral, ceramics, and basic metals
  • Light industry
  • Metal products, machinery, and transport equipment
  • Electronics and electrical appliances industry
  • Chemicals, paper, and plastics
  • Services and public utilities

These insights provide a clearer understanding of navigating the complexities of establishing and operating a majority-foreign-owned company in Thailand under the current legal framework.

Conclusion

Setting up and managing a company in Thailand offers a path filled with opportunities, yet it also comes with its fair share of challenges. With Closer Law Co., Ltd. as your partner, you gain more than just legal expertise; you acquire a team that not only understands the intricacies of Thai law but also values and supports your business vision.

Together, we can navigate the complexities of the legal landscape to successfully achieve your business goals. Let us help turn your vision into reality.

Let us guide you through every step of this exciting process, making sure you have a great starting position for your business to thrive in Thailand’s vibrant economy.

Get in Touch

Contact Info

  • Thailand – Closer Law Co. Ltd.
    59/408 Kathu Business Street, Kathu
    Phuket 83120
  • info@closer.law
  • +66 (0) 61 645 8553