From a traditionally agricultural country, more than half of which consists of farmers, Thailand is sweeping towards industrialization, currently leaning heavily on agro-based industry, diversification of natural resources and exports (Prachimdhit, 1990). Adopting the Buddhist philosophy and policy of taking the middle path as its economic direction, Thailand has successfully achieved and balanced its three-fold objectives of growth, economic stability, and a fair distribution of incomes. It has earned recognition as one of the fastest growing and successful economies in the world. Its high GDP/PPP in the Southeast Asian region compares well with other newly industrializing countries and is expected to sustain that pace in the oncoming generation (Prachimdhit, 1990). These vigorous economic accomplishments have called much attention to Thailand as a favorable environment for business and investment.
In embarking on promising entrepreneurship in Thailand, you will need to follow these simple steps:
Thai laws allow four types to suit your goal. You may need to consult a local lawyer to deal with the complexity and the time required to set up your desired business or investment. We can recommend one to provide you with precise expertise and professionalism. The types are:
This is the most popular choice among foreign investors. Shareholders can own only a limited amount of unpaid shares. Thai laws require them to divide their capital into shares. At least three promoters and shareholders must register the company. They must be or include a director, an auditor and a registrar who will need to compose the Memorandum of Association. Every promoter will receive at least one share. The first payment of the shares cannot be less than 25% of the nominal amount. A promoter’s responsibilities are to handle accounting tasks provided in the Civil and Commercial Code and the Revenue Code of Thailand and o submit the balance sheets to the appropriate authority each year.
Foreign investors may be drawn to this type of incorporation, but the laws of Thailand limit their ownership to 49%. Fifty-one percent goes to the nationals.
The company directors may apply for work permits to foreign employees.
Foreign entrepreneurs who want full ownership of their business can realize this by being part of the Board of Investment. This Board promotes select foreign companies, which assist with the grant of visas and work permits. These companies are also exempt from corporate taxes. But the Board is guided by strict criteria in choosing which foreign enterprises to promote.
Foreign companies must apply for BOI promotion. If you are thinking of applying, be aware that it will take one to two months of going back and forth to the BOI for the lengthy process. When you are fortunate to be selected, you will be required to submit a regular status report to the Board in order to retain your status. It will also be to your benefit to secure the help of a corporate lawyer or an accounting firm for the purpose.
This type is owned and registered by and in the name of a single individual. He or she functions also as the operator. A foreigner may find difficulty incorporating this type if his business does not qualify.
The Thai Civil and Commercial Code provides for these three types of partnership:
Registering partnerships may be easier than registering other company structures, but these three types of partnership cannot apply for work permits. Neither they can use the company name in opening bank accounts.
You have to register your company at the Department of Business Development or DBD, meet the requirements to qualify and present the requirements at any of its offices. These offices are spread out and located centrally in Bangkok for the convenience of most applicants. If you qualify and get registered but may need to make changes in the future, you have to do so at the DBD branch nearest your office.
The procedures for sole proprietorship and partnership are simple enough and the documents required are not many. But limited companies must comply with more intricate, arduous or exhaustive in more numerous documents. They also need to reserve their business names with the DBD according to its guidelines. These limited companies must then meet for the purpose of incorporating themselves, preparing all required documents especially a Memorandum of Association and Company Registration. When all these actions are completed, the documents must be submitted within the time frame given by the DBD.
As in any activity, planning is the first step. And a wise plan begins with research, which leads to or identifies your niche.
These are very important first steps in starting a business in Thailand and succeeding in it. Companies that fail attribute that failure to taking the easy way of shortcuts or by joining the mainstream. So you need to avoid these. Nothing can take the place of good research. You must give sufficient time to explore and seek maximum information about what sells. You must feel the pulse of the community by immersing in it. Be sensitive and discern what people need and study how to provide that need. Do not limit your contacts. Include employees, business partners, service providers, and ordinary people. It is always an advantage, even a requirement, to learn the Thai language in order to obtain optimum relevant information. Other entrepreneurs are a source of significant and substantial information and lead. Their opinions and predictions on the market are of unquestioned value. If you are in the IT industry, consult with known or successful digital marketing agencies. They are certainly knowledgeable and updated on the market and can give you important tips and advice on the appropriate strategies for maximizing potential profit. Their knowledge of the Thai market is not only a treasure but also a necessity. Armed with both maximum and optimum information, including predictions, you should be armed with inputs you can mull over in identifying what business you want to start and the effective marketing strategies you should use.
Think of how your business can be different from – and better than – your would-be competitors. Develop a workable network. Consider all risks and prepare for them as far as possible. And prepare a backup plan for low seasons or short demand or supply. If you are inclined to open a restaurant, consider distributing giveaways to early visitors or drinks throughout the promo night. The point is to gather as much knowledge about your desired enterprise before you take the plunge.
You need a good one if you intend to stay in Thailand and operate a business on a long-term basis. He knows the country, speaks their language naturally and can manage your administrative and staff mechanics better and more effectively. He will also know how to get around local authorities and very likely know who can help lower your costs. Local service charges are higher for foreigners in Thailand. Locals thus are charged less for services like cleaning, taxi or contracting. Your Thai partner can obtain quotations as high as 50% or 75% more than you can. He will remain an asset to you even if your business is already operating. Hai laws also change often, and a Thai partner who follows these changes will help you through than if you try to do it alone.
Some foreign businessmen or investors make the unwise decision of tying up with a “paper” partner who will own 51% of the company’s assets but will have no part in decision-making functions or whose ownership is not authentic. This practice is as common as it is risky that can pose disadvantages in time. It is always a good rule to consult a lawyer to avoid breaking the rules.
The wise course of action is to look for a Thai in your industry whom you can trust to help you run your enterprise. It is best to find a trusted Thai who can own shares on your behalf and then sell them to you when you want them. With a trusted Thai friend, you can control your company, as you may own only up to 49% of the shares.
The next step is to thoroughly state company goals with the entire organization and stakeholders, salaries and a regular budget to manpower, rent, and other essential expenses. Make sure you have sufficient funds to cover these at least for the first six months of operations.
This is the hardest step where you must deal with the legal requirements and situations involved in putting up your business. The struggle can be so stiff that it could even discourage you from starting.
The process can be challenging but you can overcome challenges by complying with the procedure in an orderly way. You should first book your company name to make sure that it has no duplicate in Thailand. Prepare all registration documents, which include a list of the names of shareholders, minutes of your meetings, and proof of payment of share capital. When all done, you can register your company at DBD according to its procedure. The forms you have to fill up are in the Thai language, so it is an advantage if you can read and write in Thai. Otherwise, you may seek the help of a Thai lawyer or a suitable professional.
You will then need to register for VAT and obtain licenses applicable to your business line.
Firms may require photocopies of your bank account and a sketch or map of your company’s location. There is a timetable for the grant of licenses according to the province, region and the license sought. Thai bureaucracy changes its processing time for licenses. But you will be required to pay between 600 and 2,000 baht for every license.
Some licenses must be renewed yearly. Examples are liquor and music licenses for restaurant businesses. The purpose of licensing these items is to ensure that local and international artists are paid their royalties for their work in your business. You also need an updated license if you use someone else’s music. It also protects you from harassment by the police.
You may choose between a serviced office space and a traditional office space. A service office space may be better if you wish to do away with the cumbersome details of setting up your own office space. These details include furniture, telephone and internet accounts, and installations, refreshments for employees, housekeeping staff and equipment. A serviced office requires you to simply sign a contract, bring in your basic and portable equipment and you can start operating on the same day.
A traditional office, in comparison, is certainly more complicated, difficult and expensive to build and operate in. You need to invest in the building or space, arrange for telephone and internet installations, and hire a building administrator to manage the day-to-day operations and affairs of your office building. It may be your preference if your business is attached to the office space or your workforce is too large for a serviced office space.
This is another troublesome task in the process of starting a foreign business and hiring foreign employees. Again, it is an advantage to hire or consult a lawyer in this field to make things right and easy for you and your business.
An accounting firm can take the burdensome paperwork from you although you can do it yourself at the Thai embassy of your country. An application for a non-immigrant visa requires copies of your company registration, a letter from your local labor industry and from your Thai company partner, which offers employment, a list of documents available at the Thai embassy, and a fee of $20 for the agent who will double-check your documents and will apply on your behalf.
A non-immigrant B visa does not allow a foreigner to work in Thailand. He or she needs a work permit. Upon receipt of a work visa, your employee must go to Thailand to apply for a permit to work. The grant of a work permit requires four Thai workers per foreign applicant to work in your company and two million baht of capital. You are exempted from this if you are promoted by the BOI. The grant of two work permits doubles the requirements.
Your employee can begin working after filing his or her application and waiting for its approval, which takes a month on average. But it will take only a few days if all of the applicant’s documents are ready.
This can be done when your company has been registered. Choose the bank that responds to your needs and preferences. You may need someone or your accounting firm who can recommend a suitable bank and/or introduce you to the bank manager to perform this task. Ask the bank to provide or set up an online banking account for you as it is quite convenient, safe, and easy to use.
You may also decide to secure a credit card from your bank if you have been operating your business for a few years. Foreign companies that obtain credit cards earlier than a few years are considered unsecured credit cards. This requires them to deposit the entire amount in the bank to serve as collateral.
Thailand has made its mark in the world both as an attractive tourist destination and as a profitable business setting. Foreign investors have proved this to themselves and attest to the profitability of setting up businesses in the country. This guide lists the basic but complete steps in accomplishing the task from the choice of the type of business to the details of starting the business in Thailand. It includes tips that new foreign investors will find quite helpful and easy to perform in embarking in their chosen venture.
For professional advice and legal assistance, please contact any of the Thai lawyers at Siam Legal.