About Launching a Company in Thailand

[StoneSoup]

I'm opening a new thread, to serve as a general reference. But this folows on an earlier thread, asking about issues involved in starting up a company in Thailand.

 

Below is my treatment of that subject. All of my comments relate to common, normal practices. This being Thailand, people with certain connections can sometimes skirt around many requirements. But - what I outline is the standard procedure.

 

OK, this will be a L-O-N-G post, designed to remain ?on file? in this folder for reference purposes.

 

The subject is : launching a company in Thailand ? a Thai Private Company Limited?. I will address the following scenarios:

 

1. Establishing a company here as a serious moneymaking proposition ? basically as a primary or secondary source of life income. The intent is to grow the company, earn substantial profit, and build a little business empire.

 

2. Establishing as minimal a ?shell? company as possible, for any of the following reasons:

 

a. As a ?front? for buying land.

b. As ?front? for securing a non-immigrant Class B (employment) visa.

c. As a ?front? for helping a Thai gf build an employment record, for purposes of assisting her in later getting a visa.

 

3. Establishing a semi-serious company as a way of keeping a Thai gf occupied, and hopefully allowing her to take seed money, and earn enough income from it to fund a modestly comfortable lifestyle.

 

 

My business firm is mainly aimed at supporting people in Category 1, above. For that type of enterprise, here are the things that you will need as part of the ?package?, along with typical costs:

 

Company registration, including securing VAT registration, corporate tax registration, individual employee tax registration for all employees earning more than 12,000 baht per month.

 

Assuming you will want one farang work permit and non-immigrant visa, you will need to capitalize company at a minimum of 2,000,000 baht. You will pay a capitalization fee of 500 baht per 100,000 baht of capital, so you will pay a total of 10,000 baht in capitalization charges. Other application fees paid to Thai government run around 2,000 baht. Unless you want to personally run all your papers around, you will also need to pay a lawyer to attest to a power-of-attorney. This typically costs 1,000 baht. You will need a company seal ? assume about 200 baht for that.

 

Other things you will need: An address ? this can be significant, because this address will determine the jurisdiction for several Thai offices with which you will need to interact. If you later change address, you must submit address change documents to a number of places. In order to get the VAT registration, and later the work permit, this address must be in a commercially-registered building whose landlord will issue you a building owner?s registration of your office occupancy. Preparation of this document package typically costs 2,500-4,500 baht. People often want to know if they can use their home as an office address. Normally, the answer is ?no?. Residential landlords will not normally be willing to issue you an office registration ? it opens them up to additional tax scrutiny, and some other potential liabilities, and most residential landlords are evidently not typically fully reporting their actual rental income.

 

So ? you basically need to figure out, in advance, where your fledgling business will have its office ? because you will use this address from the very first application you must submit. Office space comes at many different price levels ? depending on location. Typical requirement is to sign a one-year lease, pay a deposit of two months rent, plus pay the first month in advance. To put in a phone involves a phone installation charge, an advance deposit on calling charges (typically 10,000 baht), plus monthly base charges.

 

Let?s see ? where are we so far? 10,000 baht capitalization fee, 2,000 baht application fees, 1,000 baht lawyer fee, 200 baht company stamp/seal, 3,500 baht building owner?s office registration, lets say 45,000 baht initial office payment (2 months deposit plus first month in advance, for a 15,000 baht per month office). 10,000 baht phone deposit, plus 2,000 baht installation charge. And we have not yet even mentioned the processing charges from a company like mine.

 

Also, you will need to pay-in at least 25% of your registered capital, within 90 days of registering your company. That?s 500,000 baht ? and you must demonstrate that it came in from outside Thailand. That means first opening a business ?current? account. This normally requires at 10,000 baht deposit to open the account, plus about 200 baht for an initial checkbook. You bank outside Thailand will typically charge about US $35 (approximately 1,500 baht) for an international wire transfer. The good news is that once you pay in the capital, you may then use it to pay office lease fees, etc. But ? you cannot get the bank account to receive the funds until you have the company registered, and have a VAT certificate. Also ? until you have a work permit, you cannot even exercise signature authority over your own company bank account.

 

What this leads up to is that to start a company in Thailand, you need a Thai person to act as Senior Thai Director ? and this person will have to sign many of the documents early in the life of your company (up until the point in time when you receive a work permit).

 

Another requirement that kicks in almost immediately is the requirement for a licensed Thai accountant, or ?auditor.? A start-up company will typically outsource this function ? for 3,000 to 10,000 baht per month.

 

Not mentioned so far is the subject of shareholders. To submit your company registration application, you must list seven shareholders. No exceptions to this rule ? EVER. Every company in Thailand has at least seven shareholders. At least four of the seven shareholders must be Thais, and the Thais must own at least 51% of the shares. ? except in three cases:

 

1. If you are an American, you have no restriction on the number of shareholders that are Americans ? as long as the total shareholder count is seven, and Americans own at least 51% of the shares (and they can own all the way up to 100%). The downside is that to obtain coverage under the Treaty of Amity and Friendship, an American-owned company must register with the Department of Foreign Business ? which entails and additional 42,000 baht registration fee.

 

2. If you apply for promotion of your business by the Board Of Investment (BOI), you can also have majority non-Thai shareholders ? but again, you will then have to register (for 42,000 baht) with the Department of Foreign Business). BOI promotion is necessary of you wish to pursue a business restricted to Thais ? such as animal farming (animal husbandry).

 

3. Foreign owned businesses setting up a representative office in Thailand (or a subsidiary here) fall into a special category. They must register with Department of Foreign Business, and go through a lot of additional steps ? I will not address these here.

 

Typical ?consultant? processing charges to handle the entire company registration process run from about 7,000 baht, up to about 18,000 baht.

 

Typical ?consulting? costs for processing a work permit run from about 7,500 baht, up to about 16,000 baht, plus government fees that run about 3,000 baht (for a one-year permit). Again, a lawyer-attested power of attorney will be needed ? add 1,000 baht.

 

Getting the work permit requires that you have 2,000,000 baht in registered capital (brought in from outside Thailand) for each farang work permit issued, and also four Thai employees on the payroll (that is ? depicted on a company registration chart, and registered for social fund withholding) foreach farang work permit issued.

 

Typical ?consulting? charges for processing a non-immigrant Class B visa for a work permit holder run about 5,000 baht to 15,000 baht.

 

The differences in fees charged generally relate to how well the processing company speaks English, and the degree to which ?they come to you? (to pick up papers, obtain signatures, etc.), or make ?you come to them.? The low-end fees generally involve Thai-run companies, with modest English language skills, and very little ability to provide collateral business advice.

 

The entire company registration, work permit, non-immigrant visa process typically takes four to eight weeks. The two biggest time delays usually involve obtaining the landlord?s building owners registration of your office, and the delay (typically 12-20 days) between submitting the work permit application, and actually receiving your blue work permit booklet.

 

The only time a farang needs to personally be present is to actually pick up your work permit ? you must sign the booklet beneath your photo in person, and they then laminate over the signature and photo. One other note ? on both the day you submit your work permit application, and on the day you pick the completed work permit up, you must be in Thailand on a non-immigrant status entry permit ? meaning you must be here on a class B visa issued overseas, or a Class O visa, or some other non-immigrant visa.

 

For ?front? companies, the main changes are that if you do not need a farang work permit, the company capitalization can be reduced to 1,000,000 baht, and you can probably get by with a ?virtual? office ? basically paying another company to allow you to use their office address. This type of service is typically available for between 4,000 and 15,000 baht per month, with no advance deposits.

 

You will still need seven shareholders (on paper), you will still need an auditor, company stamp/seal, business current account, VAT registration, etc. If you never obtain a work permit, you will never be able to sign official documents or contracts, including exercising signature authority over your company bank account. So - you will need a trusted Thai to serve as Senior Thai Director, with all signature authority.

 

So ? a ?front? company will cost about 25,000 baht to launch (fees of about 13,000 baht, landlord registration at 3,500 baht, plus maybe about 8,000 baht in processing fees) probably about 10,000 baht per month (virtual office rent, plus auditor), say about 150,000 baht for the first year. You will have to put opening deposit plus 250,000 baht wired-in capital into a bank account ? but you can then use that money to pay the monthly office and auditor fees.

 

If the company is going to be completely run by a Thai (girlfriend or such), then it can be set up with the 1,000,000 baht capitalization / seven shareholders as above ? or she can set up as a Thai sole proprietorship (think noodle vendor, or real estate agent, or independent accountant). Such a Thai sole proprietorship may be set up without any capitalization, and may be registered at a home address.

 

For a foreigner coming to Thailand to set up a real company, the realistic minimum you need to get up and running is probably about 650,000 baht. Start by making a ?loan? to your not-yet-existing company of about 150,000 baht. Use that to get everything lined up to the point that you have a current account open. Then transfer in 500,000 baht capitalization. At that point, you may repay back to yourself the 150,000 baht initial loan.

 

There are lots of other costs to consider ? here are a few:

 

Hiring at least one serious Thai employee as office manager ? at a minimum of about 8,000 baht per month ? probably more like 12,000 baht monthly.

 

If you want to have a website, you will need to register a domain name, obtain hosting, and have someone develop a website.

 

If you want business cards, you may want to have a company logo developed, and then have cards printed.

 

If your office will have a computer, you will need to buy or lease an entire system ? CPU, screen, printer, etc., plus software. If you will want internet access, you will need an ISP account ? and probably a second phone line.

 

If you want FAX capability, you will need to arrange for that.

 

Keys, photocopies, parking fees, postage, office supplies, handphone costs. It all adds up.

 

More detail about many of the above aspects may be found at my firm?s website ? www.indo-siam.com

 

 

[spirit_of_town_hall]

Interesting post, the farangs that own Go Go's will they have everything above board as per those regultaions in the post?

 

STH

[StoneSoup]

Yes - every holding company that owns a bar or go-go must have seven shareholders, minimum 1,000,000 baht capitalization, VAT registration, etc.

 

Plus - many businesses must also have various licenses - some of which are fairly pricey - in order to operate.

 

In even hole-in-the-wall bars, you will see many (usually 4-6) of the required documenst posted in frames - on display, as required by Thai law.

 

Noodle stands and such are another story - sole proprietorships.

 

Cheers!

SS

[CosmicSurfer]

You talk only about "a Thai Private Company Limited".

 

There are other options.

 

I have a "Thai Limited Partnership" company... The expenses were about the same for start up, but I don't need 7 shareholders. I own 48%, my partner owns 51% and we have a third Thai that owns 1% (I've never met her... But my partner said that we needed her to complete the registration.)

 

My partner may own the greater precentage, but I retain all control though our partnership agreement. This stipulates areas of responsibility and compensation, as well as Profit distribution.

 

I used a lawyer to set up the registration and get all the documents and forms in order. We opened a Company Bank Account the same day everything was completed. I remember that I signed some Bank resolutions and my signature is also on the Bank Book. I've never tried to do any banking on my own signature, though. So I don't know what would happen then.

 

My Accountant/Bookkeeper has been very creative and helpful when it came to preparing my statement assuring that the appropriate capitalization was accomplished.

 

I have been considering applying for "Amity" but the B42,000 Registration fee I hadn't heard of and that will complicate matters. Amity does have the added advantage of not needing any Thai employess for a Work Permit... Though adding 4 Thais to the books for Tax purposes will probably be cheaperr than paying the registration fee you mention. (I thought the ratio was 7 Thai employees for 1 Work Permit.)

 

Now if we could only make a few bucks profit, I could stop teaching so many hours.

 

CS

[StoneSoup]

Yes, this structure is also an option. However, I believe that your liability is increased substantially - you better have great trust in your Thai partner. I am not fully knowledgeable about all the possibilities, depending upon the legal wording of your partnership memorandum. But I believe that in the Limited Partnership, if your main partner co-signs a loan agreement for a third party (for example), and both he and the third party default, you can be held fully liable.

 

I believe the 7:1 employee ratio was at one time required. The Dept of Labor presently applies the 4:1 rule.

 

SS

 

[StoneSoup]

Here's a good link outlining the particulars:

 

http://www.asiatradingonline.com/company.htm

 

"Let the good times roll!"

Stone Soup

[gummigut]

As stonesoup says, 4 to 1.

 

"Amity does have the added advantage of not needing any Thai employess for a Work Permit"

 

A company established under the Amity treaty still has to follow Thai law and to get a work permit you have to follow the 4 to 1 rule. I finally got a copy of the treaty and if I'm less busy one of these days I'll read it

 

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