Setting up a Thai Limited Company is a complex process, subject to precise legal requirements. The process is governed by regulations laid down by the Department of Business Development (DBD).
First, a company name must be reserved with the DBD. The name must comply with the DBD’s naming guidelines and must conclude with “limited”. Next, the company must be registered.
Choosing a Business Structure
A company structure defines the legal entity of a business, and it can impact taxes, liability, and other aspects of your Thai operations. Choosing the right structure is a crucial decision for any entrepreneur or investor entering the Thailand market. The experts at Plizz can help you understand the options and make an informed choice that aligns with your business goals and compliance needs.
The most common business structures in Thailand are sole proprietorships and limited companies. Sole proprietorships are a simple and inexpensive option where a single person owns and operates the business. Owners remain personally liable for all business debts. Limited companies offer more flexibility and a separation between personal assets and company liabilities, and they are required to file annual financial statements and comply with certain government regulations.
Foreign investors may own up to 100% of a Thai limited company, subject to restrictions and approval from the relevant authorities. The structure also facilitates work permits and visas for foreign employees, making it easier to attract international talent. Moreover, it enhances credibility and market reputation by signalling a commitment to compliance and professionalism.
Private limited companies are the most popular business structures in Thailand. The minimum number of shareholders is three, and their liability is limited to the amount of shares they hold. However, these companies cannot offer their shares to the public.
Choosing a Company Name
Choosing the right company name is one of the most crucial steps for entrepreneurs in setting up a business in Thailand. It is the first impression you will make on your customers and a key component of brand identity. It is also required to comply with specific regulations. For example, it must end with “Limited” and not contain restricted words (like investment). It is recommended to submit three different names ranked by priority to increase the chance of approval.
It is important to consult with local Thai speakers and cultural experts to check that the name you choose complies with Thai laws and does not cause misunderstanding or offense in the market. It is also advisable to use techniques like alliteration, rhyming or word plays to enhance memorability.
The next step is deciding on the number of shareholders and preparing a Memorandum of Association. This is a legal document that specifies the company’s purpose, objectives, registered capital, shareholding composition and more. It must be signed by at least two promoters, who must be Thai citizens or have a valid visa. Foreigners are advised to set up a company with at least 51% shares held by Thai nationals, if possible, in order to avoid requiring a foreign business licence. It is a good idea to maintain transparent finances and steer clear of using nominee Thai shareholders, which can be illegal and can jeopardize your corporate stability and financial security.
Incorporating the Company
Once a company is registered with the Department of Business Development, it needs to open a bank account where the needed minimum share capital will be deposited. The company must also prepare and file its constitutive documents, the Memorandum of Association (MOA) and the Articles of Association or Bylaws. Professional assistance may be required to ensure that these are drafted and filed in accordance with Thai regulations. Afterwards, the company should register with the Revenue Department to obtain a company corporate tax ID card; this step becomes necessary when a foreign-owned company is anticipating annual revenues surpassing THB 1.8 million. It should also register for Value Added Tax if it is employing foreigners and/or operating in a restricted sector according to the Foreign Business Act.
During this stage, the company must reserve its name with the DBD; a few alternatives should be prepared in advance to ensure that the chosen name is not already taken and complies with the DBD’s naming guidelines. It is also required to provide the DBD with a list of directors and shareholders as well as proof of capital deposit.
The company must hold a formal meeting of its shareholders to draft the MOA, which details the company’s core objectives, share capital structure and internal governance procedures. It is highly recommended to seek legal assistance for this crucial step to ensure that the MOA complies with Thai regulations and accurately reflects the company’s goals.
Obtaining a Foreign Business Licence
Foreign entrepreneurs are required to obtain a foreign business licence (FBL) before commencing activities in the country, particularly for companies that intend to engage in regulated sectors as defined under the Foreign Business Act. FBLs are necessary for businesses that fall under the following categories:
The minimum capital threshold for a foreign company is higher than that for a Thai-owned and operated business, ranging from 2 million to 100 million baht depending on the type of license required. The requirement is largely driven by the need to demonstrate that the company has sufficient financial resources to carry out its intended operations and meet associated legal obligations.
Depending on the specific requirements of the industry, additional documentation may be needed to support the application process. This can include proof of identity, personal documents for the director(s), and copies of the Memorandum of Association and Articles of Association.
Once a company is approved for an FBL, the next step is to register the business with the Revenue Department in order to acquire a tax ID number. If the company is expected to make taxable income exceeding 1.2 million baht, it will also need to be registered for Value Added Tax. This process is complex and requires the assistance of a trusted local advisor. The Emerhub team is experienced in the process and can guide you through the steps.
