Foreign investors are required to draft significant structural decisions and have detailed planning to set-up a business in Bangkok. Cheap and quick incorporation may lead to the vulnerability of the business to the enforcement of foreign legislation by the government. It may also result in high tax burden due to the inefficient tax structure.
There are certain things that a foreign investor should know regarding company formation in Bangkok to yield a profitable business and minimize losses. It is also advisable to hire a legal team to help in the formation of the company. That way, unnecessary trouble could be avoided.
The Different Business Structures
In Thailand, foreign investments must have a legal entity. Thailand has the following business structures:
- The possibility to utilize a branch of the foreign company to do business in Thailand or for non-profit activities.
- Sole entrepreneurship or single proprietorship.
- Two partnership alternatives.
- Three corporate alternatives.
The big corporation is not a suitable choice when setting up a business in Thailand. It usually requires 15 or more stockholders and five or more directors. It is quite challenging to gather or meet the needed numbers before the company can be formed.
In a partnership of any type, the foreign investor is exposed to uncontrollable and unlimited liability for the partners or partnership’s wrongdoings. Even if the foreign investor may not have any participation or involvement in any malpractice or wrongdoing that the partners have committed, the foreigner is not spared under Thai laws.
Under foreign legislation, a foreigner is not allowed for sole entrepreneurship or sole proprietorship. This type of business structure is not applicable to a foreign investment.
Experience confirms that almost all of Bangkok’s foreign direct investment pushed through by setting up a small Thai corporation in the form of a Ltd. or Co. It is a one-size-fits-all solution for big, medium, and small investment ventures by foreigners in Thailand.
It is advisable to use a Ltd. or Co. for the company formation in Bangkok to be on the safe side. It is likewise prudent to keep a legal team to handle important legal matters.