How to set up a limited liability company in Thailand as a foreigner
Thailand is an attractive destination for foreign investors thanks to its growing economy, dynamic market, and business-friendly environment. If you want to set up a limited liability company (LLC) in Thailand as a foreigner, you must follow certain rules and procedures. In this article, we detail the steps needed to establish a business in Thailand, the legal requirements, and the options available to foreign investors.
1. What is a Limited Liability Company (LLC) in Thailand?
A limited liability company (LLC) in Thailand is a form of business that is commonly chosen by foreigners who want to set up a business in the country. It is similar to a limited liability company in other countries, and it allows shareholders to limit their liability to the amount of their contribution to the company’s share capital.
However, it is important to note that foreigners cannot own more than 49% of the shares of a Thai company unless certain conditions are met, such as obtaining a special permit or setting up a business under a government program.
2. Legal Requirements for Setting Up a Private Limited Liability Company in Thailand
Has. Shareholders and managers
A limited liability company in Thailand must have at least 3 shareholders. Of these shareholders, a maximum of 49% can be foreigners, while the remaining 51% must be owned by Thais. This ensures that the company is predominantly Thai, as required by Thai law.
In addition, the company must have at least one director. The director can be a foreigner or a Thai. In fact, many companies choose to have one or more Thais as directors, although this is not a legal requirement.
B. Share capital
The minimum share capital required for an LLC in Thailand is usually 2 million baht (about $60,000 USD). However, this amount can be adjusted depending on the nature of the business and the planned activities. It is essential to note that at least 25% of the share capital must be paid up at the time of the company’s formation.
C. Registrar
Once the business structure is defined, the company must be registered with the Department of Business Development (DBD), a division of the Thai Ministry of Commerce. This is the first step to obtaining a legal existence in Thailand.
3. Options for foreigners wishing to set up an LLC in Thailand
A. Thai Partnership Program
To meet the 51% local ownership rule, many foreigners choose to work with a Thai partner. The latter owns 51% of the company’s shares, and can be a trusted person or a local representative. However, this option comes with risks, as Thai legislation does not provide strong legal protections for foreign investors when it comes to ownership of shares.
B. Programme BOI (Board of Investment)
A more secure option is to obtain approval from the Board of Investment (BOI). The BOI is a Thai government agency that incentivizes foreign investment by offering tax benefits, work permits, and the opportunity to own 100% of the company’s shares in certain specific sectors. Eligible sectors include industries such as technology, agriculture, manufacturing, and financial services.
C. Structure de Joint Venture
Another option is to set up a joint venture with a Thai partner, where the foreigner and the Thai own an equal share of the business or according to a specific arrangement. While this option offers some control to the foreign investor, it requires a great deal of trust between the partners.
D. Other Specific Exemptions
Certain categories of foreign investors, such as those investing in specific areas or sectors of activity strategic to the Thai government, may be exempt from the 49% ownership rule. These exceptions are often granted in programmes to encourage certain types of investment or for projects with high economic or technological potential.
4. Process of setting up a limited liability company in Thailand
A. Choosing a Business Name
The first step to setting up a private limited company in Thailand is to choose a business name. The company name must be approved by the Department of Business Development (DBD) before it can be used. It is important that the name is not already taken and that it meets local standards. You can check the availability of the name on the DBD website.
B. Drafting of the articles of association and the memorandum of association
Next, it is necessary to draft the company’s articles of association, which detail the company’s operating rules, as well as the responsibilities of shareholders and managers. The memorandum of association must be signed by all shareholders and notarized.
C. Registration of the company
Once the documents have been prepared, you will need to register the company with the DBD. This process includes submitting the company’s articles of incorporation, a copy of the shareholders’ and directors’ IDs, and proof of the company’s address. This process can take a few days to a few weeks, depending on the complexity of the business.
D. Obtaining the necessary licenses
Depending on the company’s activity, additional licenses or permits may be required. For example, if you want to open a restaurant, a liquor or food permit may be required. Similarly, for companies in regulated sectors, specific licenses must be requested.
E. Opening a bank account
Once the company is registered, it is necessary to open a business bank account in the name of the company. Some Thai banks require one of the directors or shareholders to be present for the opening of the account. This account will be used to manage the company’s finances and receive payments.
5. Other important considerations
A. Work Permit
If you are a foreign investor or employee, you will need a work permit to be able to work legally in Thailand. The work permit is issued by the Thai Ministry of Labour and is required for any paid activity in the country.
B. Tax obligations
Companies in Thailand are subject to Value Added Tax (VAT), corporate tax, and other specific taxes. It is essential to familiarize yourself with local tax obligations and ensure that your business complies with current tax regulations.
Conclusion: Setting up a private limited company in Thailand as a foreigner
Setting up a limited liability company in Thailand can be a great investment opportunity. However, it is crucial to understand the local rules, choose the right structure, and obtain the necessary permits. Depending on your industry and plans, you may want to explore options such as partnerships with Thais, BOI programs, or joint ventures. It is advisable to consult with a local lawyer or tax advisor to ensure that all the steps are properly followed and that your business is operating according to the rules.
