It is possible to establish a corporation in Thailand to
gain from commercial expansion into Asia or to obtain real estate ownership
rights. The registration process has multiple steps and is fraught with legal
complications; as a result, it must be carried out under the guidance of
experts.
Several service providers, including local and foreign law
firms and accountancy organizations, provide company registration services;
fees range from 10,000 Thai Baht to more than 100,000 THB.
Each of these businesses will offer its unique service,
including and excluding various elements. It is significant to remember that
THB 7,500 is the formal registration charge for a corporation in Thailand.
Please keep this in mind when hiring any services because not all businesses
include the official fees in their bids.
On paper, setting up a business in Thailand appears to be a
simple process, but in practice, depending on how the company is initially
structured and how you plan to do business, there may be numerous unknown costs
and obstacles. Companies wishing to register their business in Thailand must
conduct thorough research, ensure that all of their demands are addressed, and
cover all of their bases.
What is a reasonable cost to register a business?
The safe range is in the middle, or between THB 40,000 and
THB 60,000 (excluding VAT and government taxes), as is frequently the case.
You get what you pay for; if a company charges less, it may
not provide a comprehensive package, employ people with limited knowledge, or,
worse yet, provide a company registration service as a ruse to attempt and sell
you further services. Sadly, this happens frequently since offering these extra
services allows these businesses to boost their profit margins (this is
frequently the case with accounting firms).
Companies that charge more typically offer a comprehensive
package and have knowledgeable employees, but the additional cost is not always
necessary. Typically, this is the situation with foreign law companies, which
may maintain large margins without having to use efficient procedures.
Registration services may start as much as 25,000 THB for
corporations with 100% foreign or Thai ownership and 40,000 THB for
corporations with a combination of Thai and foreign shareholders. For creating
articles of association with a preference share structure, an additional 20,000
THB is required. Both packages include advice on post-registration tasks as
well as a business eligibility analysis to make sure the business structure you
choose will meet your needs.
The key considerations that must be made while registering a
company are outlined below. You can use this list to assist you sort through
the various offers you might get.
What should a package for registering a business include?
Choosing the best bundle for your company's needs is
crucial, as we said before. At the absolute least, a company registration
package needs to have the following items:
- The creation of the company registration documents (such
as the shareholder list, the memorandum of association, and the company name
reservation).
- For the benefit of the international shareholders, the
English translation of the Company Affidavit and Shareholder List
- The creation of each shareholder's certificate of shares
(in Thai and English)
- The process of creating the Share Registrar Book, which serves as a record of share transfers. Please be aware that there are fines of up to THB 10,000 and THB 20,000 for failing to issue a share certificate and failing to maintain an updated share register book, respectively.
Although the aforementioned responsibilities are very
important, they only touch the surface of the company registration procedure.
It is crucial to do your homework and confirm that you have chosen the ideal
organizational structure when planning to launch a business. Thailand offers a wide
variety of company structures, each with unique advantages and disadvantages.
Always ask your advisor to perform the following checks:
- Is a Limited Company in Thailand the ideal legal form for
your business's operations? The most common business structure in Thailand is a
limited company, although representative offices and branch offices should also
be taken into consideration since they each have special benefits that could be
useful. Could you also be eligible for a promotion from the Thailand Board of
Investors (BOI)?
- Additionally, Thailand's presence in South East Asia opens
up new, distinctive economic options. There may also be alternative structural
alternatives in Singapore or Hong Kong. These other areas might offer your
company additional advantages that you weren't previously aware of.
Before forming a company in Thailand, there are 9 key factors to take into account.
1. Can I run a Thai company that is entirely foreign-owned?
In Thailand, it is feasible for foreigners to own a firm outright.
A 100% foreign-owned corporation, however, may need to get a Foreign commercial
License in order to function, depending on the company's commercial operations.
Always have your advisor confirm whether your business qualifies for a Board of
Investment promotion or a foreign business license.
2. Can I maintain control over a business with a native Thai partner?
Well-written documentation (preferred share structures with
articles of association, shareholder agreements with reserved subjects, and
option agreements) are required to secure the foreign minority shareholder's
effective influence over the company. To ensure you won't run into any problems
in the future, it's crucial to make sure your advisor has a clear grasp of how
you intend to run your business and can appropriately design the paperwork.
3. What amount of capital is required to register my business?
A share's worth must be at least THB 5 according to Thai
law. On paper, the minimum registered capital amount needed to create a private
limited company is THB15 because there must be a minimum of three shareholders.
Contrary to popular belief, private limited firms typically have a minimum
registered capital that is equal to the sum required to launch their business.
Please be aware that you would need to have 2 million THB in
registered capital per foreign employee if you intend to engage and employ them
(for example, if you have two foreign employees, you would need 4 million THB).
The amount of registered capital necessary is reduced to 1 million Thai Baht if
the foreigner you seek to engage is married to a Thai citizen. Companies that
are supported by the BOI are exempt from this rule.
4. Do I need to establish articles of association for my company?
Although drafting articles of association is not required,
it is highly advised. Companies can optimize their management structures by
placing restrictions on the directors' authority, issuing preference shares
with varying voting and dividend rights, granting pre-emption rights, and
holding meetings virtually.
5. Are my company's business objectives comprehensive enough to encompass all planned business activities?
The business activities that the company engages in must be
agreed upon and stated when the firm is registered. The company's objectives
should then incorporate these operations. If this isn't done, the director may
be personally liable for any business operations that are carried out in
opposition to the goals of the firm. It is possible to change the goal at a
later time, but doing so calls for an EGM (Extraordinary General Meeting of the
Shareholders).
6. Is a shareholder agreement necessary?
Shareholder agreements are strongly advised because they
provide additional information about the company's policies. Shareholder
agreements are crucial because they let businesses prepare for potential risks
in the future. For instance, callback provisions and leaver clauses for when a
shareholder wants to leave the project, pre-emption rights, drag along rights,
and tag along rights for when a shareholder wants to transfer his shares, and
repercussions for when a shareholder dies and the transfer of the shares to
their descendants. Procedures for situations like the ones mentioned above and
many others can save a lot of time and trouble later on because there is
already a set system in place.
7. Which Office Address Should I Use?
The registration address must be provided when registering a
corporation. Virtual offices are typically acceptable in practice when forming
a business, but a proper office is necessary if the business wants to be
registered with the VAT system or hire foreign staff (the authorities would
require a letter of consent from the owner of the office).
8. Can I quickly dissolve a company?
In Thailand, unlike in places like Singapore or Hong Kong, a
business cannot be struck off. When shareholders of a company decide to
dissolve it after it has been registered, they must first hold an EGM and then
go through a formal liquidation procedure in front of the Ministry of Commerce
and the Revenue Department. Even if the firm did not conduct any operations, a
liquidator must be appointed and the company accounts must be audited. The
duration for completion is about six months.
The typical closure costs for a firm are THB 35,000, but if
the business did not maintain an appropriate accounting method, the costs could
rise significantly. The process will take longer if accounting conformity is
not maintained because the Revenue Department will want to confirm that all
taxes are paid before approving the company's liquidation.
Answers to each of these questions should be given with
sufficient thought and relevance to your demands. Since every business is
unique, its requirements must also be taken into consideration. Additionally,
should they be necessary, there should be a choice for drafting the shareholder
agreements and articles of association.
After forming a corporation in Thailand, can I immediately begin doing business there?
It makes sense for the proprietors to want to go to work
right away when the company registration process is over. A few extremely
crucial factors must be taken into account initially because this is not always
achievable.
i. Get Required Permits
One or more licenses may be necessary depending on your
business's operations, such as a factory license, an e-commerce license, or a
foreign business license. Your advisor should investigate whether your business
needs to get any licenses in order to operate. Your advisor should always help
you obtain any necessary licenses if they are needed.
The cost to obtain a license for your business often begins
at THB 10,000. Depending on the type of license requested, the processing time
for these licenses might take anywhere from one week to many months.
ii. Opening a bank account
The capital of the business must be released, so you must
open a bank account. If your advisor's client is located abroad, they must
adopt a practical attitude. This is true since a director must have access to
the bank account. At the moment the bank opens, the signatories must be in the
building.
A common component of our company registration package (see
the package) is the establishment of a bank account. The cost ranges from THB
5,000 to THB 10,000 when it is not.
iii. Registration for VAT
A business that generates THB 1,800,000 or more in annual
revenue is required to register for VAT. You might want to register right away
depending on your business operations and transaction flow.
It's vital to remember that some industries, like farming,
are not subject to the VAT Payment. Such information should be known by your
advisor, who should also let you know if your business qualifies for any
exemptions.
With the assistance of company registration specialists, VAT
Registration in Thailand costs as little as 7,500 THB.
iv. Hiring personnel
The business must first register with the Social Security
Fund (SSF) before recruiting new personnel. Following this, the business must
register every new hire within 30 days of their hiring. A contract for
employment is also required. Salary packages, allowances, incentives, and
non-compete agreements need special consideration because they could have a big
impact in the event that an employee is let go.
The fee to register a new employee with the SSF is THB 400,
while the cost to create an SSF firm with company registration experts starts
at THB 2,500.
A simple draft of an employment agreement typically costs
THB 9,000, and an executive version can cost up to THB 40,000.
v. Tax and accounting filings
Every new business in Thailand must establish an accounting
and invoicing system after registering their firm. Since tax filings (VAT, if
the business is registered for VAT, and withholding tax on service transactions
between businesses) and payments must be made on a monthly basis, bookkeeping
should be done every month.
In order to properly assess how to best meet your accounting
needs, it is crucial that your adviser spend time learning about your business
flow. Understanding a company properly is crucial since some costs incurred by
the company can be capitalized (for example, intellectual property), amortized
(for machinery), and tax optimized. If such techniques are not investigated to
see if they are feasible, a company may miss out on these benefits and incur
unneeded costs.
Drafting documents
New firms typically need a number of legal documents to
launch when they initially start operating. Terms & conditions, employment
contracts, service agreements, NDAs, purchase agreements, etc. are examples of
such documents. Again, in order to safeguard the company's interests, it is
crucial that these contracts are created by knowledgeable attorneys who have a
thorough grasp of your organization. Documents that were poorly written could
lead to disagreements in the future.
Depending on the intricacy of the contract or document and
the number of revisions required, the cost of creating a contract or legal
document can range from THB 8,000 to THB 40,000.
Conclusion
Although registering a company may seem like a simple
process that shouldn't cost much, there are actually several factors that need
to be taken into account. For the registration procedure to go as smoothly as
possible, it is crucial that your advisor carefully examines both your needs and
the company's ambitions. Failure to do so might need expensive restructuring in
the future.
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