Potential foreign investors in the Kingdom of Thailand should have an overview understanding of the legal structures of various entities in addition to their business knowledge in order to ensure their business methods and dealings are supported by knowledge of the basic differences of entities. In this article we would like to give an overview of business organizations which exist in the Kingdom of Thailand.
Business in Thailand can be widely conducted in the following forms:
Limited Liability Company:
In Thailand, the most common structure for conducting business is a limited liability company. A limited liability company, by law, is regarded as a juristic person with the right to own property (although with restrictions to ownership of real property for most limited liability companies with a majority foreign ownership) to and carry on business under its name. Limited liability companies have liabilities with respect to third parties which is separate from the individual liability of its shareholders. Shareholder liability in a limited liability company is limited to the value of an individual shareholder’s unpaid share capital. A limited liability company could be used for example for real estate business.
Public Company:
A public company is an entity incorporated for the purpose of offering shares to the public. The liability of shareholders is limited to the amount of the capital which remains unpaid on the shares held by them. The purpose of offering shares of the public company and the liability limit of its share holders must be clearly and specifically stated in the memorandum of association. As a public company receives money by offering its shares to the public a public company could be a preferred form of business for major enterprises or for companies which want to achieve fast growths in new economies.
Partnerships:
Unregistered Ordinary Partnerships:
An ordinary partnership is based on a contractual relationship between two or more persons to jointly invest and undertake a business with a view of sharing profits and loss derived wherefrom. All partners in an ordinary partnership are jointly and without limit, liable for all obligations of the partnership. The unregistered ordinary partnership could be used for various businesses but is not the preferred business form for real estate as it is not entitled to own property.
Registered Ordinary Partnerships:
An ordinary partnership can become incorporated as a juristic person by registering with the Minister of Commerce. A registered ordinary partnership is entitled to own property and is taxed as a corporate entity.
Limited Partnerships:
A limited partnership is a juristic person consisting of two groups of partners one of which comprises those whose liabilities are limited to the capital contributed and the other comprises those who are jointly and without limit, liable for all of the partnership’s obligations. Only an unlimited partner can manage a limited partnership. If a limited liability partner participates in the management, then he becomes an unlimited liability partner.
Joint Venture/Consortium:
Joint Venture:
An unincorporated joint venture is a contractual relationship between two or more parties, one of which must be a juristic person. It is generally organized to conduct a particular business project within a limited period. The joint venture is not recognized as a juristic entity under the Civil and Commercial Code. However, it is recognized under the Revenue Code. A joint venture could be used for example for projects in the real estate sector.
Consortium:
A consortium is also a contractual relationship between two or more parties. The distinction from a joint venture is that each party to a consortium maintains its separate identity relating to the business and is responsible for its own profits or losses. The consortium is not recognized as a legal entity under Thai law.
Branch of a Foreign Company:
Where a foreign company has a contract with a Thai government agency or a private organization to carry out a business project in Thailand, the foreign company may choose to perform such a project through a branch office. However, if the nature of the business falls within any of the restricted categories of the Foreign Business Act, a permit will be required before commencing the business activities. A branch office is regarded as the same legal entity as its head office. The head office, therefore, will be held responsible for all liabilities of the branch in Thailand.
Representative Office:
A representative office is considered as a non-trading office which is not permitted to conduct business with a view of profit. It is merely for the purpose of serving its head office overseas for the provision of information.
Regional Office:
A regional office is also considered as a non-trading office which is not permitted to conduct business with a view of profit. The regional office is a business organization established by a multinational company for the following purposes;
(a) Coordinating among branches or affiliates in the same region;
(b) Controlling the operation of branches or affiliates situated in the same region on behalf of the parent company; and
(c) Giving advice and services such as training of personnel, financial management, marketing control and sale promotion strategies, product development and research and development.
Sole proprietorship:
A sole proprietorship is normally a small business, as sole proprietorships are owned by a single person. The owner is solely responsible and liable for all obligations and liabilities of the sole proprietorship,. Sole proprietorships are not registered with the Ministry of Commerce.
Conclusion
Most foreign investors look at limited liability companies as their preferred method of investment, but perhaps don’t consider or are not familiar with the alternative modes of legal entity. It is certainly worth being familiar with the options, so that any choice can be made on an informed basis, and not necessarily following the majority for the sake of familiarity.
The Author of this article is Sebastian Kunz, Senior Associate at Limcharoen Hughes & Glanville (Phuket).
Posted under Investments & Financial Opportunities, Lifestyle, Uncategorized
This post was written by HKT Homes on March 10, 2011




