Best Corporate Structure For A Thai

[rchapstick]

My GF is in the process of setting up her own business, with her own money, and I have been helping with some general business advice. But she asked a question that I do not know how to answer.

Is it better to set up as a limited partnership or as a corporation? What are the tax and/or liability advantages with either structure. Are there other issues to consider?

As background, this will be a retailing business, with about 1mm baht capitalization. She will be running the show, with her brother as an employee. Presumably, the brother and/or another family memeber could be listed as very minor shareholders.

She wants to do this legitimately. Anyone with ideas, or potential contacts for basic advice on this?

[Master Chief]

It is advised to contact a lawyer to get such advices for "free" of charge.

To many questions to be asked.

Retailing? export import? amount of calculated income? storing of gods, inventory, shop, sales areas scale of invested capital??????

Start with a business plan, is alway a good advice, does the whole plan really work at the end!

[Chang_paarp]

Corporate structures

Sole trader; Everything in your name, total liability, All the profits go to you. Only pay personal tax on the profit declared.

Limited Partnership; 2 or more partners, unlimited liabilities for the debts of your partners, similar tax to sole trader more complex accounting.

Company; Currently 7 share holders needed (soon to be 3) limited liability to the paid up capital. Tax rates just changed, but you pay tax on the money you pay yourself.

As said above get advise for your lady's situation. She may be better off as a sole trader.

[rchapstick]

Corporate structures

Sole trader; Everything in your name, total liability, All the profits go to you. Only pay personal tax on the profit declared.

Limited Partnership; 2 or more partners, unlimited liabilities for the debts of your partners, similar tax to sole trader more complex accounting.

Company; Currently 7 share holders needed (soon to be 3) limited liability to the paid up capital. Tax rates just changed, but you pay tax on the money you pay yourself.

As said above get advise for your lady's situation. She may be better off as a sole trader.

Thanks for your help. Yes, she plans to pay for and talk with a lawyer about this, but I find it is usually best to have some idea what one's options are going into such a meeting. This is exactly the level of detail I was looking for.

WRT other points made above, she most certainly does have a business plan, which I have been helping her craft and refine, and it is in very good shape at this point (detailed financial plans and scenarios, strategic plan, competitive analysis, likely competitive responses, political plan .... the whole 9 yards). I've helped her frame the plan, but she has really put together the analysis and thought it thru well. Again, she (and I) are not looking for "free" legal advise, just a basic understanding of what her options are, and directionally what the implications of those options are.

I suspect Sunbelt is probably the wrong choice to advise her on this, as they seem to be focused on expats and not locals, and are probably priced accordingly. Does anyone have recommendations for firms serving Thai SME's?

[Cuban]

Check out the details about company profits and tax payments, a start up does not need to show a profit for X years depending on the structure of the company. This is a huge benifit if you can take advantage of it.

[AFKAFSinLOS]

Although the business will be in your GFs name and she will be running it. With this in mind I'd suggest 2 books for you:

1) "Start up and Stay up in Thailand", by Roy Tomizawa

2) "Working with with the Thais", by Hentry Holmes, Suchada Tangtongtay, with Roy Tomizawa

Although the first is written a few years back, it is a useful read for the entrepreneur in Thailand. It is targeted at foreigners but relevant also to Thais. Bear in mind as your GF is in a relationship with a foreigner, this may well alter dynamics/prices of her business as people (staff, suppliers, customers) are aware of this.

The second is a good cultural read anyway, regardless of work or not

My guess is that as your relationship progresses with her, and her business progresses, you're the type to help her wherever you can. You've already shown your interest from Day1 in helping her, even though the interest may be purely advisory rather than financial. Both these books would help you in this journey.

Be careful of getting advice on here from sponsors of Thai Visa. They inevitably have conflicts of interest.

There are many factors to consider in choice of structure: taxes, inheritance, control, liability, flexibilty, cost etc. My personal choice as a longer term goal would be a company as the business grows. However, she may wish to start as a sole trader, and progress to that. Given she will be the main driver of the business this would tend away from limited partnership route, as there are effectively no real partners. Again just personal preference, and your whole circumstances may be different.

[Martin_F]

Hi,

There are a couple of other books that are quite good:

1: How to establish a successful business in Thailand, Philip Wylie, Paiboon Publishing, 2007.

2: Doyle's Practicle Guide to Thailand Business Law, Michael Doyle, Seri, Manop & Doyle, 2006.

These give quite good introductions to the whole business structure for start-up SMEs, although aimed at the non-Thai legal structure they explain the requirements and gives you the knowledge sitting down with the lawyer or advisor going over the options.

Another good site is the BOI where I believe there is a guide to doing business in Thailand.

In my opinion, I would suggest that for the short term your GF operates as a sole trader. It is a lot simpler on VAT and company accounting, especially if you are not going to involved in the business.

After six months review the situation and then consider moving to a limited liability comany.

Although the business will be in your GFs name and she will be running it. With this in mind I'd suggest 2 books for you:

1) "Start up and Stay up in Thailand", by Roy Tomizawa

2) "Working with with the Thais", by Hentry Holmes, Suchada Tangtongtay, with Roy Tomizawa

...

[Ubon9]

We start a business believing everhing will be ok, but if things they don't turn round ok is better to have a limited company set up.

[samran]

Corporate structures

Sole trader; Everything in your name, total liability, All the profits go to you. Only pay personal tax on the profit declared.

Limited Partnership; 2 or more partners, unlimited liabilities for the debts of your partners, similar tax to sole trader more complex accounting.

Company; Currently 7 share holders needed (soon to be 3) limited liability to the paid up capital. Tax rates just changed, but you pay tax on the money you pay yourself.

As said above get advise for your lady's situation. She may be better off as a sole trader.

I asked sunbelt about this once, as I was looking to do some consulting. He was very helpful and it was all free via PM.

From a tax perspective at least, sole trader works for the size of the business. Under this status 70-80% of revenues can be written off as costs, without documentation, and the remaining 20-30% is counted as your wifes income, which is taxed at normal income tax rates.

Of course, if your costs are higher than 70-80% of revenues, then you are entitled to claim them, but you'll need receipts for everything.