Guest House, Hotels, Some Questions Concerning Company Set Up And Renting

[Timmy]

Hello,

(If there are mistakes in my English sorry my mothertongue is Dutch!)

After getting the door smacked in the face in the Isaan forum like so many first posters I did some reading, some more reading and after that even more reading. I understand that starting a business in Thailand the legal way is not a simple thing to do without careful planning. But I've got time to plan and I don't give up to easy when I got an idea in my head.

SO I have some questions.

The first plan was to get some experience on doing business in Thailand with some money I could easily loose. I have a degree (highschool) in hotel and restaurant, a certificate for small business management and I'm rather good at online marketing (but have no ambition to work in the field). I don't really want to open a restaurant so a guesthouse seemed like a good idea. I wanted to rent one for a year to get the experience and if it was successful good, if not go back home, work some more and come back to buy one putting in the experience I learned.

I have to say that my little certificate for small business management comes a little short when it comes to setting up a Thai company.

Now after reading everything I think I have to put that idea into the trash because of the 2mil bath I need for the workpermit. Am I correct or do I have other options. I assume if you want to run a guesthouse you will need to set up a company. I have a girlfriend in Thailand but I wouldn't feel comfortable letting her manage the entire operation while I'm praying to god for success.

The only good news I have read is that you now only need 3 Thais to set up a company. Is that correct?

A little question about the 2mil: You need to transfer this cash from your countries bankaccount to Thailand. So you put it in the bank and it's registered. Is there a limit you need to keep or can you use the major part to invest in your business?

I read this somewhere on the forum: "to get a work permit you must bring some expertise to the table, ideally something in short supply in Thailand" Would my degree in hotel and some work experiences in restaurants be enough to get the workpermit.

Here's another one: "a Thai Limited Company can be owned 100% by foreigners in the Hotel Management industry" If I buy a guesthouse which has 12 rooms would that mean I can accually own the darn thing 100%, even the land?? What does 100% mean in thai for falang exactly?

I have some creative ideas as how to run the guesthouse. I mean my online marketing skills count for something and I won't just be renting out the rooms I want to add a travel agency (or collect a commission), transport, food, drinks, renting stuff etc...

So the main question is: Even if I want to rent a guesthouse for a year to get some experience, I would still need 2mil because otherwise I couldn't work in it? I guess giving advice would also be considered working LOL?

Please enlighten me! Not that I don't have a clue but if there is a way I can get into renting a guesthouse for one year and try to make it successful without having to go trough all the trouble please tell me. If there isn't I'm just going to have to plan better I guess and maybe talk to some guesthouse owners.

Warm regards

[gotlost]

Welcome back Timmy was it bad in Issan??

[surayu]

Hi Timmy! for what i could see, there are at least 2 owners trying to get rid of their establishment for every new entrepeneur trying to get into the business, i think if you don't want to commit financially what the law is asking for, then might be better to delegate someone else that you can really trust, taking as much precautions as you can, so, find an area you like and start asking "the boss" how much he would accept for you to take over, bear in mind that the guy next door might ask you much more or much less of the previous one, good luck to you!

[Timmy]

Hi Timmy! for what i could see, there are at least 2 owners trying to get rid of their establishment for every new entrepeneur trying to get into the business, i think if you don't want to commit financially what the law is asking for, then might be better to delegate someone else that you can really trust, taking as much precautions as you can, so, find an area you like and start asking "the boss" how much he would accept for you to take over, bear in mind that the guy next door might ask you much more or much less of the previous one, good luck to you!

That still means I dont get a workpermit right? When searching he internet I found out that some people are selling there companies for as less as 150.000Bath with workpermit included. How does that work? Do you need to stay in the same business?

[monty]

It now seems to be that the business department wants to see cash in the bank when registering a company with foreign shareholders.

If you set up a company with just 3 Thai shareholders (e.g. your girlfriend as majority shareholder and 2 others as minority shareholders), they do not check on the cash balance.

Which means you register a 2 million Baht company with no ready cash on hand.

As the company papers will show 2 million registered capital, the company can support your work permit. It would be only 1 million if you were married to your girlfriend!

If you do put in yourself as a shareholder, I'm not sure how much of the capital has to be paid up, it will most likely not be the full 2 million. Anyway, the cash in the company accounts is freely available for investing etc after the company is registered.

To be able to get a work permit you'd need to have 4 employees on the books, with their social security contributions paid. The employees cannot be shareholders in the company, well they can, but those do not count towards the 4 employees needed! As a small upstart company you might beable to negotiate a bit with the labor department resulting in them agreeing to issue you a WP without the full 4 employees. No guarantees however.

Getting a work permit as managing director of the company you hold shares in is virtually always approved. You basically are allowed to oversee your investment. Especially if the business is a guesthouse and you hold a degree in that area.

Do understand that a work permit contains a detailed job description, and that's the only work you are allowed to do! As a managing director you are not allowed to serve customers a drink, you need Thai staff to do that!

Also, your newly created company will not be able to support a 1 year extension based on employment for you, as they would need two years worth of audited bookkeeping. Visa wise, your best chance is to get a multiple entry non immigrant B, which will see you do a border run every 90 days, for a total stay of just under 15 months.

I am not aware of 100% shareholding for foreigners in the hotel business.In anyway, 100% shareholding structures, where allowed, are always uch more complicated and time consuming (read expensive) to set up, and thay will never allow that company to own land.

The only 100% foreign companies allowed to own land AFAIK are all sponsored by the Board of Investment, and that means proper big investment!

Guess that answers most of your questions.

[alexanderthai]

I'm running a guesthouse in Pattaya. Check my website and email me for more question. I don't want to sale it. Just can help you for some info.

[aras]

hi tim,

You cant own commercial land in thailand, forget it lol.

I am kinda dutch too and the certificates you have dont mean anything in thailand.

Everything you'll do here is somewhere illegal.

It is also true that just about nobody makes money in thailand so if you purpose is to hang out with the girls and drink beer hole day you better just come here on holidays and dont loose as much money ass all the others.

Dont get me wrong i am thinking the same thing ( starting a guesthouse there) but it seems a long shot if you dont spend a lot ( really a lot) and then it still wouldnt be a good businessdeal.

Pm me maybe we could exchange ideas and knowledge.

good luck

[aras]

yes you can invest your 2 mil after registering the company it is just the same ass starting a B.V in NL only a bit more expensive lol

to hire thai employers doesnt cost much deffinitely if one of hose is your GF

I must say that i still dont get the starting a company rules i have read tons of articles about thai rule. dam_n it if i comtinue like this i could become a lawyer there the work permit thing is complicated and a bit illegal i suppose but well who cares ass long ass thai government is ok with it

[CHFarang]

hi tim,

You cant own commercial land in thailand, forget it lol.

I am kinda dutch too and the certificates you have dont mean anything in thailand.

Everything you'll do here is somewhere illegal.

It is also true that just about nobody makes money in thailand so if you purpose is to hang out with the girls and drink beer hole day you better just come here on holidays and dont loose as much money ass all the others.

Dont get me wrong i am thinking the same thing ( starting a guesthouse there) but it seems a long shot if you dont spend a lot ( really a lot) and then it still wouldnt be a good businessdeal.

Pm me maybe we could exchange ideas and knowledge.

good luck

@ aras; funny statement that "just about nobody makes money in thailand". living in the south, i am surrounded by farangs doing business and most of them are pretty successfull with their own business...

cheers, CHFarang

[Timmy]

hi tim,

You cant own commercial land in thailand, forget it lol.

I am kinda dutch too and the certificates you have dont mean anything in thailand.

Everything you'll do here is somewhere illegal.

It is also true that just about nobody makes money in thailand so if you purpose is to hang out with the girls and drink beer hole day you better just come here on holidays and dont loose as much money ass all the others.

Dont get me wrong i am thinking the same thing ( starting a guesthouse there) but it seems a long shot if you dont spend a lot ( really a lot) and then it still wouldnt be a good businessdeal.

Pm me maybe we could exchange ideas and knowledge.

good luck

If I am going to spend all this money I am not going to waste it on beer and girls . I do not drink beer btw so that is one problem solved.

I read on this forum somewhere that there is a special rule regardinding to hotel. I forgot exactly what it was but I believe If your guesthouse has over 12 rooms it is seen as a hotel and you can own it 100%.

[monty]

If I am going to spend all this money I am not going to waste it on beer and girls . I do not drink beer btw so that is one problem solved.

I read on this forum somewhere that there is a special rule regardinding to hotel. I forgot exactly what it was but I believe If your guesthouse has over 12 rooms it is seen as a hotel and you can own it 100%.

Simply not possible.

What might be possible is that the company running the hotel might be 100% foreign owned, but this company will not be allowed to own the land the building stands on.

This company will have to lease the land...

[monty]

Did a bit of research, and as I posted above, 100% shareholding would only be possible if your investment is BOI approved.

And the minimum they require is 100 rooms and at least 4 stars.

According to following article, in 2010 they will maybe relax the shareholding level in hotels to 70% foreign owned...

http://www.thephuketinsider.com/hotels/tha...ing-in-2010.php

[Timmy]

Did a bit of research, and as I posted above, 100% shareholding would only be possible if your investment is BOI approved.

And the minimum they require is 100 rooms and at least 4 stars.

According to following article, in 2010 they will maybe relax the shareholding level in hotels to 70% foreign owned...

http://www.thephuketinsider.com/hotels/tha...ing-in-2010.php

Thats a bit out of my reach .

I would be happy with 70% however

[simon43]

The rules about 100% foreign ownership seem to vary depending upon wherebout the business is in Thailand

To be absolutely correct, it is the business of 'hotel management' where 100% foreign shareholding can be legal. However, what a hotel is in Bangkok is not the same as what a hotel is in Phuket! When I built my 'hotel' in Phuket, I was told that if it had more than 12 letting rooms, then it would be classed as a hotel, would have to pay the local 1% hotel tax, but that I would be allowed to own the management business of that hotel 100% without any Thai shareholders, (but still needed to have a Thai company registered with at least 3 shareholders). But as others have mentioned, we are talking about the hotel management, not ownership of the land on which the hotel is sitting.

The best option (for a small guesthouse), is to rent the land for 30 years, register this lease at the local amphur. Then register a Thai limited company where you have 2 Thai shareholders who hold the majority shareholding whilst you own no more than 39%. But you have preferential voting rights and can control the business. But you neither own the land nor the business, so no-one can lay that claim against you.

I could comment further, but let's see if my comments so far are useful to you.

Simon

Edited November 15, 2009 by simon43

[Sunbelt Asia]

Dear Timmy,

It is certainly advisable to set up a Thai limited company to operate your business. There are many reasons for this but the most obvious is that you will be able to obtain a work permit through your company, which will enable you to actively work in your business and also obtain a non-immigrant business visa. When setting up a Thai limited company you are required to have 3 shareholders. In the majortity of instances, the company must be 51% Thai owned. However, if you are an American national you can set up a company under the Amity treaty and qualify for 100% foreign ownership. In addition, if the company is 100% export or a manufacturing business (specific categories only) then it may also qualify for 100% foreign ownership. Certain types of companies can also qualify for 100% foreign ownership through the BOI (Board of Investment).

When setting up the company it must have at least 2 million Baht of registered capital. Thai nationals are required to display an amount equal to the value of their shares in a bank account. This amount will be checked during the company set up process but is not required to be kept there for a certain period of time. However, foreigners are not required to display these funds. Therefore, you will not be required to display the full 2,000,000 Baht in a bank account upon setting up the company. Providing you have 4 Thai employees and 2,000,000 Baht of registered capital, you will be able to obtain a work permit regardless of your individual expertise.

For more information on the company set up process, please contact Sunbelt Asia for a free consultation at your convenience on 02-642-0213.

Best regards,

Foreign Business Advisor

Sunbelt Asia Co.

www.sunbeltasia.com

[email protected]

Edited February 12, 2010 by Sunbelt Asia

[beddhist]

So, if my Thai wife and I run a guest house we would need to form a company and employ people just so I can get a work permit? What will I be allowed to do or not to do myself without a WP? Change the sheets? Bookings, reception, paint the walls, clean? None of it, I guess.

How do other people get along with this? There are lots of farangs in this situation.

In one city I know a motorbike shop, owned and run by a farang. The only employee I have ever seen was also not Thai. How can this work? I'm sure he does it legally, or the Thai competition would soon have him shut down.

Thanks for any light you can shed on these questions. We are about to begin the process of moving to Thailand, but I neither can not want to retire yet.

Cheers,

Peter.

[EvilDrSomkid]

It now seems to be that the business department wants to see cash in the bank when registering a company with foreign shareholders.

If you set up a company with just 3 Thai shareholders (e.g. your girlfriend as majority shareholder and 2 others as minority shareholders), they do not check on the cash balance.

Which means you register a 2 million Baht company with no ready cash on hand.

As the company papers will show 2 million registered capital, the company can support your work permit. It would be only 1 million if you were married to your girlfriend!

If you do put in yourself as a shareholder, I'm not sure how much of the capital has to be paid up, it will most likely not be the full 2 million. Anyway, the cash in the company accounts is freely available for investing etc after the company is registered.

To be able to get a work permit you'd need to have 4 employees on the books, with their social security contributions paid. The employees cannot be shareholders in the company, well they can, but those do not count towards the 4 employees needed! As a small upstart company you might beable to negotiate a bit with the labor department resulting in them agreeing to issue you a WP without the full 4 employees. No guarantees however.

Getting a work permit as managing director of the company you hold shares in is virtually always approved. You basically are allowed to oversee your investment.

Do understand that a work permit contains a detailed job description, and that's the only work you are allowed to do! As a managing director you are not allowed to serve customers a drink, you need Thai staff to do that!

Also, your newly created company will not be able to support a 1 year extension based on employment for you, as they would need two years worth of audited bookkeeping. Visa wise, your best chance is to get a multiple entry non immigrant B, which will see you do a border run every 90 days, for a total stay of just under 15 months.

Guess that answers most of your questions.

Regarding the bold part: That kind of sucks... I am working on setting up a company with my wife later this year.

Is there any way around this legally? We do not really need more than 3 people total. Maybe 4. Would it help if the registered capital was 1.5 mil for example?

I did not know that one of the Thai shareholders do not count towards the Thai employee requirement. What I know so far is that if married to Thai national, the registered capital and employee requirements are cut in half. Ie. 1mil and 2 employees, depending on business.

We are planning on setting up an export business of goods manufactured in Thailand, we buy from manufacturing company, then export to US and EU.

Does anybody know if production equipment listed as company owned, assets, can count towards the registered capital requirement? I am guessing not, if the shares need to be fully paid up in an account in order to get the WP. I will be getting a Non-O based on marriage first.

What kind of T/O or profit do they look for in order to issue/extend the WP?

[manjara]

It now seems to be that the business department wants to see cash in the bank when registering a company with foreign shareholders.

If you set up a company with just 3 Thai shareholders (e.g. your girlfriend as majority shareholder and 2 others as minority shareholders), they do not check on the cash balance.

Which means you register a 2 million Baht company with no ready cash on hand.

As the company papers will show 2 million registered capital, the company can support your work permit. It would be only 1 million if you were married to your girlfriend!

If you do put in yourself as a shareholder, I'm not sure how much of the capital has to be paid up, it will most likely not be the full 2 million. Anyway, the cash in the company accounts is freely available for investing etc after the company is registered.

To be able to get a work permit you'd need to have 4 employees on the books, with their social security contributions paid. The employees cannot be shareholders in the company, well they can, but those do not count towards the 4 employees needed! As a small upstart company you might beable to negotiate a bit with the labor department resulting in them agreeing to issue you a WP without the full 4 employees. No guarantees however.

Getting a work permit as managing director of the company you hold shares in is virtually always approved. You basically are allowed to oversee your investment.

Do understand that a work permit contains a detailed job description, and that's the only work you are allowed to do! As a managing director you are not allowed to serve customers a drink, you need Thai staff to do that!

Also, your newly created company will not be able to support a 1 year extension based on employment for you, as they would need two years worth of audited bookkeeping. Visa wise, your best chance is to get a multiple entry non immigrant B, which will see you do a border run every 90 days, for a total stay of just under 15 months.

Guess that answers most of your questions.

Regarding the bold part: That kind of sucks... I am working on setting up a company with my wife later this year.

Is there any way around this legally? We do not really need more than 3 people total. Maybe 4. Would it help if the registered capital was 1.5 mil for example?

I did not know that one of the Thai shareholders do not count towards the Thai employee requirement. What I know so far is that if married to Thai national, the registered capital and employee requirements are cut in half. Ie. 1mil and 2 employees, depending on business.

We are planning on setting up an export business of goods manufactured in Thailand, we buy from manufacturing company, then export to US and EU.

Does anybody know if production equipment listed as company owned, assets, can count towards the registered capital requirement? I am guessing not, if the shares need to be fully paid up in an account in order to get the WP. I will be getting a Non-O based on marriage first.

What kind of T/O or profit do they look for in order to issue/extend the WP?

I set up a company with my wife and wife's family (admittedly this was a few years ago now, so things may have changed). I employ my wife and my wife's sister and I got a WP no problem (last one was for 2008). The company also only has 1 million registered capital, which is all you need if you are married to a Thai.

I did make profit and paid myself a decent wage (which you have to pay tax on monthly, along with other monthly submissions).

All in all, running the company will cost you a good chunk unless you do everything yourself - my annual audit this year is costing 23k and the company only has about 10 reciepts to process!

So, running a company is not a good option for a borderline business, it will push you way into the red.

I viewed it as the only way to stay in Thailand on an annual visa, but I think there are better ways.

[EvilDrSomkid]

Manjara, thanks for the info.

Regarding pay, I plan to start paying myself 50k p/m, which I believe is the minimum. I want to do it all legal.

I am still doing research on how to structure the company. I am not assuming I will make a profit the 1st year. I hope that the tax dept. and labor dept. will not make big issues out of this.

I will be doing a lot of the work myself. Contacts with the manufacturer and our customers. Sales and marketing, by me for one product line and my wife for others. Luckily, my wife has been running her own company already for 5 years and knows what is involved and how to handle any things.

I am checking into how to ship the product as cheaply as possible to the US and EU. The packages will be bulky, think 170x140x40cm and 10 to 30kgs is typical. I already have one company in mind in the US to target as a potential distributor for us. They re in a similar business and it would be much more cost effective to ship a larger quantity to them by sea, instead of airfreighting piece by piece.

There is a market for our products, but its a small market. We will be expanding our product lines as we go along.

[EvilDrSomkid]

I set up a company with my wife and wife's family (admittedly this was a few years ago now, so things may have changed). I employ my wife and my wife's sister and I got a WP no problem (last one was for 2008). The company also only has 1 million registered capital, which is all you need if you are married to a Thai.

I did make profit and paid myself a decent wage (which you have to pay tax on monthly, along with other monthly submissions).

All in all, running the company will cost you a good chunk unless you do everything yourself - my annual audit this year is costing 23k and the company only has about 10 reciepts to process!

So, running a company is not a good option for a borderline business, it will push you way into the red.

I viewed it as the only way to stay in Thailand on an annual visa, but I think there are better ways.

Can anybody confirm that this is still the case?

I have seen it mentioned by several people, but I need a reference to a legal text or something like that that this is still true.

My wife and I have changed our plan a little. I will be be buying shares in her existing company, which is also has registered as activity that they can do import/export.

So I will set up a division in her company to do my work.

This will save us a lot of time, money, hassles and uncertainty. Her company has more than 5 Thai employees.

[TheKingfisher]

Hi Timmy,

I'm not aware of the set up issues involved in the establishment of a guest house, however I do know about the hotel industry as it stands at the moment...

I would seriously reconsider it at the moment.

I have a large client who owns and manages many, many 3,4 & 5 star resorts and guesthouses through out Asia and they are closing 3 hotels for 6 months in Thailand in the coming months, Western tourism (ther predominant market) is dropping majorly at the moment, and some major players are a little concerned....

I would do some serious research into your market, as western tourism is dropping significantly... on the flip side, Indian and Chinese tourism to Thailand has dramatically increased..... something to think about...

Good luck and hope it goes well for you, which ever way you go.

Edited April 25, 2010 by TheKingfisher

[chiangmaibruce]

Hi all. I note that some folks in this discussion have stated that the requirement in relation to registered capital is halved if you are married to a Thai (ie. from 2mill down to 1 million baht).

Is anyone willing and able to point me towards an official government (or law firm) source/s where this can be clearly confirmed?

Thanks in anticipation

-CMB

[EvilDrSomkid]

real curious here too, as you know.

[raro]

as to my understanding shareholders do count towards the 4 Thai employees (if they are employed...) but not directors. Best, sort this out with a capable business lawyer.

[EvilDrSomkid]

as to my understanding shareholders do count towards the 4 Thai employees (if they are employed...) but not directors. Best, sort this out with a capable business lawyer.

That's clear and taken care of in my case, however, the matter now is a clear legal reference required regarding the 1mil only registered capital requirement if married to Thai national.

[chiangmaibruce]

The following source appears to confirm the issue of reduced capital requirements for those married to Thais subject to conditions as specified:

http://www.bangkoklawyers.com/capitalisati...ai-company.html

Edited May 3, 2010 by chiangmaibruce

[EvilDrSomkid]

The following source appears to confirm the issue of reduced capital requirements for those married to Thais subject to conditions as specified:

http://www.bangkoklawyers.com/capitalisati...ai-company.html

Good work finding that, Bruce.

Thanks again.