Form Of Business Entities

[calvinwong]

I am planning to move to Thai with my friends in HK and start a new business there (maybe restaurant, bar and/or guesthouse). In order to protect our investment, I would like to know what kind of business entities are available for me to register in Thai, what's the pros and cons, liabilities between them?

I read from somewhere else that i don't need to put entry B2,000,000 capital to the company at the time of registration and a min of 25% is enough instead. is this true?

It's normal in HK or other western countries to use different companies to manage the assets, businesses..etc for taxation, ownership, right, liabilities management...etc issue. would it be too trouble in Thai (as there are min. # of thai promoters/shareholders)

can i loan $$ to the company as the form of shareholder loans in order to better protect my investment if there are any problems raised between us and the Thai shareholders?

is the preference shares vote-able? can i issue p-share to us (the HK shareholders) to "by-pass" the 49% ownership limitation? can the p-share convertible to common shares...etc

how can i have my business return in form of dividend instead of salary, commission becoz of the taxation issue and return split between us (my friends from HK)

[SunbeltAsiaExpert]

There are different forms of business entities available for foreigners depending on the purpose of the business. A company limited or corporation is only one of these forms. You may set up Sole Proprietorship (restricted for foreigners unless applied through certain Treaties such as Amity Treaty but will still pose certain complications with new work permit applications), Partnership, Company Limited or Corporation, Foundation and Association or even a Regional/Representative office. Needless to say, these forms of business entities vary on structure and purpose, including liability. A Corporation or Company Limited among the above forms, is usually the most convenient and safest way to conduct a profit-making business in Thailand due to the protection of its shareholders regarding liabilities, profit and loss. A Corporation or Company Limited can be either public or private in nature. A public company is often listed on the stock exchange and typically has unlimited liability. Privately owned companies have limited liability and are often signified by the term "Co., Ltd" controlled by a “Managing Director”. MD is commonly referred to as CEO or President in western terminologies.

In the process of setting up a company, the initial shareholders, legally called “promoters”, are declared to own shares in the company (minimum number of shareholders/promoters required in a company is 3 parties). By Thai law, the minimum paid up capital is 25% which means that part of the investment, preferably the 25% in the form of cash as a start-up capital, must be issued or remitted to the company following the registration. The amount per share will depend on the amount of Capital declared in the Memorandum of Association of the company and the number of shares issued (e.g. 2 million capital, 1000 shares issued = THB2,000 per share[officially known as “Par Value”]). While the other 75% can be in any form of assets (furniture and fixture, equipment, inventory etc), it must be remitted into the company as declared in the “Balance Sheet” of the company usually at the end of the accounting year. It should be noted that when paying up the registered capital via the use of asset, it should be notified and indicated upon the company’s establishment, the full description of the item must be provided (such as a motor vehicle, the party that is paying up their shares via the use of this motor vehicle must provide the brand, model, chassis number, engine number as well as to proceed with the transfer of ownership from his/her name into the company’s name. The common accounting equation will apply at assets = liabilities + owner’s equity (capital). Soon after registering the company, an official list of shareholders form (Bor Or Jor 5) shall be issued by the Ministry of Commerce reflecting the name of shareholders and the percentages of shares they hold, total shares issued, amount of capital and the amount of paid-up shares. The shareholders can be Natural persons (individual persons) or Juristic Persons (business entity) however, the promoters of the company during the start-up process can only be Natural Persons.

You may issue “common shares” (ratio of 1 share=1 vote) or preferred shares (ratio or 10 shares per 1 vote) depending on your agreement with the rest of the shareholders. It should be noted however, that preferred share holders, in spite of the minority voting rights, are entitled for a fixed dividend at the end of the year. According to the Civil and Commercial code, shares could not be converted (that is Preferred Shares could not be converted into Ordinary/Common Shares). A loan to shareholders is definitely legal and viable but it is considered an internal transaction within the company. It is discretionary for the company whether to issue dividends or to simply carry over to the existing owner’s equity in the beginning of the following year. Salary can only be issued if such a person is declared as “employee” of the company. In cases of foreigners, a work permit must be issued. Shareholders on the contrary, are not employees of the company, rather the investor, hence, they are not entitled to a salary (if they are declared Managing Director with work permit, then yes); shareholders are only entitled to dividends in the event the company decides to issue dividends. It is likewise subject to personal income tax as other sources of income (or corporate income tax if it’s a juristic person).

Sunbelt Asia offers a very competitive price in registering the company for you for as low as THB7,500 professional fees (with free 1 month accounting filing). In order for your company to fully function as a company, you are required to comply with other requirements such as VAT and TAX, work permit, social fund registration and the like. In general, our firm can set up a fully-functional company for you starting from THB30,000 (usually for 100% Thai company) to THB70,000 inclusive of all government fees and a possible work permit. Among other things as part of the package, a set of share certificates, VAT and TAX registration, company seal and Social Fund registration shall also be provided for you including a minutes of meeting to open a corporate bank account under the name of the company. Licenses (FDA license etc) and other special license approval (BOI, Amity Treaty etc), however, are separate billing depending on the need for it. Our team of specialized licensed lawyers is ready to assist you in accomplishing this for you. Contact us now at www.sunbeltlegaladvisors.com to begin the process immediately.

www.sunbeltlegaladvisors.com