Laws Against A Company, Eating Its Capital?

[Guest DragonStar]

Hello Sirs and Others

According to its heading "Jobs, economy, banking, business, investment in Thailand", this forum ought to be the proper place for placing my posting. However, after browsing quite a few topics I'm not so sure. It seems to me that the general tendency is that some guy posts a seriously meant question, whereafter a bunch of other guys get going on having a good laugh of the pour OP, exchanging jokes with each other, of the kind, that obviously come from the buttom of minimum half a box of the CHEAPEST possible beer in the neighbourhood.

However, scattered among the bier-stube jokes, I've also found some seriously meant replies, from obviously insightful guys, who generously spend time and effort on sharing their insight. So - here I go:

This posting is concerned with some specific details with respect to running a LTD with the major incencitive, that it should yield a workpermit and postphone the moment I run out of funds. I have done my homework and know the basic setup-rules (2M registered bahts of foreign origin, 7 shareholders, 49% foreign ownership, 4 Thai employees, etc, etc, etc). Those things are all lined up and ready to get formalized.

I even know a reliable lawyer, 10 months ago I discussed matters with her and she asked me the question: Do you have a business? - to which I had to say No. The lady adviced me to wait with company-formation until I had one - Well-knowing that she could have plucked me there and then, she gave me an advice that might result in her never getting the chance again. Pretty reliable - I'd say. However, I also know that she'll charge me dearly for each and every actual service she might provide. So I'll trial this forum, to see if the outcome should be that the number of services I'll need, would become a bit lower.

Here's the outline - opinions requested

For simplicity: Let's just assume the LTD fulfil the minimum requirements (for holding one foreign workpermit) plus that the registered capital of 2 M baht actually can be paid up in cash plus that there is sufficient extra funds for the various costs involved in the formation-process plus that there will be at least one very active Thai-partner (my wife).

Put in short. Let's assume the company actually does get formed and operational. Okay? --- Now, what's wrong with these (un)optimistic considerations:

1) The LTD can hire me as managing director and/or working specialist and pay me 40.000 B/m (I have a degree, that would justify minimum that salery).

2) The company would be profit-yielding, after all expenses, except for (parts) of my salary, are paid. Meaning that in case I actually did spend all 40.000, the initial 2 M will be gone within just a few more years, than if I didn't run a business.

3) Let's say I can live happily for 30.000 B/m to my personal needs. Is there any laws preventing me from reinvesting the remaining 120.000/year in the company?

4) Let's say that the financial situation for the company develops like this: Slowly but steadily the size of its bankaccount gets smaller year after year. Is there any problem in that, as long as the company can pay its salaries/bills? - (Yes, I know there is the problem that some day the company won't be able to pay up).

Anyone feel like commenting?

DragonStar

[solo siam]

Well, you will most probably get investigated by the tax guys just about every year, If you are not paying much VAT to the government and have hardly any income then its probably going to be a problem.

You will also have to pay tax on your salary and the Thai equivelant of National Insurance for each of the Thai 'employees', add in accountancy fees, that you will need a place of business with signage of some sort etc.. and it starts to become a little pointless.

Why not actually run a proper business? doesnt have to be anything major, perhaps import or export of some kind or something where your experience may be able to help. Don't have to actually 'work' full-time but I think going into a business with the idea of making it easier to stay here might not be such a good idea.

[Indo-Siam]

Well, for starters, here are some considerations:

1. If your marriage to a Thai is properly registered here, then there is an easy way to set up a better program. Using your marriage status, obtain a non-immigrant Class O visa, and subsequent non-immigrant entry permit. Then - extend this Class O entry permit on the basis of remitting into Thailand 400,000 baht - into a Thai personal bank account bearing your passport name. Get this entry permit extension before you apply for a work permit. Then, when you obtain your work permit, you will autlomatically get a long-term work permit, matching your extended entry permit. Also, you can use some or all of the 400,000 baht later, to caopitalize your company.

2. If you will proceed as I suggest above, you DO NOY NEED ANY THAI EMPLOYEES AT ALL. The work permit office does not care about employees, except in certain situations, which will not apply to you. Also - you will NOT need to register 2,000,000 baht capital - that figure is only related to obtaining a work permit for someone who is NOT married to a Thai. Because you have a Thai spouse, you may get a work permit with just 1,000,000 baht registered capital.

3. Your "burn rate" will have to include paying for accountung services, annual audits, and maintenance of a legally-sufficient registered business address.

4. If you do not plan to have your company earn any income, then I do not understand why you want a company. You should simply string together annual long-term extensions based on bringing in 400,000 baht per year. You will last five years that way - unless Thailand again changes the minimum amounts. In general, if you only spend 30,000 of that each month, and end the year with 40,000 baht balance, all you need do is "top up" to 400,000 baht. Any way you figure it, your money will probably last longer if you forget about the company.

5. If you do proceed, the Revenue Department has very low expectations for start-up companies, as far as revenues are concerned. Unofficially, they generally give a new company two years to sort out its business. Starting in the third year, they expect you to begin paying tax on profits - they are happy with about 28,000 baht per year, for that third year.

6. Everything I outline above applies to the Bangkok area. Out in the boondocks, they may play by their own rules.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

[email protected]

www.thaistartup.com

[chownah]

If you are doing all this just so you can stay in Thailand, then there is another way. If you come from a prosperous country you don't even need a visa if you are willing to travel to the Thai border every 30 days to get a new entry card...that's what I do. If you want to find a list of countries whose citizens can use this option then go to the internet to any Thai embassy site and check out visa requirements by country. Every 30 days I drive to the border and return home. It takes me about 3 hours total time round trip including the time to process the paperwork. I enjoy getting out of the village every 30 days for a short road trip.

[Guest DragonStar]

Thank you guys. Especially Info-Siams item 2 makes things seem a little brighter. No need to employ Thai staff unless you actually need them.

I actually do want to work. I'm only 54 and thus way too young to retire, I am currently at the beginning of the 3. period of a non-o multiple and know that a 1 year extension from Chiang Mai imm. wouldn't be hard to get.

However, thats not a feasible solution because that doesn't allow me to work - as far as I know.

I - sorry, I mean my wife - already runs a business (a Cyber Cafe) in Chiang May, which I - sorry, I mean my wife - has set up starting from renting an empty shophouse. The proper licenses for running it as a personal owned business are all in place (I hope).

I just want to legalize my participation and most certainly, I'd like that business to make the company account grow every year. However, after about two months of full operation its obvious that hard work alone doesn't make you rich - you'll also need luck and high season all year round. Either that or earnings from 2-3 places of same kind. (the frase "... eating away its capital" stems from circumstance that I don't rely on luck)l

Any problems (except paperwork, fees, costs of legal assistance, etc.) in the company buying my - sorry, my wife's - personly owned business?

Thanks.

DragonStar

[~G~]

DragonStar,

I'll let the professionals answer the legal issues, I'd just like to make one remark you might want to consider. That's the overhead costs (and headache) that comes with a company + a work permit in relation to the costs of running exactly the same business as a sole proprietor (what I assume your wife is doing now).

You need to be VAT registered. You need to extend you WP again and again. Accountancy requirements are beyond compare. You need a formal address. You will be visited by Revenue Department.

If the biz is not very profitable now, the extra expenses will certainly not help. My understanding is that all that overhead is justifiable in larger businesses, generally not always in a small internet cafe.

I do not suggest that you should not do it - just something to keep in mind when considering expected income, profit and loss, and the way you can, or cannot, compete with locals who do not have this overhead.

[Guest DragonStar]

Tanks ~G~, but do I actually have a choise if I want to avoid the constant thread of getting jailed for working without a work permit?

Various inspectors do take their rounds in the neighbourhood, checking licenses and who knows what. It won't be hard to catch me in situations where: "I'm not working, only looking" won't be axccepted. Besides, we actually do steal patrons from the nearby competitors - some of these might have nephews or uncles within the force.

So, once again - does one have a choise?

DragonStar

[~G~]

Tanks ~G~, but do I actually have a choise if I want to avoid the constant thread of getting jailed for working without a work permit?

<{POST_SNAPBACK}>

Yes, the choice is not to work there at all...

[Indo-Siam]

Hello Dragon Star -

I normally am not much in favor of forming Thai Limited Partnerships (TLP), but in your particular situation, that is the correct answer for your situation.

Simply form a TLP with your wife, and register 1,000,000 baht capital. I think total goverment fees will be well under 3,000 baht - "all in". That entity can then sponsor a work permit. You then simply have the TLP take over running the Intenet Cafe.

The TLP paperwork and process only take a day or two - plus a couple of days to get the name reservation for the TLP.

If you cannot - for some reason - find someone in Chiang Mai to help you for such a TLP, my office could probably prepare all the documents, and send them to you via EMS. You just have to file them at Commercial Registration Office up there.

If interested, have your wife speak to Khun Beer at 02-260-3914.

Good luck!

Steve Sykes

Managing Director

Indo-Siam Group

Bangkok

[email protected]

www.thaistartup.com

[Guest DragonStar]

Thanks Steve,

I'll do that first thing, tomorrow. Rather that, than bore my self to death by following ~G~'s solution.

DragonStar

[~G~]

Thanks Steve,

I'll do that first thing, tomorrow. Rather that, than bore my self to death by following ~G~'s solution.

DragonStar

<{POST_SNAPBACK}>

Dragon Star - there are many solutions to boredom - getting involved in a biz you don't have very good reasons to believe will be profitable might not be the best one.

Having said that - you might turn this business into a success. Please take my post as my personal view only. If you do choose to form any kind of legal body - I can certainly recommend Steve's services, as his company is highly experienced in this field.

[Guest DragonStar]

Hi ~G~,

No offence meant!

I certainly do respect everybody's right to live his life the way he chooses (as long as it doesn't harm others). I'm also very thankful, that you did take your time and effort, trying to help me out. Thanks!

If you are happy, good! I have no comments on that. My situation is basically the same as yours - I think. I want to be able to do and live as i am doing and living right now - preferably in a way, that no police-crackdown can possibly spoil my happiness. Are we at level with respect to that?

One difference between you and me might be, that you can survive in Thailand by means of your present and/or future income. I cannot!

By obtaining the legal right to take my hand out of my pocket, I expect/dream about a future, where I can make my current cashdraining situation into a non-cashdraining situation. Period.

Thanks again, DragonStar

[~G~]

No offence taken.

My remarks are based on my experience of following that path of setting up a company, WP, etc., and on the observation that my estimate of the required overhead costs was too low. Not that I would not do the same thing again, I would, but I'd do it in a way that takes into consideration these factors.

Good luck

[autonomous_unit]

One comment... you need to think carefully about your job description before forming the company and applying for a work permit. Being the directory of the company is easy, but if you try to put technical work like maintaining/operating computers (IT), I think you will quickly run into a special case of the labor rules!

I'm not a legal professional and do not know exactly how the chips fall for an internet cafe. However, for some IT work, you need to document how you are a specialist with skills not common in the local market and then you will most likely be forced to document "knowledge transfer" which does seem to introduce a requirement for Thai national employees (how ever many you are required to train).

All of this can be avoided if you are a director and manage staff who do the IT work. Trying to do the IT work while your work permit does not include it in your job description may leave you right back where you started, e.g. worried that someone will "catch" you working without permit.

[~G~]

All of this can be avoided if you are a director and manage staff who do the IT work. Trying to do the IT work while your work permit does not include it in your job description may leave you right back where you started, e.g. worried that someone will "catch" you working without permit.

<{POST_SNAPBACK}>

See what I mean... it's endless. One needs to draw the line somewhere. You're running a software company with a turnover of 10 Million dollars a year? Yes - go through all the beurocracy, whatever it takes. Running a 10 PCs internet cafe, charging 15-30 baht an hour? What's the point?

My point is that if you wish to make money - think of something which will worth your time and the overhead involved. Thais who want to start a small biz can have quick and easy start with not much fuss. For a foreigner, every the tinyest business is a major headache, beaucracy-wise.

My view - think big or forget about it altogether

Edited November 1, 2005 by ~G~

[Guest DragonStar]

Thanks for the warning.

I think that I've followed each and every link, related to workpermit and company formation, from ThaiVisas mainpages, Ethailand.com, Siam-Info, Sunbelt and even BOI. I won't claim that I've understood everything clearly, but I do have a pretty good idea of the quantity of bureaucratic obstacles and their associated workloads.

Yes, I agree - if one is the kind of guy, that lets bureaucracy and small-faced officials gets to his head - don't go for it. The trick is to take it as part of the game and not let it get to your head. Then no headache. - Life is but a stepping stone. Be balanced.

As for thinking Big. I'm a one-step-at-a-time guy... Step 1: Make yourself a solid foundation, that can pay bread and butter and your wife's allowance and keep her occupied... The experience and knowledge you gain by doing so, prepares you for making the right decessions at step 2.

-----------------------------------------

Well, in exchange for the advices from the experienced guys around, I'll try to share an experience of my own.

After Siam-Info's first reply, the business has become much better. Without the cost of 30-35.000 B/m to 4 fulltime Thai employees, it actually is profitable. I've just written the buttom line in the account-book here at the end of our second month. The yield (before tax) is at level with my actual, personal expenses (very small) plus spouse-allowance. (This is after the shop has paid all Internet, daily Bagkok Post, 90% power, 50% rent + a few minor fringes). No reason not to believe that next month will be even better. Tourist high-season has barely begun in Chiang Mai and we see a growing stream of longterm regulars (that used to be regulars elsewhere). The words are spreading.

The remedy for stealing not so few patrons from Thai competetors has been simple: same charges - much better quality (not difficulty).