Limited Partnership,ordinary Partnership Or Reg Company?

[jaiyen17]

Hello there,

I am in need of some guidance. My fiance and I have been exporting thai handicrafts, clothing, Jewerely and furniture to America for 6 years. This business started very small as supplemental travel income for me. We now have wholesale catalogues, a website, numerous u.s stores we ship to as well as my own successful retail store in Lake Tahoe. We also run some ebay when time permits. At the current time we have 500,000 baht in product orders and I probably have 2,000,000 baht in inventory at my retail store in tahoe.

This year we rented a house in Nonthaburi that has a large additional space that could be a shop but we use it as a product wherehouse.

I am a canadian citizen living as a permanent resident in the u.s for 37 years. My fiance is thai national. We plan on investing in real estate in thailand in the next two years. We have a three year contract right now on our rental property in Thailand. This march we will be married here in thailand and then at the end of April plan on applying for a toursist visa for him to america for the summer months. (I am not very optimistic about getting it unfourtunately) Right now I would like to make sure what we are doing is all "above the board" in thailand and need to establish him as a business owner of some sort for visa issues. He truly has been 1/2 of this business since it's beginning so how do we get that on paper??? In america I have a commercial business license and a sellers permit. I pay quite a bit in income tax as well as sales tax from the register.

My question here is how to make this business completely legal in thailand while giving us the best chance for our future investments etc and our visa issues. I was thinking that Pocky could just get his own business licence for his "buying, sourcing and shipping" end of the business here but it sounds like simple business license such as I have in america is for people who want to set up a shop where the money is made in thailand. Right now I have him on a monthly salary of $20,000 baht and that is the only money he makes from our business. He also works on the side as an artist (his education and past work has been in art and graphic design)

I am interested in getting back our VAT taxes that are accumulating and usually lost here in thailand. I am also interested in securing our business name for our future. (It's a good one )

Will an ordinary or limited partnership work for us? I'm not really interested in dealing with a company and shareholders. We truly are a simple partnership. What taxes will that open us up to paying in thailand? How can I keep the business money made in america seperate from the thai money. The only money made right now in thailand unless we set up a shop in bangkok is his salary. and maybe some Ebay if we ship from here.

Any advice would be much appreciated. I feel like I'm swimming in an unfamiliar sea.

[Carmine6]

Sunbelt Asia which sponsors this topic may be able to help you (click their logo on the forum front page for contact info). It really sounds like a question for them or a Thai attorney. I say that because you're dealing with a relatively short time frame before you apply for your fiance's toursit visa and it would be nice to get all this ironed out before that. I think the more you can set up a real separate company in Thailand, the better his visa case looks.

Keeping the money separate seems straight forward if you sell to your US business from the Thai business. If your tax rate is higher in the US, you can even shift some profit to the Thai company by charging the US business more for the goods. Good luck.

[jaiyen17]

Thanx Carmine,

You're always so fast to reply to my questions. I was trying to avoid lawyer fee's but you're right we could probably use some good sound guidance. A couple of years ago when we were real "young minds" with all this business and visa stuff we met a nice couple on Koh Samed who reccommended we talk to a gentleman named Greg Lange at sunbelt asia. We walked in the door and he met with us for about an hour. At that time we were exporting a small amount of product, I didn't own a shop, we didn't have a house in thailand, we were just a couple of love birds trying to find a way to be together. It was truly amazing that he took the time out of his busy schedule to talk with us. (he must have thought, "how sweet, but naive!) Now I've come to realize that he is the "big guy" at sunbelt asia. How wonderfully refreshing that he was as humble as he was to meet with such "small fish" . Anway, Pocky went to the local nonthaburi office and got all the partnership paperwork. It's relatively inexpensive and simple to do it all yourself. I'm just not sure the difference yet between an "ordinary partnership" and a "limited partnership" also will a registered partnership be regarded any differently than a registered company by the american embassey. All we really want is to make sure everything we're doing is above board. I couldn't be operating anything in america without some sort of "business license". So I really feel that we need somthing here for sure, and just getting back the "Vat" taxes is incentive enough.

If we start selling product from our thai company to our U.S company doesn't that mean we're taxed on that as income in thailand, I would think so. Really it's not income because it's the American business that transfered the money to the thai company to have it sent back to the same american business as wholesale product. If we end up paying taxes on it in thailand that doens't sound at all beneficial! Now I'm really confused! It seems as though the only money really being made in thailand is Pocky's salary. The rest of the money is just going out to other thai business's.

Looking forward to hearing more ideas by the way, how much do lawyers cost for consultation at sunbelt asia when Mr. Lange isn't volunteering his precious time?

Edited February 16, 2006 by jaiyen17

[Carmine6]

Thanx Carmine,

You're always so fast to reply to my questions. I was trying to avoid lawyer fee's but you're right we could probably use some good sound guidance. A couple of years ago when we were real "young minds" with all this business and visa stuff we met a nice couple on Koh Samed who reccommended we talk to a gentleman named Greg Lange at sunbelt asia. We walked in the door and he met with us for about an hour. At that time we were exporting a small amount of product, I didn't own a shop, we didn't have a house in thailand, we were just a couple of love birds trying to find a way to be together. It was truly amazing that he took the time out of his busy schedule to talk with us. (he must have thought, "how sweet, but naive!) Now I've come to realize that he is the "big guy" at sunbelt asia. How wonderfully refreshing that he was as humble as he was to meet with such "small fish" . Anway, Pocky went to the local nonthaburi office and got all the partnership paperwork. It's relatively inexpensive and simple to do it all yourself. I'm just not sure the difference yet between an "ordinary partnership" and a "limited partnership" also will a registered partnership be regarded any differently than a registered company by the american embassey. All we really want is to make sure everything we're doing is above board. I couldn't be operating anything in america without some sort of "business license". So I really feel that we need somthing here for sure, and just getting back the "Vat" taxes is incentive enough.

If we start selling product from our thai company to our U.S company doesn't that mean we're taxed on that as income in thailand, I would think so. Really it's not income because it's the American business that transfered the money to the thai company to have it sent back to the same american business as wholesale product. If we end up paying taxes on it in thailand that doens't sound at all beneficial! Now I'm really confused! It seems as though the only money really being made in thailand is Pocky's salary. The rest of the money is just going out to other thai business's.

Looking forward to hearing more ideas by the way, how much do lawyers cost for consultation at sunbelt asia when Mr. Lange isn't volunteering his precious time?

Well you just happen to be dealing with some things that I've considered myself, so I'd done some minimal researching before. The only reason I said to try Sunbelt was positive comments on these boards, so glad to see it really is true.

Since you're all set up, I guess the big issue now is taxes. You would be subject to Thai taxes if you sell from the Thai partnership to the US business, but that's the point if the tax rate is lower in Thailand. I'm not sure if that's the case, or if you will suddenly end up with extra import/export tariffs or something. Hence a discussion with a lawyer just to figure out what options you have. I don't think the tax would be on the whole amount that you receive from the US business. The Thai business would be buying the goods from someone else, so only the profit should be taxed.

If the Thai tax rate is better, you could charge the US business a higher price and generate income in Thailand. The higher price will lower the profit of the US business and the taxes as well. You'd have to create invoices and things like that, but if it saves some taxes, it's worth it. You could even bypass the US business and invoice your customers directly if it makes sense. That might even be a better story for the visa as well - that the Thai partnership may start shipping and invoicing directly and that's why you set it up, and that's why Pocky will have to head back to Thailand.

Perhaps moving income to Thailand would also allow more ability to obtain a loan to buy land or build a house too. I'm not sure. Just some things to consider and ask someone qualified. Also consider that moving more money over there increases the risk for you if your relationship goes bad.

In the US, the distinction between a general partnership and a limited partnership is mainly the financial liability and management responsibility of the partners. Limited partners aren't generally liable for the financial debts of the partnership if it defaults on a loan or is sued, but there has to be a general partner that is. The limited partners also don't manage the operations of the partnership. In regular partnerships everyone can be held liable, and everyone can act on behalf of the partnership. No idea what the difference is in Thailand.

[Sunbelt Asia]

Thanks jaiyen17 for your nice comments.

We simply don't like partnerships.

With the ordinary partnership, your fiancée and you both would have unlimited liability. That liability ceases two years after a partner leaves that partnership. Once creditors attach the partnership assets they then can go after the individual partners assets.

On the Limited Partnership, you as the foreigner would have limited liability but your fiancée would have unlimited liability. Limited liability for you that is, if you did not get involve in the mgmt of the business, if you do then its unlimited liability as well for you. Also you as the foreigner cannot be on the bank account in a partnership.

I understand you don't like a Limited Company but you should. Your fiancée can own 49,990 shares and you as well can own 49,990 shares with 5 other shareholders (any nationally) owning the remaining 10 shares of the 100,000 shares allocated. Exporting is NOT restricted under the Alien Business Law so you both can have the equal number of shares. Your fiancée and you would have limited liability in a Limited Company and you both can be on the bank account. If either one of you died you would be protected with a will.

A limited company also would show more creditability than a limited partnership to obtain a visa to the USA. By the way, a Limited Company Business registration by itself is not very useful to obtain a visa. You will need contracts, invoices, bills of lading, accountant's reports and bank records showing regular, steady business activity.

What taxes will that open us up to paying in thailand?

USA and Thailand are under the double taxation treaty so if you pay taxes on income in Thailand you are exempt from that level of taxation in the USA on that net income declared. Have your Thai company be the exporter and payment sent back to Thailand for the shipment with a profit ( instead of just wholesale) This way this company will show the USA officials that this business is worth Pocky to come back to Thailand for. If its only a 20,000 Baht salary, forget it.

A Thai Limited Company with Tax ID, and Vat registration would only be 8,500 Baht in professional fees, 6,930 in government fees for a total of 15,430 Baht and you have a simple Thai Limited Company. The Consultation is free with or without the "Big Guy"

www.lawyer.th.com

[jaiyen17]

Thanks jaiyen17 for your nice comments.

We simply don't like partnerships.

With the ordinary partnership, your fiancée and you both would have unlimited liability. That liability ceases two years after a partner leaves that partnership. Once creditors attach the partnership assets they then can go after the individual partners assets.

On the Limited Partnership, you as the foreigner would have limited liability but your fiancée would have unlimited liability. Limited liability for you that is, if you did not get involve in the mgmt of the business, if you do then its unlimited liability as well for you. Also you as the foreigner cannot be on the bank account in a partnership.

I understand you don't like a Limited Company but you should. Your fiancée can own 49,990 shares and you as well can own 49,990 shares with 5 other shareholders (any nationally) owning the remaining 10 shares of the 100,000 shares allocated. Exporting is NOT restricted under the Alien Business Law so you both can have the equal number of shares. Your fiancée and you would have limited liability in a Limited Company and you both can be on the bank account. If either one of you died you would be protected with a will.

A limited company also would show more creditability than a limited partnership to obtain a visa to the USA. By the way, a Limited Company Business registration by itself is not very useful to obtain a visa. You will need contracts, invoices, bills of lading, accountant's reports and bank records showing regular, steady business activity.

What taxes will that open us up to paying in thailand?

USA and Thailand are under the double taxation treaty so if you pay taxes on income in Thailand you are exempt from that level of taxation in the USA on that net income declared. Have your Thai company be the exporter and payment sent back to Thailand for the shipment with a profit ( instead of just wholesale) This way this company will show the USA officials that this business is worth Pocky to come back to Thailand for. If its only a 20,000 Baht salary, forget it.

A Thai Limited Company with Tax ID, and Vat registration would only be 8,500 Baht in professional fees, 6,930 in government fees for a total of 15,430 Baht and you have a simple Thai Limited Company. The Consultation is free with or without the "Big Guy"

www.lawyer.th.com

Alright Sunbelt Asia, are you ready to take us on? After years of "checking you out" and after this recent post back to me with the best info. I've seen yet, I'm ready to put my future company and visa issues in your hands When can we schedule an appointment. If the wonderful person who sent the above post has any time that would be great, if not, I'm sure I will hear from someone qualified. one quick question that would be great to hear before the appointment.

In response to:

A limited company also would show more creditability than a limited partnership to obtain a visa to the USA. By the way, a Limited Company Business registration by itself is not very useful to obtain a visa. You will need contracts, invoices, bills of lading, accountant's reports and bank records showing regular, steady business activity.

We have six years of business activity and 2 years of steady 40 - 60 thousand baht transfers for business every month or two throughout my peak U.S season then smaller the rest of the year.

We have ton's of invoices, bills of lading, about 100 UPS 25 kilo box receipts and lot's of order receipts. For instance right now we have 420 pairs of leather sandals coming on Wed. and 600 pieces of clothing from Chiang mai on the 27th. I have been running all the money through Pocky's account for the business. I transfer it, he does all the buying and shipping. When I'm in thailand every year I run most of it through my account using the ATM. Some of the larger shipments are in my name. We've been doing business like this for a few years with no accountant, (i do it myself) and no registered company. All my licenscing and tax paying has been done "above board" in the U.S Will this be any help at all to our "tourist visa" app for Pocky on April 27th? His Salary has been a regular 27,000 baht for a year. (included in this is our rent for our home which he pays)

After 6 years, we really want to get married! But now I'm afraid to do it before I obtain my U.S citizenship as marrying a thai national as a canadian citizen may not be looked at fondly in the eyes of the u.s government. Right now I've been a permanent resident for 37 years so it will be easy for me to "nauralize" with no hitches. I've been stubborn about getting my U.S citizenship because I am so terribly dissatified with our current government that I was more embarrassed to say I'm American and liked my neutral "canadian" identity. But now I realize for Pocky and I's future, my citizenship is a must. Wish I had it right now.

Alright, I'll post this now and hope for some more good advice and an appointment

Phone # 09-786-1778 my name is Christy Thank you much!!!!

[Sunbelt Asia]

Thanks Christy.

See you soon.

www.lawyer.th.com

[ScubaDuc]

Thanks jaiyen17 for your nice comments.

We simply don't like partnerships.

With the ordinary partnership, your fiancée and you both would have unlimited liability. That liability ceases two years after a partner leaves that partnership. Once creditors attach the partnership assets they then can go after the individual partners assets.

On the Limited Partnership, you as the foreigner would have limited liability but your fiancée would have unlimited liability. Limited liability for you that is, if you did not get involve in the mgmt of the business, if you do then its unlimited liability as well for you. Also you as the foreigner cannot be on the bank account in a partnership.

I understand you don't like a Limited Company but you should. Your fiancée can own 49,990 shares and you as well can own 49,990 shares with 5 other shareholders (any nationally) owning the remaining 10 shares of the 100,000 shares allocated. Exporting is NOT restricted under the Alien Business Law so you both can have the equal number of shares. Your fiancée and you would have limited liability in a Limited Company and you both can be on the bank account. If either one of you died you would be protected with a will.

A limited company also would show more creditability than a limited partnership to obtain a visa to the USA. By the way, a Limited Company Business registration by itself is not very useful to obtain a visa. You will need contracts, invoices, bills of lading, accountant's reports and bank records showing regular, steady business activity.

What taxes will that open us up to paying in thailand?

USA and Thailand are under the double taxation treaty so if you pay taxes on income in Thailand you are exempt from that level of taxation in the USA on that net income declared. Have your Thai company be the exporter and payment sent back to Thailand for the shipment with a profit ( instead of just wholesale) This way this company will show the USA officials that this business is worth Pocky to come back to Thailand for. If its only a 20,000 Baht salary, forget it.

A Thai Limited Company with Tax ID, and Vat registration would only be 8,500 Baht in professional fees, 6,930 in government fees for a total of 15,430 Baht and you have a simple Thai Limited Company. The Consultation is free with or without the "Big Guy"

www.lawyer.th.com

Technically, the treaty itself is called "Treaty for the Avoidance of Double Taxation" I just spent some time in the PriceWaterhouse library looking it up. Taxation issues differ depending on nationality also. Some citizens (US, Lux, etc) are liable on their worldwide income while other are only liable on the portion of income derived in a country. You also have to ask yourselves, where and how you are going to realize profits (salary, dividends, interest) etc. Then, you should strip the funtions off the highest tax rate locations and charge for the functions performed by say, a coordination center. The important thing to remember, is that all "doble tax treaty" contains a see through provision whre they will nail you if they thing you are setting up a structure to avoid taxes. However, this is almost impossible to proove if you set up the correct structure BEFORE you start the business. With all respect, I would suggest you also consult an expert in international taxation at Price, for example, before contacting a Thai law firm. My 2 (euro)cents

[Carmine6]

Thanks jaiyen17 for your nice comments.

We simply don't like partnerships.

With the ordinary partnership, your fiancée and you both would have unlimited liability. That liability ceases two years after a partner leaves that partnership. Once creditors attach the partnership assets they then can go after the individual partners assets.

On the Limited Partnership, you as the foreigner would have limited liability but your fiancée would have unlimited liability. Limited liability for you that is, if you did not get involve in the mgmt of the business, if you do then its unlimited liability as well for you. Also you as the foreigner cannot be on the bank account in a partnership.

I understand you don't like a Limited Company but you should. Your fiancée can own 49,990 shares and you as well can own 49,990 shares with 5 other shareholders (any nationally) owning the remaining 10 shares of the 100,000 shares allocated. Exporting is NOT restricted under the Alien Business Law so you both can have the equal number of shares. Your fiancée and you would have limited liability in a Limited Company and you both can be on the bank account. If either one of you died you would be protected with a will.

A limited company also would show more creditability than a limited partnership to obtain a visa to the USA. By the way, a Limited Company Business registration by itself is not very useful to obtain a visa. You will need contracts, invoices, bills of lading, accountant's reports and bank records showing regular, steady business activity.

What taxes will that open us up to paying in thailand?

USA and Thailand are under the double taxation treaty so if you pay taxes on income in Thailand you are exempt from that level of taxation in the USA on that net income declared. Have your Thai company be the exporter and payment sent back to Thailand for the shipment with a profit ( instead of just wholesale) This way this company will show the USA officials that this business is worth Pocky to come back to Thailand for. If its only a 20,000 Baht salary, forget it.

A Thai Limited Company with Tax ID, and Vat registration would only be 8,500 Baht in professional fees, 6,930 in government fees for a total of 15,430 Baht and you have a simple Thai Limited Company. The Consultation is free with or without the "Big Guy"

www.lawyer.th.com

Technically, the treaty itself is called "Treaty for the Avoidance of Double Taxation" I just spent some time in the PriceWaterhouse library looking it up. Taxation issues differ depending on nationality also. Some citizens (US, Lux, etc) are liable on their worldwide income while other are only liable on the portion of income derived in a country. You also have to ask yourselves, where and how you are going to realize profits (salary, dividends, interest) etc. Then, you should strip the funtions off the highest tax rate locations and charge for the functions performed by say, a coordination center. The important thing to remember, is that all "doble tax treaty" contains a see through provision whre they will nail you if they thing you are setting up a structure to avoid taxes. However, this is almost impossible to proove if you set up the correct structure BEFORE you start the business. With all respect, I would suggest you also consult an expert in international taxation at Price, for example, before contacting a Thai law firm. My 2 (euro)cents

PWC for a company this size? That makes no sense.

[ScubaDuc]

PWC for a company this size? That makes no sense.

It made pleanty of sense to me and I only have a consulting company. I can't give many details in a public forum but I managed to save a bundle by triangulating and engaging in "functional analysis": Strip the functions to a third entity in a tax heaven and realize as little $$$ where you have to pay....Simple concept if you can get away with it!

P.S. A PriceWaterhouse partner was my professor so it didn't really cost me that much

[Carmine6]

PWC for a company this size? That makes no sense.

It made pleanty of sense to me and I only have a consulting company. I can't give many details in a public forum but I managed to save a bundle by triangulating and engaging in "functional analysis": Strip the functions to a third entity in a tax heaven and realize as little $$$ where you have to pay....Simple concept if you can get away with it!

P.S. A PriceWaterhouse partner was my professor so it didn't really cost me that much

Well it makes sense to get some guidance, but companies this small are so far off the radar that no one is going to go after them for transfer pricing tax issues. Plus the fees the Big 4 charge would bankrupt a company this small in a week. My bill rate was $450/hr and I was years away from being a partner.

Edited February 21, 2006 by Carmine6

[ScubaDuc]

PWC for a company this size? That makes no sense.

It made pleanty of sense to me and I only have a consulting company. I can't give many details in a public forum but I managed to save a bundle by triangulating and engaging in "functional analysis": Strip the functions to a third entity in a tax heaven and realize as little $$$ where you have to pay....Simple concept if you can get away with it!

P.S. A PriceWaterhouse partner was my professor so it didn't really cost me that much

Well it makes sense to get some guidance, but companies this small are so far off the radar that no one is going to go after them for transfer pricing tax issues. Plus the fees the Big 4 charge would bankrupt a company this small in a week. My bill rate was $450/hr and I was years away from being a partner.

I don't disagree with you, the point of my first post was that one should think about where and how to realize profits. Also, a few hrs advice with a leading four may set you back $5K-10K but you don't have to have them do the actual work....just advise about structure. Any "good" financial institution here has a list of partnership company already set up in tax shelters for their clients. You only have to choose the name you like the most and pay a yearly fee which is not that much.