Can my 8-year old Thai son own a sole trader business (book khon tamada)?

[simon43]

Following on from my recent thread about 'creative' use of a Thai-US Amity company to own a guesthouse business on longterm, leased land, I have to admit that this idea is not practical for a non-US or non-Thai citizen.

So I need to consider other alternatives. My objective is to find a legal way for me to own or control my small hotel business in Phuket. To recap from the other thread, I have built 3 small hotels in Phuket since 2005, and each one of them has been profitable, and each one of them has experienced problems (both big and small), due to the 'interference' of my Thai partners in these businesses.

The bottom line is that I can run the businesses far better without them (or anyone else), sticking their fingers into the pie

This new hotel is a small but very important project for me. It will provide me with an income stream for the next 20 years, so I want to eliminate the 'fingers in the pie'.

I will not be actively working in this business, but I do want to have legal control over the business.

If I were to establish a Thai ltd company, current thinking (AFAIK), is that there is no legal way for me to control the business, (nominee use is illegal etc). Besides, registering and managing a ltd company is akin to using a hammer to crack a nut. This will be a small guesthouse/hotel with about 8 letting rooms, built on leased land, (the land is leased in my name only).

I have a young Thai son. Is there a viable option for a sole-trader business that manages the guesthouse to be registered in his name, and for me to have power of attorney over that management, due to his young age?

In any case, I would welcome details of any solution that allows me to legally own/control this small business. I do not want my ex-wifes to have any position in the administration of this new business, (because they will then assume that they own the business, and correcting ignorance can be costly and time-consuming...

Simon

[Arkady]

A sole proprietorship means that individual is operating a business himself and filing personal tax returns. It would pretty obvious that this is not possible and therefore that you set him up as a nominee in violation of the foreign business act as well as working without a WP. He would certainly not be granted any licenses you might need for the business or planning permission, if you buy the properties and want to do extensive renovation. The police will come around to check out guest houses and would rumble this structure in seconds.

[Phronesis]

Simon

The FBA allows 100 percent foreign ownership of a company that provides hotel management services.

Simple...

[simon43]

The FBA allows 100 percent foreign ownership of a company that provides hotel management services

Yes I know! But 'hotel management services' refers specifically to a 'hotel', not a guesthouse. It sounds like i'm splitting hairs, but certainly here in Phuket there is a legal definition of what constitutes a hotel (must have 12 or more letting rooms), and what constitutes a guesthouse. (The inclusion of the word 'hotel' in the business name doesn't actually make it a hotel...)

I'm sure most lawyers won't have a clue about this important definition etc. i'll ask Sunbelt to see if I can have 100% foreign ownership of a ltd company that manages my guesthouse. (I don't want to build 12 rooms to create a 'hotel' because that leads one into a whole host of additional taxes and admin work)

Simon

[yankee99]

There really is no such thing as a sole proprietorship in thailand in regards to being a registered company. Even if no falangs are involved you need 3 people. It can be 98%, 1% and 1%. I dont know that its illegal to run a business with the 49/51% structure i see many people do it successfully. Of course setting that up to solely own land is a different story....

You can also register a loan/mortgage on the deed to give you a extra layer of protection. With this the there is little chance to lose your investment....

Thinking some more if it was me i would have two companies. One holding the property and the other holding the business. Of course the business would be paying rent to the land owning company........

[bitcoinbob]

your son will not be able to help till he is 18.that is the age he can engage in legal contracts. you need a thai nominee who is not going to interfer, only way around it. look what happened to Mandarin Oriental, which will cease management of its Dhara Dhevi resort in Chiang Mai, Thailand, at the end of August.

[Phronesis]

The FBA allows 100 percent foreign ownership of a company that provides hotel management services

Yes I know! But 'hotel management services' refers specifically to a 'hotel', not a guesthouse. It sounds like i'm splitting hairs, but certainly here in Phuket there is a legal definition of what constitutes a hotel (must have 12 or more letting rooms), and what constitutes a guesthouse. (The inclusion of the word 'hotel' in the business name doesn't actually make it a hotel...)

I'm sure most lawyers won't have a clue about this important definition etc. i'll ask Sunbelt to see if I can have 100% foreign ownership of a ltd company that manages my guesthouse. (I don't want to build 12 rooms to create a 'hotel' because that leads one into a whole host of additional taxes and admin work)

Simon

Simon

You can't have your cake and eat it too. Sure hotel classification raises additional compliance expenses, but at least these are quantifiable and can be factored into your business model. No so with the unknown costs of interference from Thai nominees, spouse or partners...

[Card]

The FBA allows 100 percent foreign ownership of a company that provides hotel management services

Yes I know! But 'hotel management services' refers specifically to a 'hotel', not a guesthouse. It sounds like i'm splitting hairs, but certainly here in Phuket there is a legal definition of what constitutes a hotel (must have 12 or more letting rooms), and what constitutes a guesthouse. (The inclusion of the word 'hotel' in the business name doesn't actually make it a hotel...)

I'm sure most lawyers won't have a clue about this important definition etc. i'll ask Sunbelt to see if I can have 100% foreign ownership of a ltd company that manages my guesthouse. (I don't want to build 12 rooms to create a 'hotel' because that leads one into a whole host of additional taxes and admin work)

Simon

So why didn't u build or extend the guest house to 12 rooms to convert it into a hotel?

[TravelerEastWest]

If you have two Thai children you can own the common shares and give them the preferred shares.

You keep control with the common shares.

To own the land legally the children need more than 50% ownership then you will have Thai company.

20+ years down the road I assume you will want them to own the land anyway.

[simon43]

There really is no such thing as a sole proprietorship in thailand

Yes there is - it is a legal form of business registration for a sole trader, but that person must either be Thai or a US citizen (Thai-US Amity treaty). My Thai wives often use this form of business registration, but it is not available for me as a Brit!

20+ years down the road I assume you will want them to own the land anyway.

No, I have no interest in owning the land. Myt business model (that I used for 3 different small hotels to date), is to rent land from a Thai landlord for a period of 20 years or so, with that land lease contract in my name only. I then build the hotel, and make my monthly land rental payments. I earn decent profits from the hotel business and then typically sell it as a going concern after 5 - 10 years, pocketing more profits that allow me to repeat the whole process.

But in this latest project, I will have the land lease in my name (as previously), but I do not want my ex's to be involved in the ownership of the hotel/guesthouse business because I simply do not trust them enough to 'own' the source of my retirement income

Simon

[realenglish1]

Then you can own 49% and have a good Thai friend own 3 % and your others own 48 % That will give you control

The rest is elementary

[RAZZELL]

Simon - Over the years I've always read your business and personal "problems"...I love the way you keep battling on and suceeding!

Can you say why you don't want to have 12 rooms - or whatever is needed to become an hotel? Seems to be the most simple solution?

RAZZ

Edited September 5, 2013 by RAZZELL

[yankee99]

There really is no such thing as a sole proprietorship in thailand

Yes there is - it is a legal form of business registration for a sole trader, but that person must either be Thai or a US citizen (Thai-US Amity treaty). My Thai wives often use this form of business registration, but it is not available for me as a Brit!

20+ years down the road I assume you will want them to own the land anyway.

No, I have no interest in owning the land. Myt business model (that I used for 3 different small hotels to date), is to rent land from a Thai landlord for a period of 20 years or so, with that land lease contract in my name only. I then build the hotel, and make my monthly land rental payments. I earn decent profits from the hotel business and then typically sell it as a going concern after 5 - 10 years, pocketing more profits that allow me to repeat the whole process.

But in this latest project, I will have the land lease in my name (as previously), but I do not want my ex's to be involved in the ownership of the hotel/guesthouse business because I simply do not trust them enough to 'own' the source of my retirement income

Simon

Not sure what she has but my guess its not registered with the dbd.....If it is i stand corrected and ask you to kindly post the form without personal info......I went through this to register my wife with thai customs e-system and although she could do it in her name she needed a real (dbd registered) company to do it in a business name...

We also contacted at least 6 lawyers and all had the same answer ..... mai dai!

[Maestro]

From the OP:

...My objective is to find a legal way for me to own or control my small hotel business in Phuket...run the businesses...I will not be actively working in this business, but I do want to have legal control over the business...

I believe you have been told this before: you cannot control and run the business without working in it, ie without being an employee with a work permit.

I have a young Thai son. Is there a viable option for a sole-trader business that manages the guesthouse to be registered in his name, and for me to have power of attorney over that management, due to his young age?

As has already been mentioned in this topic, a minor cannot be a sole trader. However, a minor can hold shares in a company. If you have sole custody for your child, you presumably have also sole authority to manage his assets but you may want to check if you need a separate court order for this. In this case your son could own 51% of the company, you the remaining 49%.

[khunPer]

A limited Thai company. You will need 3 shareholders. You can own 49%, your son can own 49% or 50% and a good Thai friend can own 1%, which may not be more than your friend can prove to be able to buy/invest, fx, 1% of 2 mio. eq. 20k.

Your son's shares will be administrated by his guardian until 20 years of age. If you is the guardian, then you. You can include preferred shares in the company, fx. 10 votes on preferred shares and one vote only on normal shares, and you can own the preferred shares.

A Thai individual can run a personal business, but I have never been into that, so cannot help. There is also somtehing called a “limited partnership”, which is not a limited company, but rather two individual people running a business. Unfortunately I have no experience in that either. You may need to talk to an accountant or a lawyer.

[sabye]

A limited Thai company. You will need 3 shareholders. You can own 49%, your son can own 49% or 50% and a good Thai friend can own 1%, which may not be more than your friend can prove to be able to buy/invest, fx, 1% of 2 mio. eq. 20k.

Your son's shares will be administrated by his guardian until 20 years of age. If you is the guardian, then you. You can include preferred shares in the company, fx. 10 votes on preferred shares and one vote only on normal shares, and you can own the preferred shares.

A Thai individual can run a personal business, but I have never been into that, so cannot help. There is also somtehing called a “limited partnership”, which is not a limited company, but rather two individual people running a business. Unfortunately I have no experience in that either. You may need to talk to an accountant or a lawyer.

Your son can own the majority of Thai shares BUT only once he reaches the age of 12. I just did this a few months ago with my son. I own 49%, my wife owns 25% and my son owns 26%. You could adjust the number of shares as you wish but for myself it made no difference as I have loaned my own money to the company to get it up and running. The loan is a demand loan with a fixed interest rate of 2% per year. If I have problems with my wife, my son and I have control of the company and if I have problems with my wife and son then I can demand my money back from company and this would effectively bankrupt it. The head of the DBD here told my son can own the shares but he could not be a director until he was 18 years old so he cannot control any of the company business but he can vote at our meetings.

The first thing I was told by a Thai when I came here 15 years ago was "Don't ever, ever trust a Thai!" So far that has been the best advice I have received since I came here.

[harrry]

You are aware that land in a minor's name cannot be sold leased for more than 3 years or mortgaged. THe court may allow it but they will not.

[malakmd]

There are two solution for your problem

1- Have your Own Ltd company, get your WP and run business with full control

2- Hire a property management company and let them manage your guest house under your supervision and guidelines, indeed you need to pay monthly or yearly charges to them.

I can suggest you someone who can help you if you want to hire property management firm.

[simon43]

@yankee99, the sole trader entity is very easy to register at your local Tessabahn. Of course, this type of entity does not offer limited personal liability, but that would not be an issue for my business ==> it never has any large liabilities.

You are aware that land in a minor's name cannot be sold leased for more than 3 years or mortgaged. THe court may allow it but they will not.

Your comment is not relevant - I do not own the land, but lease it on a long-term basis.

Of course, I could build 12 rooms+ and operate the guesthouse as a hotel. But that means I have to charge a 7% service charge to my guests, plus another 1% hotel tax etc. It's all 'doable', but at first sight, the affect on my 'bottom line' is high. I also suspect that my attempts to register this management business as 100% foreign-owned would be 'thwarted' by the Phuket authorities, who are hardly famous for their 'pro-foreigner' stance

But I will take on board all these comments and decide what to do. I am busy building extra rooms at the existing 'hotels', so won't be ready to build a new hotel until next low season.

Simon

[harrry]

You are aware that land in a minor's name cannot be sold leased for more than 3 years or mortgaged. THe court may allow it but they will not.

Your comment is not relevant - I do not own the land, but lease it on a long-term basis.

Of course, I could build 12 rooms+ and operate the guesthouse as a hotel. But that means I have to charge a 7% service charge to my guests, plus another 1% hotel tax etc. It's all 'doable', but at first sight, the affect on my 'bottom line' is high. I also suspect that my attempts to register this management business as 100% foreign-owned would be 'thwarted' by the Phuket authorities, who are hardly famous for their 'pro-foreigner' stance

But I will take on board all these comments and decide what to do. I am busy building extra rooms at the existing 'hotels', so won't be ready to build a new hotel until next low season.

Simon

That is fine.....but will the court allow you to sell any of his assets...his bussiness for example? And presumably he will lease the land not you.

Edited September 6, 2013 by harrry

[simon43]

And presumably he will lease the land not you.

No, I always lease the land in my name only - that gives me some 'protection'. But from the good comments on this thread, it seems that involving my Thai son is not a viable solution.

I've emailed Sunbelt re the 'hotel management company' definition, and I'll wait for their reply.

Simon

[inkorat]

Simon,

You should have no problem running the business as a sole owner or partnership under the Treaty of Amity as a U.S. citizen and you could get the building permit in your name and own the structure.

Your child can own the land. The problem is only that a legal guardian must be appointed until they are 20 and there are some restrictions on what contracts they can enter into, unless agreed otherwise by the courts.

If it was me, I would just establish the leasehold right on the back of the title deed just prior to the transfer into your son's name. When he receives ownership, your 30 year or lifetime right has already been established and predates his ownership. No minor issues...

[simon43]

@Inkorat. please read the details again in my OP. I am not a US citizen and nor do I own the land or wish to own the land...

Simon

[technologybytes]

Honestly, you should just accept that this is Thailand and you can't get what you want.

I'm sure there are countries in the world where you can do the kind of business you want to do on your own terms, but not in Thailand.