legal capital requirements for start-up

[TTom911]

HI,

I am planning to setup a company to run an online marketing business. I have the entire system (website) to operate and run the business in place, no further major investment is required, no major "infrastructure", even no office, really, needed as all is run online. So, from a factual standpoint not much money is needed to run the business.

I understand that a company requires a certain capital to be put in, registered and also Thai stakeholders need to be "on board", literally.

Thinking of a Ltd (or any other form of incorporation with as "little formal and admin overhead" as possible), what is the amount a foreigner has to factually put cash into a bank account (and what would a Thai "partner" have to put in in terms of cash) to qualify for registration? And for how long would any such amounts need to remain in that account (given that the running expenses will be very low and will from an operational standpoint not need much cash reserves)?

Thanks of any input.

[Soutpeel]

If your not married to a thai national the company needs to be capitalised for THB 2.0million and you will need 4 thai employees to get the WP

[inzman]

You only state the capital amount. You do not have to fund all of it. You can fund as little as 100k.

[TTom911]

You only state the capital amount. You do not have to fund all of it. You can fund as little as 100k.

Thanks for the input. Being a foreigner, does this also apply (meaning, only having to pay up a fairly low amount, as you state)?

Edited June 22, 2014 by TTom911

[inzman]

You only state the capital amount. You do not have to fund all of it. You can fund as little as 100k.

Thanks for the input. Being a foreigner, does this also apply (meaning, only having to pay up a fairly low amount, as you state)?

same for everyone.

[mccw]

If it's on line why not just register the company in a zero tax jurisdiction such as British virgin island, Belize or caymans etc and manage it quietly / privately here; so you don't have Thai tax or need for employees or the dodgey 49% with a bunch of Thai shareholders etc etc?

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[fletchsmile]

My understanding which goes back around 10 years doing, when being involved with this:

Of the THB 2mio in registered capital you needed to get one foreigner's work permit it did not all need to be fully paid up. I recall it being 25% that had to be paid up and the rest paid up "over time". There was a rather vague interpretation as to what the "over time was".

BTW People often set up 2 companies. An actual working company subsidiary (S) and a holding company (H). The holding company can have a smaller capital amount. It then owns the majority shares in the working company. Majority being anything from 51% - 99%.

As long as H is Thai then S will be Thai too. It would then be S that needs the 2mio capital

There are several benefits to this structure, including being able to sell interests in H or S down the line. Also if H has only say THB 100k capital, then your Thai partner only needs to put in 51k+, which is easier than getting them to put in 51% of 2mio.

BTW 2 once the capital is put into your company (or companies) people often find ways to then get the money straight back out, eg loan yourself some money, pay yourself/ someone else a consultancy fee etc.

BTW 3 It's worth reading the book:

"Start Up and Stay Up in Thailand", by Roy Tomizawa.

It's a bit dated now, although there may be a revised edition since I bought mine. It isn't fantastic on the detailed technical stuff, but a useful general read for ideas and thoughts on starting a business here

Cheers

Fletch

[Soutpeel]

If it's on line why not just register the company in a zero tax jurisdiction such as British virgin island, Belize or caymans etc and manage it quietly / privately here; so you don't have Thai tax or need for employees or the dodgey 49% with a bunch of Thai shareholders etc etc?

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And just work illegally you mean ? Maybe the OP wants to try and do the right thing ?

[TTom911]

Thanks for posting!

I see several references to "offshore" here.

Even if a business is "online" it means (hopefully) one has customers and collects income (and maybe writes a receipt..), has some employee or need a work permit for oneself, e.g. in Thailand... all that require a local registration. Whether or not that subsequently ties into a kind of a "holding company structure" with an offshore company at the top, how transfer prices and cross-charging can be "optimised" to minimise taxes, that would very much dependent on the nature of the business at question but would be a different/extra subject altogether.

But "offshore" is NOT THE SINGLE ANSWER for any online business if there are clear (all the more if they are traceable...!!) "local business activities", e.g. in Thailand. "Local business activity" requires "local incorporation", unless one wants to try and "flaunt the system" completely, which I don't think is a good idea. The easiest thing for the competitor to bring the business down is tipping off the authorities and let them have a "little look at the farang...". That is almost 100% certain the first thing the competition might try and do coz it' sooooo easy... If that happens then such "flaunting activities" would be discovered in minutes, would be bullet proof in court with little effort and would send the business (and the owner/management) down the pan immediately.

"Making clever and legal use of the system" is professional, trying to "flaunt the system" is bad business practice and foolish, hands the gun straight into the hand of the competition and will backfire sooner rather than later, in particular if the business is successful, no one MIGHT care if the business is bad anyways, but that's not the plan, right!?...).

Thats at is least my humble view.

Edited June 26, 2014 by TTom911

[innerspace]

Think its between 3k to 5k per 500000 registered capital that needs to be paid at the department of business to register. Plus social and tax on your 4 thai staff and yourself for your work permit.

Plus vat if you want vosa extensions without leaving the country.

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[mccw]

If it's on line why not just register the company in a zero tax jurisdiction such as British virgin island, Belize or caymans etc and manage it quietly / privately here; so you don't have Thai tax or need for employees or the dodgey 49% with a bunch of Thai shareholders etc etc?

Sent from my iPad using Thaivisa Connect Thailand

And just work illegally you mean ? Maybe the OP wants to try and do the right thing ?

I meant if all his sales are outside of the country. Placing orders at a factory or paying a freelance Thai to ship goods to meet sales abroad does not constitute working.

If he were dealing with local sales and actually having employees in an office type environment on a pay role with himself there 9-5 telling everybody what to do - then yes I would say Thai company and work permit is definitely the way to go.

It's not exactly clear how large or scale he talking from opening post.

I spoke to a lawyer the other day about company formation. They said needed a bank book / statement showing funds equal to the capital amount ie 500k for a Thai or 2MB for foreigner.

[TTom911]

If it's on line why not just register the company in a zero tax jurisdiction such as British virgin island, Belize or caymans etc and manage it quietly / privately here; so you don't have Thai tax or need for employees or the dodgey 49% with a bunch of Thai shareholders etc etc?

Sent from my iPad using Thaivisa Connect Thailand

And just work illegally you mean ? Maybe the OP wants to try and do the right thing ?

I meant if all his sales are outside of the country. Placing orders at a factory or paying a freelance Thai to ship goods to meet sales abroad does not constitute working.

If he were dealing with local sales and actually having employees in an office type environment on a pay role with himself there 9-5 telling everybody what to do - then yes I would say Thai company and work permit is definitely the way to go.

It's not exactly clear how large or scale he talking from opening post.

I spoke to a lawyer the other day about company formation. They said needed a bank book / statement showing funds equal to the capital amount ie 500k for a Thai or 2MB for foreigner.

1. yes, there would be local customers which makes a local registration mandatory (Bank book, WP, VAT, lahlalahlalah...). Otherwise I would not go anywhere near of considering to set up a Thai company...

2. yes, it is about setting up as company "cleverly" yet legally; and, because see 3, still as "trim and lean" as possible (in terms of capital/cash requirements and processes/overheads)

3. it would be a startup operation where, as with most businesses a farang would try in Thailand, it is anybody's guess if it works or not... What works elsewhere (which means, what is based on on real and hard experience/expertise made outside Thailand) may still not work in Thailand for a million of unfortunate reasons... Hence, caution is advised and "the worst case" must be, even if not the preferred, part of the business plan...

[mccw]

OP

You could buy a ready made Thai company?

Take over shares and voting rights to be the boss. But the capital requirements steps and all that is already passed; so less for you to do / show. Possible? I think it is as I thought about this work around for ourselves, or set up on my wife name first and then add me in to the share holding after formation.

[TTom911]

deleted

Edited June 26, 2014 by TTom911

[TTom911]

OP

You could buy a ready made Thai company?

Take over shares and voting rights to be the boss. But the capital requirements steps and all that is already passed; so less for you to do / show. Possible? I think it is as I thought about this work around for ourselves, or set up on my wife name first and then add me in to the share holding after formation.

interesting concept... with the major caveat that I don't want to run a due diligence on an operating Thai company... where only god knows how many skeletons are in the closet...

[mccw]

OP

You could buy a ready made Thai company?

Take over shares and voting rights to be the boss. But the capital requirements steps and all that is already passed; so less for you to do / show. Possible? I think it is as I thought about this work around for ourselves, or set up on my wife name first and then add me in to the share holding after formation.

interesting concept... with the major caveat that I don't want to run a due diligence on an operating Thai company... where only god knows how many skeletons are in the closet...

You could have your 4 share holders set it up/ a new company- no skeletons- so submit only 500k - then take over the controlling interest.

You have trusted 4 Thais who are real partners anyway or taking a chance on lawyer provided nominees? If real partners then above suggestion should be no problem- or even just close friends be ok more than randoms.

[TTom911]

OP

You could buy a ready made Thai company?

Take over shares and voting rights to be the boss. But the capital requirements steps and all that is already passed; so less for you to do / show. Possible? I think it is as I thought about this work around for ourselves, or set up on my wife name first and then add me in to the share holding after formation.

interesting concept... with the major caveat that I don't want to run a due diligence on an operating Thai company... where only god knows how many skeletons are in the closet...

You could have your 4 share holders set it up/ a new company- no skeletons- so submit only 500k - then take over the controlling interest.

You have trusted 4 Thais who are real partners anyway or taking a chance on lawyer provided nominees? If real partners then above suggestion should be no problem- or even just close friends be ok more than randoms.

As per what I figured so far it would probably be best to do as much "stealth piloting" as possible to minimise (never being able to totally exclude) the risk of being totally off the mark in terms of market acceptance and then use a known legal firm who can represent the "thai stakeholders". Will cost a certain amount per month for that service, which is nothing but fair, but in return has someone involved who is as neutral as it can get (certainly more neutral than any "Thai GF and her entourage..." might turn out to be...).

There are a few names (firms) appearing here in posts pretty regularly and communications with some of them was very transparent and concise which makes me reasonably confident that it would be good to work with them. Can't speak of experience yet, but the communication were trustworthy and open.

And yes, also there some "trust" is required, but that has to be accepted in business anyways. My point is only to "minimise" potential troubles, not wish-dreaming that it is possible "to prepare everything and then believe to never have issues..."

Edited June 26, 2014 by TTom911