Another Business Startup Thread - Serious Advice Please

[No1inbangkok]

Morning TV'ers,

Now before we start, can you wining old buggers, those disillusioned with life in Thailand etc save your breath and move on to another thread.

 

I know many a foreigner who is happily running a business here, I'm keeping my plans hush hush so looking for some incognito advice from the business savvy people here in BKK or whichever sunny beach you may be on.

I have a potential Thai business partner who I trust, I would like 49% of the business, I would also like my girlfriend to be a minority shareholder. Depending on the investment my business partner makes, this would look something like 49% me, 49% him, 2% her..... potentially less him/more her depending on how the more detailed conversation around capital plays out.

 

Now is this an advisable shareholder allocation?

How do I structure it in regards to preference/ordinary shares? Obviously I want to try to maintain as much control as possible however if we are 49/49 partners then I expect he will want equal right in the company, what negative exposure does this leave me in respect to the businesses future?

I will need a work permit, I'm confused about the 2m Baht per visa vs the hiring 4:1 Thai staff requirement, any advice?

 

Any other useful advice around this, please speak up

Thanks in advance

 

 

[SbuxPlease]

No one can really tell you how to best allocate ownership of your company. Unless you qualify under the treaty of amity, it must be 51% thai owned. If your girlfriend is Thai you could split up ownership between her, yourself, and your Thai business partner any way that is mutually agreeable. Typically the owners will all be required to show they have made a fair contribution to the paid-up capital.

Three way disputes could be challenging to resolve and your thai business partner may not appreciate being on the short end of things between your girlfriend and yourself. It's critical to figure this out among yourselves in advance.

Re the work permit, you've pretty much got it. You should show 2M baht paid up in the company as some combination of assets+cash invested by the owners, hire 4 Thais to work for the company, and then it can apply for one foreigner work permit.

 

 

[bluebluewater]

Ahhhh . . .   a partnership.  The only kind of ship designed to sink.  However I do wish you luck.

[lannarebirth]

Why don't you take on a 4th partner. A lawyer on retainer to you for the purposes of owning 2% of your company. That would effectively give you 51% control of the company in case there is ever a falling out between you and your business partner and/or girlfriend.

[chicowoodduck]

Never could figure out way folks want to throw good money after bad....kind of like getting married....just buy her a house and give it to her and not get married...she will get everything sooner than later. Save your hard earned money for a rainy day that will find you soon enough....and enjoy life....it is a short ride by any measure...?

[Thaidream]

The advice I give to everyone- never open a business with anyone else. If you cannot have 100% control you are risking much without total control. After 50 years in Thailand I have watched relationship after relationship fail and 90% of businesses go under.  Unless you are covered by a Treaty of Amity- my advice is do not do it. Business relationships between foreigners and Thai that are lasting are few and far between. Remember Thais will always believe other Thais and never believe anyone who is a foreigner when there is a dispute. I love Thailand and Thais but I would not do business with them unless I have total conrol or all the money risked is Thai money.

[Eric Loh]

Post 4 advise is very sound. I would go further and suggest that you have the retainer lawyer hold the 2% rather than your GF. Work out an terms and conditions in the retainer agreement to your favor in situation when you needed control.

[No1inbangkok]

Hi all,

 

thanks for for the advice about legal retainer. Can you provide any further info, prices or even recommendations for food trustworthy person/company?

 

i would prefer to keep the gf out, she's a good hearted girl and I'd be very surprised if she had bad intentions even if we broke up, but separating business and pleasure is obviously important.

 

ive worked with potential Thai partner for a couple of years so I know him reasonably well but obviously I'm not stupid enough to not take precautions.

[tails]

59 minutes ago, lannarebirth said:

Why don't you take on a 4th partner. A lawyer on retainer to you for the purposes of owning 2% of your company. That would effectively give you 51% control of the company in case there is ever a falling out between you and your business partner and/or girlfriend.

 

Excellent advice, similar to what I've done

[kingstonkid]

Just make sure that YOU choose the lawyer.  I would recommend using a lawyer in a firm rather than just an individual.

[williamgeorgeallen]

you are probably throwing your money away so dont invest anything you cant happily walk away from. i have a business just south of pattaya. i have 49%, my girl (mother of my 2 kids) has 25% and my accountant has 26%. i dont pay out any dividends, its just to satisfy the law. i would never ever tell anyone to put anything in their thai girlfriends or wifes name however my company has almost no assets so there is no point anyone screwing me over as there is nothing to take. i have a very good accountant whom can be trusted to be a minor shareholder, she does it to get my accounting business. she was recommended to me by several western people. if you are in pattaya message me and i will give you her details.

[adwbkk]

Advice regarding lawyer as partner is good.  

I imagine that you can see that a 49-49-2 deal gives all the power to the 2% shareholder.   This is not a good idea regardless of where you live or what the ethnicity of your partners is. 

Somebody above said that a partnership is the only ship designed to sink.   Not sure I would go that far but the ship certainly needs a captain so you need to decide who that captain is.   If that captain is you then you need to structure the thing so that there can be no doubt about who is in charge.   In any business there will be disagreement and someone needs to be able to make the final decision, if that is you make sure you have the absolute power to do so.   The best way to do that is via a lawyer as partner and as someone else has said make sure that the lawyer is from a reputable company.   You will hold the proxy vote for the lawyer.   The lawyer will also have given you a signed share transfer just in case you want to make a change at short notice.   Preferential shares can be used but if challenged in court you will loose.   Even a proxy deal could be challenged.

Someone else said you should only invest what you are prepared to loose and that is true.   The company must have B2mil paid up capital which can be registered and then borrowed back from the company at a nominal interest rate.

[Robert24]

No need to get a lawyer as shareholder in my opinion. The easiest way to have full control if you structure it with your shares being preferred shares. This way you control the company. 

 

Personally I recommend doing so if you are investing the majority or most of the capital. However if your Thai partner invests the equal amount of money as you do, I'm sure he won't accept your preferred shares structure. In such a case I would recommend just to have ordinary shares according to the capital paid in.

 

also I don't recommend this forum to get sound business advice. Most people on here giving advice have no real experience, just grumpy, bitter....you know what I mean.

[Thaidream]

I am not grumpy nor am I bitter. I am simply realistic.I came here 50 years ago  and have a wealth of experience gleaned from working with Thais; speaking Thai and being married to Thais. I understand their psyche completely and how both their political and social systems work.  I will say it again- do not get into a business within Thailand without being 100% in control. Putting shares in the names of anyone other than yourself is never going to give you more than 49% control unless you are an American. The ways presented maymay work, but be aware that all these ways have failed in the past and the Thai system presents ways around them that cannot be controlled If you decide to go ahead- good luck- You will need it.

[khunPer]

First I'll kindly advise you to use an experienced business lawyer, that small fee can be wisely spent.

 

You can make preferred shares. My lawyer did that for me in my company set-up (reorganize from the old type with 7 shareholders), where I hold some (5 percent of the shareholder capital) preferred shares with 10 votes, and in total 49 percent of the nominal capital. However, that may not be the intention of the law, but to my knowledge it has not yet been tested in Court.

 

A poster in this Forum suggested instead to give Thai shareholders preferred shares; where they are guarantee a fixed annual dividend of for example 4 percent in return of no voting rights.

 

To be shareholder and member of the board (director), you don't need a Work Permit; you can sign as bord member, for example an annual statement, but you cannot do any other kind of work; for that you'll need a Work Permit. In general, a company shall have a 2 million baht registered shareholder capital and 4 Thai employees for 1 alien (farang) Work Permit, often also an annual statement (best showing some profit). For each additional Work Permit an extra 1 million baht shareholder capital and 4 more Thai workers is required. There are exceptions for some branches – may need foreign expertise from set-up – your business lawyer can help you with exact up-to-date information.

 

When the rules were changed from 7 shareholders to 3 shareholders only, it has been required that the Thai shareholders can prove mean of fund for their shares, i.e. show they have money to but the number of shares they own, so they are not proxy-shareholders. If a Thai partner owns 49 percent of a 2 million baht Co. Ltd. he/she need to show proof of 980,000 baht; however it's not really a problem with minor shareholders as a spouse holding two or some few percent in a 2 million baht company. Lawyers often make undated, but signed sales documents and proxy for a Thai spouse shareholder, so in case of a break-up, the partner's shares can be transferred. If you have minor half-Thai children, they can be shareholders (under guardian).

 

Wish you good luck with your plans...

[Thaidream]

Anyway you do the math; hire as many lawyers as you want; and structure it - you still only own 49% of the business. Remember, most of these set ups are smoke and mirrors- I would hate to invest significant funds only to learn later when it all went to court and I have paid a  huge amount of money to lawyers that I lost all my money because I only owned 49% of the business. If you have money to burn and can exist well without your invested funds- take a chance. If you cannot afford the loss- you know what the answer should be. I do not want to discourage you but unfortunately Thailand is not a country to open a business in without encountering huge risks.  If you do this- I would suggest learning to speak Thai well- you would be surprised how many things happen that you were not aware of prior to learning the language.

[ericthai]

9 hours ago, Thaidream said:

The advice I give to everyone- never open a business with anyone else. If you cannot have 100% control you are risking much without total control. After 50 years in Thailand I have watched relationship after relationship fail and 90% of businesses go under.  Unless you are covered by a Treaty of Amity- my advice is do not do it. Business relationships between foreigners and Thai that are lasting are few and far between. Remember Thais will always believe other Thais and never believe anyone who is a foreigner when there is a dispute. I love Thailand and Thais but I would not do business with them unless I have total conrol or all the money risked is Thai money.

90% go under???? Can you provide some evidence to these statistics? or your just making this up?   

[williamgeorgeallen]

yea 90% does not seem right. from what i have seen it is far more than 90%. sorry but this is just based on casual observation over the last 10 years, no stats to quote.

i used to tell everyone not to open a business in thailand (no one listens to me as i have a business in thailand) now i tell everyone that it is fine to have a business in thailand if the money they invested can be lost without concern. still no one listens anyway.

Edited August 3, 2016 by williamgeorgeallen

[adwbkk]

From the Washington Post 2014

"The Facts

As far as we can tell, there is no statistical basis for the assertion that nine out of 10 businesses fail. It appears to be one of those nonsense facts that people repeat without thinking too clearly about it. Here are some basic questions to ask when assessing such a factoid:

1. What’s the time frame? Two years, five years, 10 years? That can make a big difference.
2. Does “fail” mean that it goes out of business because it was not financially viable? Or does that also include data about successful enterprises that merge with another company?
3. Wouldn’t failure rates be different for some industries than others? Does it make sense to lump all businesses together?

There have been a number of studies that have looked at this issue. This chart, from Web site designer smallbusinessplanned.com, summarizes the results of three different studies. Basically, after four years, 50 percent of the businesses are open. As time goes on, the success rate decreases, but it never gets to a failure rate of “nine out of 10.”

 

Pretty sure Thailand would not be wildly different.

[INV]

On 2016-08-03 at 10:59 AM, williamgeorgeallen said:

you are probably throwing your money away so dont invest anything you cant happily walk away from. i have a business just south of pattaya. i have 49%, my girl (mother of my 2 kids) has 25% and my accountant has 26%. i dont pay out any dividends, its just to satisfy the law. i would never ever tell anyone to put anything in their thai girlfriends or wifes name however my company has almost no assets so there is no point anyone screwing me over as there is nothing to take. i have a very good accountant whom can be trusted to be a minor shareholder, she does it to get my accounting business. she was recommended to me by several western people. if you are in pattaya message me and i will give you her details.

Hi.I hope you dont mind I send you a PM regards accounting. Looking to find a good one in Pattaya. Thanks

[williamgeorgeallen]

15 minutes ago, INV said:

Hi.I hope you dont mind I send you a PM regards accounting. Looking to find a good one in Pattaya. Thanks

just sent you her details. she is not the cheapest around but she is great and speaks very good english. dont try to ask her out though as she has a thai boyfriend.

[INV]

4 minutes ago, williamgeorgeallen said:

just sent you her details. she is not the cheapest around but she is great and speaks very good english. dont try to ask her out though as she has a thai boyfriend.

Thanks a lot and I would not even dare to look at her to much, my Gf will cut of my ,well you know what I mean hehe

[williamgeorgeallen]

1 minute ago, INV said:

Thanks a lot and I would not even dare to look at her to much, my Gf will cut of my ,well you know what I mean hehe

again dont expect the girl i use to be cheap. i tried to use another accountant who was cheaper and ended up getting into some trouble. bussiness in thailand as a foreigner is a minefield and you will need all the help you can get.

[INV]

1 minute ago, williamgeorgeallen said:

again dont expect the girl i use to be cheap. i tried to use another accountant who was cheaper and ended up getting into some trouble. bussiness in thailand as a foreigner is a minefield and you will need all the help you can get.

Yeah I hade few companies some years back in Phuket and one of my accontant messed up and cost me 300k baht in tax and fines so I learned to stay on top of things and make sure things are done when it supposed to.No problem to pay for someone that know their job well. Thanks for all your help williamgeorgeallen

[williamgeorgeallen]

8 minutes ago, INV said:

Yeah I hade few companies some years back in Phuket and one of my accontant messed up and cost me 300k baht in tax and fines so I learned to stay on top of things and make sure things are done when it supposed to.No problem to pay for someone that know their job well. Thanks for all your help williamgeorgeallen

really happy to send business her way. dont know what i would do if she went out of business. sounds like you understand that some things are worth paying a bit more for. the owner of the company is very well connected with immigration as well so visa processing tends to go quite smoothly as well.

[INV]

Yeah done my shares of dumb mistakes to save a few pennys so learned and still learning every day so sure will contact with her and see what we can work out. Thanks

[No1inbangkok]

Anybody recommend a good Bangkok based lawyer that can take care of 2% proxy vote, and the cost involved?

 

I'm guessing start up costs will be roughly 500k as this is a service business, which is obviously less expensive than investing in a factory or similar operation.

 

Also I have overseas businesses which I would use for invoicing my international customers that have no business activity in Thailand, so part of my business operation is 0% financial risk anyway, but I need a business here for my Thai custom and to be able to live/work here legally etc.

 

[khunPer]

7 hours ago, No1inbangkok said:

...I'm guessing start up costs will be roughly 500k as this is a service business...

...but I need a business here for my Thai custom and to be able to live/work here legally etc.

If the company is not coming under some speciel exceptions, you will normally need a shareholder capital of minimum 2 million baht and 2-4 Thai employees (normally 4) for the first foreign Work Permit.
If you are US citizen (don't recall you mentioned anything about this) you can use the US-Thailand Treaty of Amity to own a company, but I believe there will still be minimum requirements for shareholder capital of 2 or 3 million baht.