Canadian Starting New Business With Less Than 2M Baht

[meer93]

Hey guys,

 

Before I start, I'd very much appreciate it if we left the "you're burning your money" comments out of this thread. I am ok losing the amount I'll be investing.

 

I want to open a business in Thailand (chiang mai), I've read that to get a work permit, there are some mandatory rules, like having 2M Baht invested. My question is, do I NEED to invest 2M thai Baht into my 49% share considering I won't be needing a work permit/don't plan on working a single minute? My gf would own the 51% and she'd run it full time. Ideally my share would cost me 300-500K.

 

Any information would be greatly appreciated.

Edited October 5, 2016 by meer93

[blackcab]

In a word, no. You also don't need a limited company. Your GF can do the business as a sole proprietor.

 

This would work where there were very few assets and you could keep a good check on the cash flow.

[meatboy]

dont forget you might or should i say,more than likely you will need some BROWN ENVELOPES.

[mark5335]

For a limited company with registered capital not exceeding 5MB, the capital does not need to be paid up in full. Therefore, you do not need to invest 2MB in the company.

[meer93]

Sorry, I don't quite understand. If the business I'm looking to open only requires, for instance, 500K baht to start, can I legally buy into 49% of the business under my own name?

 

I know I can just put it all under her name, but I'd like to have my name under the business on paper.

 

Thank you!

[meer93]

Bump

[LukKrueng]

To start a business you have to invest as much as needed for the business. To register a company is a different story. I guess the OP is talking about registering a limited company. As far as I know the lowest amount for this is 500K THB REGISTERED CAPITAL - not investment. However, a company that wants to employ a foreigner must have 2M THB REGISTERED CAPITAL for each work permit to be issued, + 4 employees (I think for a foreigner married to a Thai it's half of both, but not sure if it is related to the foreigner's visa/extension of stay or not).

For the OP - if you do not intend to get a WP from your new company, the 1-2M are not relevant at all.

[northernboy]

Hi Meer 93

I think a lot of people here will offer advice that is helpful but the question is is it pertain to you 

As a Canadian Chiang Mai resident with a Thai wife does not tell much as far as your goal risk  tolerance or cash flow needs in the future. 

 

If I can offer the best advice possible is to seek out successful Chiang Mai expats that  have long-term profitable businesses not just subsidised hobby businesses.  Chiang Mai has a lot and if you do some networking they are normally helpful. Beware of anyone offering to sell you a business, franchise  or consultation service. seek out people with 10 to 20 years plus experience in your marketplace.

  

I assume you trust your wife. If is for your wife to run and she is competent to do so.The first question to ask is the extra setup and maintenance costs to claim is your if you are married.  requirements of e LTD.CO worth the effort. As a single proprietor is far easier in Thailand.

 

Another concern is the marketplace ready for your business.  Canada and Thailand are vastly different...... I have seen any would be great businesses ideas fail due to the market was yet ready for the idea and waiting a year or more might have saved the business. yes some were Canadian too 

 

Hope you take these ideas and concerns very seriously. 

 

 

 

[LukKrueng]

27 minutes ago, northernboy said:

Hi Meer 93

I think a lot of people here will offer advice that is helpful but the question is is it pertain to you 

As a Canadian Chiang Mai resident with a Thai wife does not tell much as far as your goal risk  tolerance or cash flow needs in the future. 

 

If I can offer the best advice possible is to seek out successful Chiang Mai expats that  have long-term profitable businesses not just subsidised hobby businesses.  Chiang Mai has a lot and if you do some networking they are normally helpful. Beware of anyone offering to sell you a business, franchise  or consultation service. seek out people with 10 to 20 years plus experience in your marketplace.

  

I assume you trust your wife. If is for your wife to run and she is competent to do so.The first question to ask is the extra setup and maintenance costs to claim is your if you are married.  requirements of e LTD.CO worth the effort. As a single proprietor is far easier in Thailand.

 

Another concern is the marketplace ready for your business.  Canada and Thailand are vastly different...... I have seen any would be great businesses ideas fail due to the market was yet ready for the idea and waiting a year or more might have saved the business. yes some were Canadian too 

 

Hope you take these ideas and concerns very seriously. 

 

 

 

 

While your reply is well thought and with good intentions, it has nothing to do with the question of the OP.... He didn't ask about the business aspects / risks / ideas. He only asks about the technicality of registration of a business...

Edited October 11, 2016 by LukKrueng

[northernboy]

8 minutes ago, LukKrueng said:

 

While your reply is well thought and with well intentions, it has nothing to do with the question of the OP.... He didn't ask about the business aspects / risks / ideas. He only asks about the technicality of registration of a business...

1

 

Surprise, I am already well aware of that fact, I intentionally did not answer it directly ! 

 

My thinking was 

Maybe if he has to ask that question here, it might be the wrong question to actually be asking.

That I was tactfully trying to recommend he seek a better path to gain a wisdom that might be needed or useful in his case. 

 

I think Black Cab may actually right. But not knowing any real details one can not tell.  

[kingstonkid]

OP

 

Are you active in the EXPAT community?  

 

If you are then a suggestion might be to talk to people and get recommendations for legal advice from legal expert.

 

If you are not really active then contact the Thai Canadian Chamber of commerce  they should be able to recommend someone in your area to talk to.

 

There is good advice here but again it is on TV personally I would use it for thought but seek expert advise in the field.

 

BEST OF LUCK

[SOTIRIOS]

...he said girlfriend...not wife.....

 

...but if 'you can afford to lose the money'....then just give it all to her..in her name...and let her run it....

 

...you would have to sort out a visa for yourself though....

[khunPer]

Op asks:
»My question is, do I NEED to invest 2M thai Baht into my 49% share considering I won't be needing a work permit/don't plan on working a single minute? My gf would own the 51% and she'd run it full time. Ideally my share would cost me 300-500K.«

 

To my knowledge, the minimum 2 million baht total company limited capital is needed when applying for an alien's Work Permit – your 49% share will always be 49% of the company capital. Of your GF's majority share the funds may need to be documented, i.e. the she has that money herself, so she's is not acting as a proxy for you. The minimum number of shareholders shall be three (3), so you need to find one more...

 

If your GF is going to run a small business on her own, just let her run it as a personal business in her name, as there are costs involved in running a company limited, here-under accountant and auditor for the annual statement. Expect yearly costs to be some 40,000 baht and up. Expect company limited set-up costs and fees in the rage of 30-50k baht, or more. Your GF need to be paid a salary and most likely also pay social security (half deducted from salary, half paid by company), furthermore the company shall pay some company tax (the auditor will normally not allow the company to run with a loss, more than the first year, or the first few years). You can make a simple loan agreement with your GF for your 300-500K investment, if she's doing a small business, which may be a lot easier to administrate than a company – to be honest, I don't think all of the small vendors makes detailed annual statements, and pay v.a.t. and tax...

 

[fletchsmile]

If OP wants a work permit for a foreigner then he'll need THB 2mn registered capital.

 

As he's said that he doesn't want that, then no he doesn't need THB 2mn capital.

 

The registered capital needed for a Thai compamy (51% owned at least by Thais) would be THB 100,000 or whatever is required for exercising the business, although there's no proper definition in the rules of the latter.

 

BTW It's also quite commmon for for people to set up two companies. A holding company with THB 100k capital of which Thais own 51k and the foreigner 49k. This holding company then majority owns  a susbidiary/operator company, where the real value, assets, business activity sits. While the Holding Co. has only 100k of capital, the Opco often has millions of baht+.

 

 

[NickJ]

Just the fact that your core questions are generated towards us..on this forum says alot...Sadly.

[lvr181]

I can only wish the OP, best of luck.   Whatever your risk profile is, never forget the "political" risk.

[fletchsmile]

On ‎17‎/‎10‎/‎2016 at 11:27 PM, VIBE said:

Hi, what would the benefit be of having 2 companies?  The one company owns the second, but they both would need a Thai shareholder that owns 51%.  Just seems like more accounting costs to me, as the books on both would need to be kept.

 

Holding companies can be useful or a variety of reasons in many countries. So a lot of those benefits also aply here

 

One reason particular to Thailand though that this structure is used is that it only requires the Thai investor to invest 51k.

 

If there was no HoldCo. then the Thai investor would have to own 51% directly of the Opco. So if the Opco wants a work permit for a foreigner, which in return requires THB 2mn of capital, then that requires the Thai investor to put in over THB 1mn baht. Every additional work permit will require the Thai investor to put more in. They may not have the means or may be unwilling to do so. 

 

 

 

 

[khunPer]

7 hours ago, fletchsmile said:

 

Holding companies can be useful or a variety of reasons in many countries. So a lot of those benefits also aply here

 

One reason particular to Thailand though that this structure is used is that it only requires the Thai investor to invest 51k.

 

If there was no HoldCo. then the Thai investor would have to own 51% directly of the Opco. So if the Opco wants a work permit for a foreigner, which in return requires THB 2mn of capital, then that requires the Thai investor to put in over THB 1mn baht. Every additional work permit will require the Thai investor to put more in. They may not have the means or may be unwilling to do so. 

 

 

 

 

Understand the Holding Company has 100k baht shareholder capital with 51%, i.e. 51k, held by Thai national(s) – however the daughter company with Work Permit(s) need at least 2 million baht shareholder capital, from where comes that funds, as the parent company only has a capital of 100k – are you suggesting that the parent company borrow money, like 1 million baht for holding minimum 51% of the daughter company..?

[fletchsmile]

That's one possible solution.

 

The subsidiary company also doesn't need to be 100% as you highlight. The majority shareholders including parent (which is already majority owned by Thais) of the subsid still need to be Thai though.

 

Also as the subsidiary company becomes profitable it can pay dividends etc to the parent. The parent could in turn put this money back into the subsidiary as capital.

 

It can be quite a nice arrangement for separating the Thai investor in the parent company from activities in the subsidiary company.

 

Particularly if the Thai investor owns 51% via preference shares with limited voting rights that pay a fixed dividend. Pay say 10% fixed dividend on those pref shares to the Thai investor and it costs you effectively 5.1k a year. In return it can be more convenient if you want to sell the business in the subsidiary.

 

 

 

 

Edited October 26, 2016 by fletchsmile

[khunPer]

2 hours ago, fletchsmile said:

That's one possible solution.

 

The subsidiary company also doesn't need to be 100% as you highlight. The majority shareholders including parent (which is already majority owned by Thais) of the subsid still need to be Thai though.

 

Also as the subsidiary company becomes profitable it can pay dividends etc to the parent. The parent could in turn put this money back into the subsidiary as capital.

 

It can be quite a nice arrangement for separating the Thai investor in the parent company from activities in the subsidiary company.

 

Particularly if the Thai investor owns 51% via preference shares with limited voting rights that pay a fixed dividend. Pay say 10% fixed dividend on those pref shares to the Thai investor and it costs you effectively 5.1k a year. In return it can be more convenient if you want to sell the business in the subsidiary.

 

 

 

 

Has the preferred shares with promised dividend, but no voting rights for Thai shareholders been tried at Court – presume it's not the intention of the Law..?

[blackcab]

4 hours ago, khunPer said:

Has the preferred shares with promised dividend, but no voting rights for Thai shareholders been tried at Court – presume it's not the intention of the Law..?

 

The structure is known to the Thai government. Indeed, there are a couple of instances of company ownership where this exact arrangement of preference shares is explicitly disallowed.

 

It is highly unlikely, however, that these restrictions would impact the average expat company owner in Thailand.