In good company: A look at the various types of businesses that can be established

In Thailand business organisations can be divided into two types, non-profit organisations and business organisations. Non-profit organisations have to register under the Civil and Commercial Code, and are divided into associations and foundations. Associations can conduct any activity that is ongoing and not operated with the purpose of profit. Foundations allocate property specially to the public, and again are not for profit.

Business organisations can start from two or more persons going into business together with the purpose of profit sharing, and can be divided into three types: partnerships, limited companies and joint ventures.

Partnerships

Partnerships are split into ordinary partnerships and limited partnerships. Ordinary partnerships may or may not register as a legal entity. Non-registered ordinary partnerships have no status as a legal entity and all partners have joint, unlimited liability for all the partnership’s obligations. Registered ordinary partnerships are registered as legal entities and their liability for obligations may be enforced first as a corporate entity. Limited partnerships must be registered and have two kinds: liability partnerships, whose liability is limited to their respective contributions, and unlimited liability partnerships, which have joint, unlimited liability for the partnership’s obligations.

Limited Companies

There are two types of limited companies: private companies, governed by the Civil and Commercial Code, and public companies, governed by the Public Company Act. A private limited company is established with capital divided into equal shares. Three or more persons, the promoters, subscribe their names to a memorandum to form a limited company. The liability of the shareholders is limited to the amount, if any, of the remaining unpaid amount, and the liability of directors may be unlimited if indicated in the memorandum. All shares the company proposes to be registered must be subscribed, and at least 25% of the subscribed shares must be paid up. Shares can be ordinary or preference shares, which carry voting rights. The value of a share must be not less than TB5 ($0.16).

Private limited companies must have at least three shareholders and cannot offer shares to the public or issue debentures. Under the Foreign Business Act, foreigner participation is allowed up to a maximum of 49% of capital shares, and 51% must be held by Thai nationals. However, under certain conditions, a private limited company may be owned by foreigners that can wholly control and operate their business, though they can generally only own 49% of shares.

A public limited company can offer shares, debentures and warrants to the public. To establish a public limited company, a minimum of 15 promoters are required, and the promoters must hold their shares for at least two years before they can be transferred. Each shares must have a value of at least TB5 ($0.16) and be fully paid up. The board of directors must have at least five members, with half of them Thai nationals.

Restrictions on share transfers are unlawful except to protect the rights and benefits of the company.

Joint Ventures

In Thailand, a joint venture is formed by a contractual arrangement among two or more people or legal entities. A joint venture must be registered at the Revenue Department and is considered a single entity for taxation purposes. A joint venture is normally used when large, independent foreign and Thai contractors come together to work or do business on large-scale construction projects.

Other Forms

Foreign companies may carry out certain business through a branch office, which is required to maintain accounts only relating to the branch in Thailand. A representative office is defined as an office in Thailand by a foreign company engaged in international trading, but it cannot engage in any profit-seeking or profit-making enterprise. The scope of activities of a representative office must be limited to approved activities according to Thai law.

A regional office is established by a multinational corporation in a country other than that where it has its registered head office, without having to be registered as a legal entity under the country of establishment.