Thailand is a lucrative proposition for a business set up. It earns the majority of its revenue through tourism and making an investment in the hospitality sector is a tempting proposition for most foreigners. If you want to set up a business in Thailand you must be aware of the rules and regulations. A careful study of the list of companies in Thailand will reveal that while foreigners are allowed to set up businesses and companies in Thailand the majority of the ownership has to be with a Thai national. The company can not have more than 49% of foreign ownership. However, in the majority of the cases, a maximum of 39% or even less is allowed.
As with any business set up especially in a foreign country, a thorough research is needed. Studying of the market conditions is a good way to determine whether it’s worth making an investment in Thailand. Things to know for starting up a business in Thailand by foreign nationals.
1) Ownership: As informed earlier, Thailand prohibits foreign nationals to completely own a business set up unless they are US nationals. For other nationals, you have to necessarily team up with a Thai company or a Thai national. The Thailand business directory will give you a complete list of companies in your proposed sector of business. Getting a co-partner is more beneficial to be a local company it will be well aware of the rules and regulations of the country. In case of a majority foreign ownership, the alien business license is required from the ministry of commerce. Generally, this license is granted if you have a very large investment or will be hiring a majority of Thai employees.
2) Trustworthy partner: While you may get the requisite permissions and grants from the concerned department, the main focus is to form an alliance with a trustworthy partner or company. The Thai company list can give a good brief of the companies that are operational in Thailand. It is advisable to go for reputed and experienced companies as there are minimal chances of getting cheated. Newer companies may look tempting but is a risk considering that you are investing money in a relatively unknown land. A stable business partner means that you get good returns on investment. Most people opt for registering businesses under Thai wife or husband’s name. If you are also looking to do so think long and hard about your decision. Firstly, he/she will have the majority of the shares and thereby greater control. If there are any problems later on between you two, it will be a mess. For a medium-sized investment like a hotel or restaurant, a company will be a better option. For a small-scale investment, try to go for a Thai friend who you can trust.
3) Research: Do not assume that because a particular thing works in other countries it will work in Thailand. Do thorough research about the market conditions. One of the major mistakes that many foreigners do is that they assume that any investment in the hospitality industry will yield results. While it is true that a majority of the Thai economy is due to the hospitality sector investing blindly will lead to failure. Look for company list in Thailand for the hospitality sector and see how they have fared. While the interiors of Thailand may have stunning and untouched beaches, if it does not have the proper means of transport, there is no point in opening a hotel there. Therefore research and analysis should form a large part of your study.
4) Labor Employment Ratio: Many foreigners tend to overlook this aspect. It is the norm for Thai companies to employ in the ratio of 4:1. The Thailand company database will give you the exact details of the employment terms of other companies. Thailand takes a lot of pride in nationalism and though there are a lot of cultures and ethnic groups in Thailand make sure that you hire a good number of Thais before you get in foreign staff.
5) Legal Representation: Amongst all other investments, hiring a legal firm will prove to be one of the wealthy investments you make. Enlist the services of an expert legal firm that specializes in business set up. They will ensure that all legal requirements are met and there are no loopholes later on. All the documentation that is submitted to the government is in Thai and it can get difficult for you to comprehend. Make sure that you get the copies of your contracts in English.
Your legal firm should be able to handle a lot of this for you. It is advisable to not blindly sign any documents which could have severe repercussions later.
6) Go Legal: While you may hear stories about how someone else managed to ditch the taxes, do not fall for it. Take into consideration that you are a foreign national in an unknown land. There is absolutely no need for you to get into illegal tangles which might wreak havoc with your business. As far as possible stay on the legal side of the law.
7) Pricing: One of the major mistakes that are made by foreign nationals is to price their product/service at a higher rate. When you are pricing, more than the profit study the market conditions. Profit will come eventually but Thailand is famous all over the world for its cheap pricing. It is said that in Thailand even the average Joe can think of staying like a King. Hence, make your pricing chart accordingly. Once you have built your reputation and business then raise your prices.
8) Exit Plan: One of the most important things to have is an exit plan. By the exit plan, we do not mean fleeing the country, but a business exit plan. There are a number of businesses in Thailand that start and disappear into oblivion. So just as you have a start plan, have a wind-up plan as well.