Common Myths about running a business in Thailand

Common Myths about running a business in Thailand

When running a business in Thailand it is essential to learn the local rules, regulations and ways of business in order to maximise your chances of success. What works in the west is often not relevant or recommended here.

However in order to do this you must learn to separate the myths from the facts. Often locals and expats pass on information that they learnt, unaware that they are incomplete, outdated or plain wrong!

Today we will dive into the most common.

You can only own 49% of a Thai Company

While this is a requirement for most  Thai companies, there are several important exceptions to consider.

  1. Amity Treaty - This agreement between Thailand and the United States of America, allows US Citizens to hold the majority of shares (or all shares) in a Thai company. Various restrictions and requirements do apply.
  2. Foreign Business License - Many companies are technically eligible to apply for a foreign business license, which if granted will allow foreigners to hold up to 100% of shares in the company. This is restricted to certain industries under lists two and three of the Foreign Business Act, plus has high barriers of entry so most business opt for the simpler Thai majority company, but it is possible.
  3. Board of Investment (BOI) - Businesses operating in certain categories that BOI are looking to promote, can receive a range of benefits from tax exemptions to less restricted work permit issuance. This depends on successfully receiving BOI approval for your planned project. Another benefit is this will also remove most of the red tape for a Foreign Business License, making the issuance a formality once you have your BOI certificate.

You need 2 Million Baht in the bank to register a company

This is completely false, yet is often believed due to misunderstanding 2 related requirements.

Firstly every company needs to have an amount of "Registered Capital" which is determined by the value of each share, multiplied by the number of each share.

Secondly most foreign owned businesses need a work permit for the owner-manager, with 2M THB the minimum registered capital for a normal work permit application, though exceptions apply.

However if a work permit is not needed, the minimum registered capital is technically 10 THB due to a minimum of 5 THB per share and a minimum of 2 shareholders. However a minimum of 100,000 THB is more common since the share capital registration fee is paid in increments of 100,000 THB so it costs the same to register a company with 10 THB vs 100,000 THB registered capital.

Also the registered capital is not actually required to be paid into or held in the bank. If the shares are fully paid up then the payment received must be accounted for in the balance sheet, but many companies will handle this by showing the amount as a directors loan. Legally this means the shareholders paid the money in, then took it out and now owe the company the missing money. It's also possible for shares to not be fully paid up, however many departments expect paid up shares when a foreigner is involved, so this doesn't generally apply.

You Need 4 Thai Staff and 2 Million Baht per work permit

Under normal requirements this is the case, that there must be 2M THB registered capital and 4 staff on the books for each foreigner who is issued a work permit. But exceptions apply!

  1. Foreigners married to a Thai national only need 2 Thai staff and 1M THB in registered capital for their work permit.
  2. BOI approved companies gain special privileges that disregard the registered capital requirement. With Thai staff, technically there is no minimum numbers per work permit, but an unofficial guideline of 1 Thai per 1 Foreigner is generally enforced. Foreign staff are approved on a case by case basis.

Also note the difference between Registered capital and cash in bank as detailed in the previous point.

You need a minimum of 3 or 7 shareholders in a company

Both of these numbers were right, depending on which year you were talking about.

Prior to 2008 the requirements stated that every company must have at least 7 shareholders, which resulted in a lot of nominee shareholders being appointed, which is technically illegal, despite still being common.

From 2008 until 2023 this requirement was dropped to 3 shareholders.

Currently, since February 2023, the requirement is 2 shareholders. 
However in many cases this is not advised for a foreigner, unless you are taking one of the paths toward full foreign ownership. If you take the easy route of 49% ownership having 2 shareholders means your partner has a majority shareholding, which could be avoided by having a 3rd shareholder who can split the vote.

Thai staff are unreliable or unproductive

While there are cases where this may be the case, this is also true of some workers in every country.

The perception of this is often amplified by a few factors.

  1. Hiring the cheapest employees - Many people move to Thailand because of the lower cost of living, but when you apply this too heavily in your business it can backfire. While you can find staff at low wages, the better workers will rightfully expect more. So if you aim for the minimum salary, don't be surprised by minimal effort.
  2. Communication - Often issues just boil down to this, if you can't explain clearly in their native language what you are after, things will often turn out differently to your expectations.
  3. Culture - Things that may be normal in the west are often perceived differently here which can impact the workplace. Learning how to talk to and treat Thai staff goes a long way. Cross various invisible lines and everything can break down instantly.

To make a small fortune in Thailand, you need to start with a big fortune

This is a classic line of bar stool business advice, but there are countless cases to contradict it.

In general there are 2 key influences in the many cases where this did turn out to be true.

  1. Lack of relevant business experience - So many come here and decide to stick around living the dream, figuring out a business is the easy way to make that happen. But if you haven't run a successful business before you should be ready for an uphill struggle. Most that fail at business in Thailand would fail in their home countries. They lack some parts of the diverse management, finance, recruitment, problem solving, strategy skill set every entrepreneur needs.
  2. Those that have the ability to run a business and fail generally do so by failing to adapt to the Thai way of business. You really need to rethink everything, from where to spend money, what customers here want, how to manage staff, how to handle government authorities and more. "But this is how we do it back home" is a shortcut to disaster!

Outside of these groups there are of course some who fail due to bad luck. But there are many more happy success stories living a great life supported by their Thai business.

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