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Posts Tagged ‘Limited Liability Company’

28th June 2013

Limited Companies in the Kingdom of Thailand

Thai Limited Companies are somewhat similar to limited liability companies in jurisdictions such as the United States, the United Kingdom, or the European Union. However, there are certain formalities which must be adhered to in order to be certain that a Thai company is properly registered. First, a name for the company must be reserved and approved by the Thai Ministry of Commerce and then three shareholders must be utilized in order to meet the requirements for Thai company registration. Meanwhile, depending upon the type of business or the presence of possible future foreign employees certain capital requirements must be met (those wishing to register a Thai Limited Company are encouraged to ascertain the exact amount of capital necessary for a certain type of business before taking steps toward registration). Foreign nationals wishing to register a company in Thailand should note that some types of business are restricted under the provisions of the Foreign Business Act. It should be noted that usage of Thai nominee shareholders to hold shares of a Thai limited company on a foreign national’s behalf solely for the purpose of avoiding conflict with the provisions of the Foreign Business Act is strictly prohibited. American Citizens wishing to register a Thai company or American Companies wishing to set-up corporate offices in Thailand may be eligible to receive certification under the provisions of the US-Thai Treaty of Amity and therefore be in compliance with the Foreign Business Act and other applicable Thai law as companies with Treaty of Amity certification are accorded “National Treatment”.

An issue that may be of interest to those weighing the option of registering a company in Thailand: the corporate tax rate  for small companies making over one million baht per year has been reduced from 23% to 20% as of 2013, according to the official wesite of the Revenue Department in Thailand.

Sole Proprietorships in the Kingdom of Thailand

A sole proprietorship is defined as a business enterprise in which one natural person is the owner. It should be noted that sole proprietorships, unlike Thai limited companies or Thai limited partnerships, provide no limited liability to the owner and therefore the owner’s liability with respect to those conducting business with the sole proprietorship is unlimited.  There are some possible tax benefits arising from operating a sole proprietorship since the sole proprietor may be taxed progressively in much the same way as a natural person. In certain cases, a sole proprietor could opt to be taxed based upon gross receipts, minus a standardized deduction. However, those interested in this type of structure are well advised to contact professionals in order to ascertain further information about whether this type of structure can be utilized for one’s proposed business and the possible tax liabilities of such a proposition.

It should be noted that a sole proprietorship may not be feasible for most foreign nationals wishing to conduct business in Thailand pursuant to the provisions of the Foreign Business Act. It may be possible to obtain a foreign business license for a sole proprietorship in Thailand and thereby maintain compliance with the Foreign Business Act, but such licenses are examined on a case by case basis based upon the type of activity the sole proprietor wishes to conduct. For American Citizens it may be possible to obtain certification for a Thai sole proprietorship pursuant to the provisions of the US-Thai Treaty of Amity.

For related information please see: Thailand Company.



 

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3rd July 2010

In an effort to provide information upon which individuals can make informed decisions the following is a brief overview of the concept of limited liability and its practical applications. The following is a direct quote from Wikipedia:

Limited liability is a concept whereby a person’s financial liability is limited to a fixed sum, most commonly the value of a person’s investment in a company or partnership with limited liability. In other words, if a company with limited liability is sued, then the plaintiffs are suing the company, not its owners or investors. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of his investment in that company. This usually takes the form of that person’s dividends in the company being zero, since the company has no profits to allocate. The same is true for the members of a limited liability partnership and the limited partners in a limited partnership.[1] By contrast, sole proprietors and partners in general partnerships are each liable for all the debts of the business (unlimited liability).

Although a shareholder’s liability for the company’s actions is limited, the shareholder may still be liable for its own acts. For example, the directors of small companies (who are frequently also shareholders) are often required to give personal guarantees of the company’s debts to those lending to the company. They will then be liable for those debts in the event that the company cannot pay, although the other shareholders will not be so liable. This is known as co-signing.

The legal structures used by individuals in an effort to enjoy limited liability have changed over the course of recent years. In the relatively distant past, many American jurisdictions required a great deal of formality when granting limited liability. In recent years, legislative measures have been taken in an effort to make conferment of limited liability more available to larger numbers of people and enterprises.

The creation of the Limited Liability Company (also known by its acronym LLC) was a watershed moment in American jurisprudence. To quote Wikipedia again:

A limited liability company (LLC), also known as a company with limited liability (WLL), is a flexible form of business enterprise that blends elements of partnership and corporate structures. It is a legal form of business company, in the law of the vast majority of United States jurisdictions, that provides limited liability to its owners. Often incorrectly called a “limited liability corporation” (instead of company), it is a hybrid business entity having certain characteristics of both a corporation and a partnership or sole proprietorship (depending on how many owners there are). An LLC, although a business entity, is a type of unincorporated association and is not a corporation. The primary characteristic an LLC shares with a corporation is limited liability, and the primary characteristic it shares with a partnership is the availability of pass-through income taxation. It is often more flexible than a corporation and it is well-suited for companies with a single owner.

It is important to understand that limited liability does not imply owners are always fully protected from personal liabilities. Courts can and do pierce the corporate veil of LLCs when some type of fraud or misrepresentation is involved, or under certain situations where the owner uses the company as an “alter ego.”

As can be inferred from the above quotation, Limited Liability Companies are an optimal tool for business in the global information age as they provide flexibility as well as mobility for an individual or small group of individuals seeking to provide goods and services to niche markets in the international arena. That said, there are certain legal issues that must be addressed when incorporating any venture and, as straightforward as a US LLC may first appear, there are formalities that must be adhered to when one wishes to organize an American LLC.

For related information please see: US Company Registration.

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21st June 2010

This blog frequently discusses the formation and incorporation of Thai companies, but we rarely discuss corporate formations in the United States of America. Relatively few foreign nationals are aware of the many benefits that come from setting up a corporate structure in the United States.

One of the most advantageous aspects of setting up a company in the United States is banking. American banks are some of the most efficient and customer-service oriented financial institutions in the world. For this reason, many Americans and non-US Citizens routinely use US banks in order to enjoy all of the amenities of truly “global” service. Simply because an individual is not physically in the United States should not mean that he or she should not be accorded comparable banking advantages when competing in the global marketplace. Furthermore, lack of American citizenship should not be a bar upon an international businessperson’s ability to conduct their affairs, banking or otherwise, efficiently and on a global scale.

Limited Liability is another major benefit to those wishing to conduct business in the international, supranational, and multinational spheres. In many jurisdictions of the United States of America the Limited Liability Company has been used as a means of providing limited liability to small and medium enterprises (SMEs). A US LLC can also be utilized by foreign nationals doing business in a US jurisdiction so long as the legal formalities are met. That said, those interested in setting up a company in the US are well-advised to seek counsel from an attorney licensed in the jurisdiction where the business is to be conducted.

US Immigration is likely one other point of interest to those seeking a corporate presence in the United States of America. If a US visa applicant has a bona fide business reason for traveling to the United States, then a US business visa may be obtained from a US Embassy or US Consulate overseas. For those who simply need to conduct a meeting or undergo specialized training, a US B1 visa may be the appropriate travel document. However, those wishing to remain for a relatively long period of time working in the USA may apply for a visa category such as the E2 visa or the L1 visa (either the L1A or L1B sub-category). In some cases, an H-1 visa may be the appropriate visa for an individual working and conducting business in the United States. Depending upon the category of the US visa being sought, an applicant’s unique qualifications and skills must be adjudicated by a US Consular Officer with appropriate jurisdiction.

For more information about company registration in Thailand please see: Company in Thailand or US-Thai Treaty of Amity. For further information about setup of a Company in the USA please see: US Company Registration.

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