Integrity Legal

In the Kingdom of Thailand there are many different types of business structures which can be utilized in order to legally operate pursuant to Thai law. In previous postings on this blog Thai limited partnerships as well as Thai ordinary partnerships and registered ordinary partnerships were discussed. Another type of business structure which is similar to a Thai partnership is known as a Joint Venture.

In the eyes of Thai jurisprudence the term “joint venture” has two meanings. The first definition of a joint venture is similar to an ordinary  partnership (also sometimes referred to as an unregistered ordinary partnership). However, a joint venture of this type must include at least one juristic person although the type of juristic person included in a joint venture may differ depending upon the unique circumstances of a given situation. Therefore, a joint venture could be the combination of a limited company and a natural person, a natural person and a limited partnership, two limited companies, or a limited partnership and a limited company. However, the aforementioned combinations are not an exhaustive list of all the combinations which could be devised to create a joint venture. Aside from requiring that this type of joint venture include a juristic person, the joint venture should also keep joint accounts and share profits (the division of profits is generally dictated in the terms of the jont venture agreement). Management responsibilities within a Thai joint venture are generally dictated by the terms of the joint venture agreement. The type of joint venture described above is taxed at the same rate as a juristic person, meaning that as of 2013 a Thai joint venture would be taxed at a rate of 20%. However, the profits gained from a joint venture by a juristic person domiciled in Thailand are not subject to further taxation. Those participants in a joint venture which are not domiciled in Thailand and therefore receive their profits outside of the country are subject to a 10% witholding tax on their portion of the profits.

The other type of joint venture which may be utilized by those wishing to jointly undertake business in the Kingdom of Thailand looks more like a Thai Limited Company. Essentially, this type of joint venture is created when two (or more) companies decide to create a third Thai company which would act as the vehicle for the joint venture in Thailand. These types of structures may vary widely in terms of management, percentage of ownership, and taxation depending upon the unique circumstances of the parties involved and the agreements made with regard to the aforementioned issues. Therefore, those seeking further information on this type of structure are well advised to contact a legal professional in Thailand in order to ascertain details about a prospective joint venture.

For related information please see: Tax Registration Thailand.

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Those researching business and corporate entities in Thailand (sometimes referred to as Thai juristic persons) often come upon information pertaining to Thai partnerships. Partnerships in the Kingdom of Thailand are different from Thai limited companies and Thai sole proprietorships for a number of reasons. For example, Thai limited companies provide the shareholders with limited liability. This means that liabilities incurred by a Thai limited company do not generally flow through to the individual shareholders (that said, under some circumstances, directors of Thai companies may have some legal liability to the company itself). Depending upon the type of Thai partnership, the partners may or may not have limited liability. Thai Partnerships differ from Thai Sole Proprietorships for a number of reasons, but the most obvious difference is that Thai Sole Proprietorships, as the name suggests, are operated by one natural person.

In the Kingdom of Thailand, there are different types of partnerships: Thai Ordinary Partnerships, Thai Registered Ordinary Partnerships, and Thai Limited Partnerships. In this posting only ordinary partnerships and registered ordinary partnerships will be discussed as Thai limited partnerships will be discussed in a later posting.

Thai Ordinary Partnerships

Thai ordinary partnerships are sometimes referred to as unregistered partnerships. The name “unregistered partnership” may stem from the fact that Thai ordinary partnerships are not required to have a written partnership agreement and even where a written partnership agreement exists it is not required that the aforementioned agreement be registered. That being stated, ordinary partnerships are still required to register their existence as a business entity with the Thai Ministry of Commerce. However, notwithstanding the fact that an ordinary partnership has registered with the Ministry of Commerce, this type of registration should not be construed to mean that the partnership is a Thai registered ordinary partnership. All partners in a Thai ordinary partnership have unlimited liability for the acts of any of the other partners which occur in the course of the partnership’s business. Creditors of an ordinary partnership may make claims against the property of any of the partners and do not need to first make a claim against the assets of the partnership.

Thai Registered Ordinary Partnerships

Thai Registered Ordinary Partnerships must be registered with the Ministry of Commerce in the Kingdom of Thailand. When registering this type of partnership a copy of the written partnership agreement, information regarding capital contributions as well as managerial duties of the partners, and objectives of the partnership must be included in the application for registration. In the eyes of Thai law, a registered ordinary partership is viewed as a distinct entity separate and apart from the partners. However, the legal distinction between the registered ordinary partnership and the partners as individuals should not be construed to mean that the partners have limited liability. That stated, if a claim is to be made by a creditor against a Registered Ordinary Parntership, then the creditor must first seek to make their claim against the assets of the Registered Ordinary Partnership before making a claim against either of the individual partner’s assets.

There are significant differences in the way in which registered ordinary partnerships and ordinary partnerships are taxed in the Kingdom of Thailand. Therefore, those interested in establishing either of these types of partnerships are encouraged to contact a legal professional in Thailand to ascertain whether either of these types of structures are suitable.

It should also be noted that foreign nationals wishing to set-up a Thai Registered Ordinary Partnership or a Thai Ordinary Partnership may be barred from doing so pursuant to the provisions of the Thai Foreign Business Act. In some cases, a Thai Foreign Business License may be obtained depending upon the type of business the foreign nationals wish to undertake through use of a Thai partnership. American citizens wishing to set-up a Thai partnership (either a registered ordinary partnership or simply an ordinary partnership) may obtain certification for their proposed partnership pursuant to the terms of the US-Thai Treaty of Amity, provided that the proposed business activity is not restricted under the terms of the Treaty; and, upon being approved for a Treaty certificate, operate their partnership notwithstanding the provisions of the Foreign Business Act.

For related information please see: Thailand Company Registration.

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