A Thai business partnership is a legal arrangement between two or more individuals or entities to conduct business in Thailand. Partnerships in Thailand are governed by the Civil and Commercial Code (CCC) and are categorized into unregistered ordinary partnerships, registered ordinary partnerships, and limited partnerships. Foreign investors seeking to establish a business partnership must also consider restrictions under the Foreign Business Act (FBA).
1. Types of Business Partnerships in Thailand
1.1 Unregistered Ordinary Partnership
- A partnership where two or more individuals operate a business together without official registration.
- Each partner has unlimited liability for the business’s debts and obligations.
- Not a separate legal entity, meaning partners are personally liable for financial and legal matters.
Advantages:
- Simple and inexpensive to set up.
- Suitable for small businesses with minimal risk.
Disadvantages:
- No legal protection for individual partners.
- Difficulty in securing financing and contracts.
1.2 Registered Ordinary Partnership
- A partnership that is officially registered with the Department of Business Development (DBD) under the Ministry of Commerce.
- Becomes a separate legal entity from the partners, but partners still retain unlimited liability.
- Can enter into contracts, own property, and sue or be sued under its own name.
Advantages:
- More credibility for business transactions.
- Easier access to bank loans and business contracts.
Disadvantages:
- Partners remain personally liable for debts.
- More administrative requirements than an unregistered partnership.
1.3 Limited Partnership
- A hybrid partnership where at least one partner has unlimited liability, while the other(s) have limited liability based on their capital contribution.
- The general partner manages the business and assumes full liability.
- The limited partner contributes capital but has no management authority and is only liable for the amount invested.
- Must be registered with the DBD to be legally recognized.
Advantages:
- Limited partners enjoy reduced liability.
- Suitable for investment purposes without operational involvement.
Disadvantages:
- General partners bear full financial and legal risks.
- Limited partners have no control over business operations.
2. Foreigners and Business Partnerships in Thailand
Under the Foreign Business Act (FBA), foreign investors must be aware of ownership restrictions:
- Foreigners cannot hold more than 49% ownership in certain restricted business activities.
- Foreigners can form a Thai-majority partnership (Thai nationals owning at least 51%) to conduct restricted business activities.
- Board of Investment (BOI) promotion or Foreign Business License (FBL) can allow foreigners to hold majority ownership in some cases.
Foreigners should also be aware of work permit and tax obligations before joining a partnership in Thailand.
3. Registration Process for a Partnership in Thailand
- Select the Partnership Type – Decide between ordinary (registered or unregistered) or limited partnership.
- Reserve a Business Name – Register the business name with the DBD.
- Prepare the Partnership Agreement – Define profit-sharing, management roles, and partner liabilities.
- Submit Registration Documents – Register the partnership at the DBD.
- Obtain a Tax ID and VAT Registration – Partnerships with revenue over 1.8 million THB per year must register for VAT.
4. Taxation and Financial Obligations
- Ordinary Partnerships (Unregistered): Partners file personal income tax (PIT) on their share of profits.
- Registered Ordinary & Limited Partnerships: Taxed as a legal entity at corporate income tax (CIT) rates of 20%.
- Withholding Tax and VAT may apply depending on business operations.
5. Dissolution and Liability Considerations
- Ordinary Partnerships dissolve when a partner leaves, unless agreed otherwise.
- Limited Partnerships can continue if a limited partner exits.
- Partners in ordinary partnerships (registered or unregistered) remain personally liable for any outstanding debts after dissolution.
6. Conclusion
Thai business partnerships offer flexible business structures for both locals and foreign investors. Choosing the right partnership type depends on liability concerns, business objectives, and legal obligations. Given the legal and tax implications, consulting a business lawyer or financial expert is recommended before forming a partnership in Thailand.