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Sole Proprietorship in Thailand

Sole Proprietorship in Thailand

The sole proprietorship in Thailand is the simplest business form. It is owned and operated by a single individual, the proprietor, who enters the business with all of his assets. This is a recommended option to all businessmen who wish to enter the market and begin their business activities by operating a small one-man business. 

The sole trader has a number of advantages but also some precautions because of its unlimited liability characteristics. Our specialists in company registration in Thailand can provide you with suitable information in this matter, in order for you to start a business.

We invite you to watch the following video on the main traits of the sole trader:

The characteristics of the sole trader in Thailand

sole trader or a sole proprietor is a simple business form with lighter taxation, accounting and reporting requirements than partnership or corporations. However, investors should be well aware of the liability implications.

Our team of Thai company formation agents highlights the main characteristics of the sole trader in the list below:

  • a single-man business: the defining trait of the sole proprietorship, this is a simple business form that is owned by one person who has unlimited liability.
  • it can engage in any business: some types of business activities will require that the sole trader is registered with the local District Office for that particular activity; however, service-related businesses are not required to do so.
  • the sole trader can be the owner of the registered office: the sole trader should have a registered office in Thailand, however, due to the simple nature of the business, the proprietor can also be the owner of the property.
  • income treatment: the income derived by a sole trader will be treated and taxed as personal income, up to a certain profit amount per year.
  • special VAT conditions: the sole trader needs to obtain a VAT certificate only if the business has an annual income that exceeds 1,800,000 Bhat.

The sole trader or sole proprietorship may seem advantageous to many investors because of the reduced business costs. However, its main trait, the fact that there is no distinction between the individual and his business, is an issue that should be taken into consideration by all investors. The unlimited liability is the most important trait of the sole trader and, in some cases, it is the reason why investors choose to change the business form when the business evolves and the liability rate increases.

A sole proprietorship is also subject to lighter accounting and control requirements because it is a small business that will, in most cases, drive a smaller annual turnover compared to other business forms. This means that the owner will need to impose a good financial control policy and manage the inbound and outbound payments accordingly so that the business will not accumulate debt. When needed, entrepreneurs can also use the aid of a debt collector. 

Company formation in Thailand can be perceived as easier in case of the sole trader, however, in general, this business form will face more challenges in terms of raising capital. Unlike in a private limited liability company, in which the founders contribute to the business, the sole trader will have only one founder who cannot take another partner, for example, in the case of the partnership. Both the partnership and the private limited liability company are examples of how other business forms can raise capital easier than the sole trader. Moreover, the sole trader will not be perceived in a similar manner as the private limited liability company, making it more difficult in most cases to obtain a bank loan.

The sole trader is more popular among Thai nationals compared to foreign investors because for the latter, the Foreign Business Act regulates ownership for this business form. In practice, foreigners will also be required to handle all of the legal issues that refer to lawfully working in the country based on a valid work permit. 

Our company registration agents in Thailand are able to offer the necessary information and guidance, in order for you to properly open a company in Thailand.

Register a sole proprietorship in Thailand

First of all, overseas businessmen who wish to establish a sole proprietorship in Thailand need to obtain a work permit, according to the Immigration and Labor Law in the country. Our team of Thai company formation agents can provide investors with detailed information about the requirements set forth by the Thai Ministry of Labor.

American citizens who wish to do business in Thailand have the right to 100% ownership, due to the US – Thailand Treaty of Amity and Economic Cooperation signed in 1968.

It is good to know that our experts in company registration in Thailand can offer detailed information on this matter. In order to properly function, the commercial activities of a sole proprietorship in Thailand need to be registered at the local District Office, and the following documents are necessary:

•    a signed copy of the house registration book of the business address;
•    the map of the business address;
•    the taxpayer number;
•    the VAT certificate;
•    the registration application form.

Investing in Thailand

The sole trader is just one of the business forms that are available for incorporation in Thailand. Foreign investors will often choose the more popular private liability company for their business activities, however, they can also establish partnerships together with a Thai national, especially if the business is small. In all cases, we recommend that individuals who wish to open a company in Thailand reflect on the characteristics of each business form and, as needed, request a specialized consultation with one of our agents for a more comprehensive understanding of the liabilities, especially in case of the sole trader.

The Foreign Business Act defines a foreign company is a legal entity registered in Thailand in which half or more of the shares are owned by foreigners. These types of companies are restricted from engaging in certain types of activities unless obtaining a special approval or license from the relevant Thai authorities. Entrepreneurs who wish to know more about these restrictions can reach out to our team of Thai company formation agents. For the purpose of the Act, a foreigner is any natural person whose nationality is not Thai. 

Thailand encourages foreign investment and has an Investment Promotion Act that expressly encourages investments through tax and non-tax incentives. Some of these include the following:

  • tax incentives: exemptions from or reductions of the import duties on machinery; the reduction of import duties on essential materials or raw materials; 50% reduction on the corporate income tax and others.
  • non-tax incentives: permits for foreign nationals who wish to enter Thailand to study investment opportunities; permits to bring skilled workers and experts for certain investment-promoted activities; 100% foreign ownership for some types of businesses as well as the permit to own land in some cases.

A sole trader is a business form that is suitable for those investors interested in opening a small business. In many situations, these investors may find that the business grows in time and they will need to change the business form so that it will suit the needs of their now small to medium-sized business. In Thailand, the number of small and medium-sized enterprises is growing, as highlighted in the following statistics for the year 2017:

  • SME:  at the end of 2017, the number of small and medium companies was 3,046,793.
  • SE: out of these, small enterprises were the most numerous, at 3,028,495.
  • a large number of sole traders: sole traders and other types of small companies had a total number of 2,285,731. 
  • ME: 18,298 medium-sized companies were present on the market at the end of 2017. 

The sole trader can be a popular business form among Thai entrepreneurs. Non-Thai individuals who are married to a Thai national can open a sole trader in their name. one of our agents can give you more information about the advantages of opening a sole trader and can offer you complete advice regarding the most suitable business form for your needs.

If you have questions about the sole proprietorship or about the company registration procedure in Thailand, you are invited to contact us.