How to Start Your Own Business in Thailand
Starting a Business and Making Money in Thailand
How to start a business in Thailand is a topic most often brought up by travelers who have become enamored with the lifestyle they've experienced in the Kingdom. It's also the way they believe they can live in the country longer while making a comfortable living in Thailand. But they are not aware that foreigners who want to open a shop in Thailand is not allowed to fully own a company; except for US citizens under the US Treaty of Amity. And they wonder how much it cost to start up a business in Bangkok, Chiang Mai or on any of the idyllic beaches along the country's beautiful coastline.
There are also cultural differences and legal boundaries that have to be considered before planning to open a shop in Thailand.
In this article I will explain what you have to do legally and what you should expect while operating a business in the Thailand. You will also learn the benefits as well as the pitfalls of setting up shop. I'll also touch upon a few business ideas and ventures that I think will work and will not work. The advices in this hub are based on my experiences as well as stories from foreigners who own restaurants and retail shops throughout Thailand and living their dreams.
Most frequent visitors or long stay residents in Thailand have dreams and aspirations of opening a bar business in Phuket, a seaside bungalow resort in Koh Chang and even a coffee bar in Bangkok. Whatever business you ultimately decide to start you have to seriously consider what you are going to be doing and most importantly have an exit plan if all fails. Sadly many businesses started by foreigners do fail at a high rate. Mostly due to unpreparedness in finances. But the potential rewards are great if you are up to the task and if lady luck smiles upon you with good fortunes.
While speaking to most bleary eyed travelers I come across who want to open a business in Thailand I can easily see within a few minutes that they really have no idea what they are getting into, especially when they don't have a business plan. But the most important plan they are lacking is the exit plan.
Starting a business in Thailand is not as hard as you would think since the country is very capitalistic and extremely receptive to foreign businesses. And with a nation of spenders on the heels of China's explosive growth, Thailand is on the receiving end of an exploding middle class with cash to spend.
Thailand has a lot of potential for a successful business if you:
- Have a strong idea and business plan
- Have ample supply of funds to start your business
- Willingness to understand Thai culture, mentality and be open minded with a huge dose of patience
Before you read any further, my advice is that if you are a casual visitor to Thailand you might want to stay in Thailand much longer to get a better feel of what you will be getting involved in. Unless you have so much money that you don't know what to do with it (if that is the case please write me a check). And whether you like it or not you will have to learn the Thai language and perhaps even read Thai in order for your business to grow successfully.
Finally, you should assess your goals and think through your plan. If your wish and desire is to open a small business in Thailand with limited capital you have to accept the fact that it might not make you a millionaire back home. However, if your business is successful, you can look forward to having a very comfortable living while enjoying life in Thailand.
How Much Money Does It Cost To Start A Business In Thailand
There is no magic bullet figure. Though it is safe to say that the cost of opening shop in Thailand from start to finish is cheaper than opening one in your home country. Just keep in mind that the cost of opening up in Bangkok will cost slightly more, especially the cost of rent in prime locations which in the big city is higher compared to the rest of the country. But it is also where you can make the most money since the majority of the wealth is in Bangkok.
Manual labor and construction is very affordable. Once the shop is opened and depending on the type of business you are running; electricity, water, inventory and staff salaries are way more affordable compared to the United States. As of writing a salary of 8,000THB - 10,000THB is the norm for Thais working in restaurants, shops and department stores in Bangkok.
Here's a small example of expenses I pay for one of my coffee shops in Bangkok:
- Staff salary: Full time 9,000THB/month | Part time: 4,500THB/month
- Rent: Coffee shop 15sqm. 13,000THB/month
- Expenses: Supplies and inventory 15,000THB/month (ice, cups, sugar, milk, coffee beans etc.). Of course this amount changes month to month.
- Electricity and water 800THB/month total; water usage is cheap in Bangkok and air conditioning is already provided by the department store I'm renting from which is why my electricity bill is ridiculously low.
Those figures above are more or less rough estimates totaling 30810THB per month. If I take those numbers into account and compare it to my hometown of New York City my expenses would be about 250,000THB to 300,000THB per month.
This is essentially part of the reason why foreigners want to open shop in Thailand when they discover how affordable it is to open up their dream business. So they sell all their belongings including the dog, pack up their bags and never look back.
That could be a big mistake. A back up plan or exit plan or emergency plan is needed if the business fails. There is no guarantee for success in the Land of Smiles no matter how well you planned and executed your business. Besides planning your business financially you should plan on reserving a portion of your funds to return home if necessary. Be prepared, always have enough money for emergencies. This is true in your home country and it's even more true in Thailand.
Personally I have failed businesses in Thailand. I was prepared though so I learned from my mistakes and forged ahead.
Starting a Legal Corporation in Thailand
There are several types of corporations that you can set up. The type you choose should depend on how much you are investing or how well you know the people you are getting into business with. Remember, foreigners are not allowed to own 100% shares of any business in Thailand, unless you are a US citizen which you can read more about below.
The most popular way to start a business in Thailand is to register a business under a Thai person. This is what I have done and know a few others who've gone through this course.
However, the "Thai partner" by law must own 51% of the company which makes him or her the majority shareholder.
Obviously if you are going to register your business under a Thai partner, it has to be with someone you trust life and death with along with your hard earned money. That said, the majority of successful small foreign owned businesses in Thailand have started out this way. It's also by far the fastest way to set up shop and you may not even need to involve hiring a lawyer which cuts costs. Now I can't tell you how to find a Thai partner, especially one you can trust a substantial amount of your money with.
Foreign small business owners usually file a business under a Thai wife, Thai girlfriend or very good Thai friends/business partners that they have known for a long time with a good background.
All you have to do to register a business under a Thai person is to have your Thai partner head over to the governmental agencies with basic information such as type of business. Then you will need proper paper-works of where you will be doing business so a contract with a landlord is required. Then your partner will need to deal with a governmental agency involoved with taxes and acquire any necessary business licenses. Believe me this isn't as hard as it sounds and depending on the establishement the process is very quick and easy for Thais. And if you will be setting some type of street side restaurant you will need to have your Thai partner head over to local police precinct and agree on rent payments, which is really not much, depending on size and establishment.
Types of legal corporations you can set up are Limited Thai Partnerships and Established Thai Partnerships, which still require you to have Thai partners along with your name as company shareholders. However foreign partners cannot own the majority share. There are ways to circumnavigate the rules such creating "dummy" Thai partners. But I wouldn't let this idea even cross my mind since the punishment involves heavy fines and imprisonment.
If you want to have your name on record as a company shareholder you should hire a lawyer who will be by your side to set up agreements with your partners. Remember, in Thailand, contracts written in Thai are contracts which take precedence over foreign written contracts. Since I have no experience in Thai partnerships I recommend a popular foreign run law firm called Sunbelt Legal Advisors based in Thailand.
Which ever route you choose to take it is imperative you let your Thai partner or representative do the majority of the negotiating when dealing with construction, buying a Thai franchise or buying a Thai business to acquiring inventory with local Thai suppliers. As a Westerner and especially if you are not fluent in Thai you will have a higher risk of being subjected to dual pricing, more red tape and unnecessary price haggling.
Treaty of Amity - A Must Read For US Citizens
Treaty of Amity and Economic Relations is an exclusive agreement between Thailand and the USA. Signed in May 29th, 1968 it gives US citizens the right to own 100% of a company in Thailand and vice versa.
You will need a lawyer to help you facilitate and navigate the technical rules involved in opening up a business under the treaty of Amity and without saying you will still need a Thai national you can wholeheartedly trust with your best interest in mind. Starting a company under the Treaty of Amity costs double compared to starting other corporation types as well as the same scrutiny and governmental regulations as forming a Thai corporation.
I am a US citizen and I had the option to form my business under the Treaty. However after speaking extensively with a few US business owners operating under the Amity in Thailand it was explained to me that it took half a year to get the paperwork completed on the Thai end, and time was money. Though they enjoy the fruits of their labor today they would not have wanted to gone through the process again if given the choice. I am not trying to discourage any US citizens from trying to start a business under the Treaty of Amity in Thailand. It might be easier today with many professional law firms in Bangkok. Just make sure you have the right legal representation such as Sun Belt Advisers.
So why are US citizens so special? My theory is it must have had something to do with major US corporations not being too comfortable with the fact that they won't have total company control. I'm sure the big wigs in Coca-Cola or US car makers did not want any unwanted shareholders in their stakes in Thailand. With some lobbying in Washington they successfully had the US government squeeze out some sort of deal with the Thai government. Ahhh capitalism. Don't you just love it?
Start-Up, Franchise or Buying a Business in Thailand
Depending on the type of venture, setting a start-up business in Thailand from scratch is fast and quick. For instance Bangkok has a lot of excellent designers who can help you create your dream store front at the fraction of the cost in the West. And construction is very fast since they work around the clock. Furniture, restaurant equipment and office equipment can be easily found and purchased at reasonable prices. If you need to find wholesalers in Thailand for all types of equipment, stock or inventory, head over to a book store and ask for a Thai business directory. These books are invaluable for finding the right contacts to start and acquire the necessary items to get your business on the right track.
Franchise opportunities are plenty in Thailand. Thai franchises are very affordable and if you are looking to invest in a Thai franchise there is a magazine you can purchase in most book stores. Inside you can find franchises for ice treats (very popular), noodle shops, spas and services. Then there are the international franchises. A popular sandwich shop franchise called Subways are popping up all over Bangkok. Many US franchises are very successful in Thailand. Matter of fact many are more successful here in Thailand then they are back in the USA.
Buying a business might require you to look for a broker so it can be a bit pricey especially when it involves hiring a lawyer and accountant to sort out the feasibility. Many businesses are put up for sale by Thais and foreigners whom for a myriad of reasons need to go home in a hurry or just gave up. The drawback to buying a business of course is that there is a reason why the seller wants to sell. The positive is you have a business ready in a box so all you have to do is nurture and grow it. Buying a business is a crap shoot though as many of the best profitable businesses for sale are usually swooped up by brokers themselves or by Thais with the inside information. Here is a company associated with Sun Belt legal called Sunbelt Asia and they do broker companies for sale. Regardless you must do your due diligence and check to see if the business you are interested in buying has legs to survive when the keys are handed to you.
If you work at a business you started in Thailand without a work visa such as a restaurant you may just get away with it without any consequences. However, if your restaurant is successful and your competition is suffering they just might make a call to the local immigration office and report you. The penalty is deportation and in extreme cases shutting down your business permanently. This is something to think seriously about.
Work Visa or No Work Visa?
It is strictly prohibited to work in a company in Thailand without a work visa. As a foreigner you are not even allowed to volunteer at a business you've funded. That means even if the company is under your name you will still need a work permit. There are monthly fees or taxes for work visas which cost a minimum of 5000 Baht. For a small business in Thailand that is a considerable amount especially when you multiply it by 12 months. It's one of the reasons why most foreigners register a business under a Thai person they trust and micro-mange covertly.
Since visa rules may change at a moments notice so it is best that you do visa research on your own. Again, speak with a Thai law firm for up to date information regarding work visas for foreigners.
I do not recommend searching on the web for answers because it may not be correct because rules and laws change.
You can stay on the business premise of course and have your Thai partner delegate. This is the reason why you and your partner must absolutely understand each other both fiscally and personally before you start your venture.
Business Ideas That Might Work And Won't Work
There are many foreigners who want to open a business in Thailand and have the money (and hopefully an exit plan) but don't know what to start. Then there are those who have way too much money but have ridiculous ideas that in all probability will take off and profit.
The key to having a successful business in Thailand is to target the Thai demographics with only foreigners making up the smaller percentage of sales. For example there are many foreigners who have the idea of opening a go go bar or a small beer bar with ladies available for sexual services. It is the wrong way to go and I strongly advise against it. First and foremost there are enough of these venues. Then there are the moral and ethical reasons why you should not start such a business.
Finally if you decide to concentrate solely on foreign customers you are missing out on the much larger Thai customer base whom would never step through the doors of go go bars. And foreigners come and go but Thais are always loyal to their favorite places of business. So do not make the mistake of targeting the foreign market exclusively.
Consider this. Thailand has a tumultuous history with military coups and clashes against the government occurring once every decade. Once the ashes and rubble is cleared any businesses catering to foreign tourist may have suffered so greatly that it will take them awhile to recover.
The best business in my opinion is the Food Business. Here are 3 reasons why:
- Thais love to eat in groups
- Thai eating lifestyle is changing rapidly towards Western foods
- There are no kitchen appliances such as stoves and ovens in the majority of apartments and condominiums in Thailand
Eating is a communal affair and since the average Thai apartment is small it is not suitable for large friendly gatherings where everyone can eat comfortably.
Thanks to a bit of cultural imperialism from the West, eating on the go is becoming quite frequent for middle income office workers in Bangkok. Instead of grabbing a bowl of rice porridge with minced pork; many today are preferring small sandwiches, breads, bagels and pastries with a cup of coffee for breakfast. Through lunch and dinner you will find Thais dining in Western style fast food restaurants in groups.
But the reason that lit a light bulb in my head is that Thais living in city apartments and condominiums do not have a full kitchen. With so many people concentrated in one place they have to eat out.
Here are 3 small restaurant ideas that I think might work:
- Buffalo Style Chicken Wings
- Pommes Frites (Belgian Style Fries with assorted flavored dipping sauces)
- Fast Food Trucks (Tacos, Waffles, Crepes etc.)
As a native New Yorker I noticed a lot of remarkable similarities between the Big Apple and the Big Mango which is what Bangkok is called in relations to New York City. Thais are big time foodies and will frequent their favorite eateries often and in groups. Buffalo Wings and Pomme Frits are easy to make along with the dipping sauces that accompany them. Thais and foreigners easily recognize them and there won't be a huge learning curve while teaching Thai staffs how to cook and prepare those dishes properly.
Mobile food trucks I believe are also a really good idea. It's very popular in the USA and I think can work very well in the Bangkok. There are a lot of clubs and discos in the city that open late in the night. If you park your truck outside a very popular club around closing time you will be rolling in the Baht as hungry young clubbers are usually those who try new things to eat.
Personally, I do not have the time nor the resources to open these businesses currently. But if you are interested in opening up these businesses just contact me and I'll offer my advice.
Having a successful business in Thailand as a foreigner is a great way to enjoy the country and live abroad. The potential for profits is high with so many Thai youths and a growing middle class willing to spend money.
One final thing you should think about is that Thailand has a history of political instability with military coups occurring every decade or so. Also at this moment foreigners living in Thailand long term are basically less than 2nd rate citizens and it doesn't look like they will be granted full rights as a Thai. Thai immigration laws can change for the bad, further limiting the amount of time a foreigner can stay in the country or create more legal red tape.
There is a lot of uncertainty to consider before thinking about opening a business in Bangkok, Chiang Mai, Pattaya or Phuket so give careful thought and plan carefully especially for the future. But if you are fully prepared, done your market research and know your business plan inside and out with plenty of funds for start up and exit then your rewards are great for a successful business in Thailand.
Questions & Answers
A US citizen that owns a Thai business under the amity treaty could then own land under that company, is that correct?
Yes and no. As a US citizen, the land won’t be in your name. However, it can be under the name of the Thai corporation. I recommend speaking with a Thai based law firm for more info.
© 2011 Edwin Clark