Thailand Business Partnerships

Thailand Business partnerships offer foreign and Thai entrepreneurs a practical legal structure to jointly operate businesses. While the concept of a partnership may seem straightforward, Thailand’s legal system distinguishes multiple partnership types, each with distinct rights, responsibilities, liabilities, and tax implications.

This article presents a comprehensive analysis of registered and unregistered partnerships under Thai law, with a focus on the Civil and Commercial Code (CCC), practical setup requirements, foreign participation restrictions, liability risks, and legal compliance strategies.

1. Legal Basis for Partnerships in Thailand

Business partnerships in Thailand are primarily governed by the Civil and Commercial Code (Sections 1012–1067). The CCC recognizes three primary types of partnerships:

1. Unregistered Ordinary Partnership

2. Registered Ordinary Partnership

3. Limited Partnership

Each structure offers varying levels of legal status, liability exposure, and ease of doing business, especially where foreign parties are involved.

2. Unregistered Ordinary Partnership

2.1 Legal Characteristics

• Formed when two or more persons agree to share profits and losses from a business.

• No registration with the Ministry of Commerce is required.

• The partnership has no separate legal personality from its partners.

2.2 Legal and Financial Liability

• Partners are jointly and severally liable for the obligations of the business.

• Each partner can bind the other through contracts entered into on behalf of the partnership.

2.3 Legal Risks

• Absence of registration means limited recognition in legal disputes.

• Tax authorities may treat such partnerships as sole proprietorships, requiring personal income tax filings.

• Offers little protection in case of bankruptcy, lawsuits, or partner misconduct.

3. Registered Ordinary Partnership

3.1 Legal Characteristics

• Must be registered with the Department of Business Development (DBD) at the Ministry of Commerce.

• Gains separate legal status once registered.

• Operates under a partnership name and can own assets, enter into contracts, and sue or be sued.

3.2 Management and Authority

• All partners can manage and represent the business unless otherwise agreed in the Partnership Agreement.

• Registration provides more accountability and transparency in the partnership’s operations.

3.3 Taxation

• Subject to corporate income tax (CIT) at a rate of 20% on net profits.

• Must file annual financial statements with the DBD and Revenue Department.

4. Limited Partnership (LP)

4.1 Legal Composition

• Comprises two types of partners:

  1. General Partner – Has unlimited liability and full management authority.

  2. Limited Partner – Liability limited to their capital contribution; cannot manage or bind the partnership.

4.2 Legal Entity Status

• Must be registered with the DBD.

• Becomes a juristic person upon registration.

4.3 Governance Requirements

• Partnership name must include the word “Limited Partnership”.

• Only the general partner’s name may appear in the business name.

4.4 Liability and Risk Management

• General partners carry full liability for debts and obligations.

• Limited partners risk losing limited liability protections if they participate in management.

4.5 Taxation and Filings

• Like registered ordinary partnerships, limited partnerships are subject to:

  • Corporate Income Tax (CIT).

  • VAT or Specific Business Tax (if applicable).

  • Annual balance sheet submission to the Ministry of Commerce and Revenue Department.

5. Partnership Agreements: Legal Elements and Custom Clauses

A comprehensive Partnership Agreement is critical for mitigating disputes and clarifying roles. While not strictly required by law, it is legally enforceable and often reviewed by courts in case of dissolution or conflict.

Essential Clauses to Include

• Capital Contributions (form, timing, and valuation).

• Profit and Loss Sharing Ratios.

• Management and Voting Rights.

• Withdrawal, Death, or Expulsion of a Partner.

• Dispute Resolution Mechanism.

• Dissolution Procedures.

• Non-Competition and Confidentiality Terms.

6. Foreign Participation in Partnerships

Foreigners can participate in Thai partnerships, but certain restrictions apply under the Foreign Business Act (FBA) B.E. 2542.

6.1 Impact of FBA

• A partnership is deemed foreign if more than 49% of capital or control is held by foreigners.

• Restricted business activities (List 1 and 2 of the FBA) cannot be operated by foreign-majority partnerships unless:

  • A Foreign Business License is obtained.

  • The business is BOI-promoted (Board of Investment).

6.2 Legal and Tax Implications for Foreign Partners

• Foreign general partners in a limited partnership carry full liability, which can be difficult to enforce across borders.

• Work permits are required if the foreign partner is actively involved in business operations.

7. Compliance, Reporting, and Termination

7.1 Annual Obligations

• Accounting Records: Partnerships must maintain books and submit annual financial statements.

• Tax Filings: Must register for and pay Corporate Income Tax; may also be subject to VAT or SBT.

• Social Security: Required if the partnership hires employees.

7.2 Dissolution and Liquidation

• A partnership may be dissolved by:

  • Mutual agreement.

  • Completion of its purpose.

  • Death or withdrawal of a partner (unless the agreement provides otherwise).

  • Court order.

• Must file dissolution documents and settle debts and assets before formal liquidation.

8. Strategic Use Cases for Partnership Models

Conclusion

Thailand’s partnership structures offer legal and financial flexibility for local and foreign business operators. However, each form entails specific liabilities, registration duties, and foreign ownership restrictions. A deep understanding of the Civil and Commercial Code, Foreign Business Act, and tax compliance obligations is essential to structure partnerships effectively and sustainably.