1. Sole Proprietorship

A sole proprietorship is a business owned and run by one individual. The owner has full authority over management and decision-making, which gives the business flexibility and allows decisions to be made and acted on quickly.

However, the owner alone receives all profits and bears all losses of the business, and is personally liable for its debts and the risks arising from its operations.

This structure suits small businesses, owner-managed businesses, and businesses that do not yet need to raise capital from outside investors.

For tax purposes, the owner is liable to personal income tax at progressive rates from 5% to 35% on net income, after deducting expenses and allowances permitted under Thai tax law. Expenses may be deducted either at a standard rate prescribed by law or on an actual-expense basis, depending on the type of income and the applicable conditions.

Note: Under the Foreign Business Act, certain businesses are closed to foreign nationals, and others may be operated only with a foreign business licence or certificate. This also applies to sole proprietorships.

2. Ordinary Partnership

An ordinary partnership is formed when two or more persons agree to carry on a business together with the aim of sharing its profits. All partners are jointly liable, without limit, for the debts of the partnership.

An ordinary partnership may take one of two forms:

2.1 Unregistered Ordinary Partnership: not a juristic person; taxed under personal income tax rules
2.2 Registered Ordinary Partnership: a separate juristic person; subject to corporate income tax

This structure suits businesses whose partners have a high degree of mutual trust, as every partner is jointly liable for the debts of the business.

3. Limited Partnership

A limited partnership must be registered, upon which it becomes a juristic person separate from its partners. It must have at least one partner of each of the following two types:

3.1 Limited Partners
Liable for the debts of the partnership only up to the amount they have agreed to contribute. A limited partner may not act as a managing partner.

3.2 Unlimited Partners
Jointly and unlimitedly liable for all debts of the partnership. Only unlimited partners may manage the partnership, as a managing partner.

For accounting and tax purposes, a limited partnership must keep accounts, prepare annual financial statements, have them audited and file them, and pay corporate income tax as required by law.

4. Limited Company

A limited company is a form of business that is a juristic person, i.e. a legal entity in its own right.

Key features of a limited company:

4.1  Its capital is divided into shares of equal value.
4.2 At least two promoters are required to form the company.
4.3 Each shareholder’s liability is limited to the amount, if any, still unpaid on their shares.
4.4 The company is a juristic person separate from its shareholders.
4.5 It may increase its capital and admit new shareholders or investors.
4.6 It is managed by one or more directors.

This form offers a clear management system and organisational structure, making it suitable for businesses that plan to expand or that have several investors.

For accounting and tax purposes, a limited company must keep accounts, prepare annual financial statements, have them audited by a Certified Public Accountant (CPA) and file them with the Department of Business Development (DBD), and pay corporate income tax as required by law.

Note: A company in which foreigners (foreign individuals or foreign-owned companies) hold half or more of the shares is treated as a “foreigner” under the Foreign Business Act B.E. 2542 (1999). Certain businesses are closed to foreigners, and others may be operated only with a foreign business licence or certificate.