Thai Business Partnerships. Thailand’s legal framework provides for several forms of business organization, including corporations, sole proprietorships, and partnerships. For many local and foreign investors, partnerships offer a flexible business structure that can be tailored to various commercial purposes. However, to use partnerships effectively in Thailand, it is important to understand their legal characteristics, formation requirements, liabilities, and regulatory obligations.

This article provides an in-depth guide to business partnerships in Thailand under Thai law, with attention to structure, liability, governance, taxation, and practical issues.

Legal Framework

Business partnerships in Thailand are governed by:

• The Civil and Commercial Code (CCC), Book III: Specific Contracts (Sections 1012–1088).

• Additional sector-specific laws (e.g., Foreign Business Act B.E. 2542 (1999)) if the partnership engages in restricted activities.

Partnerships must also comply with registration, accounting, and tax obligations under:

• The Revenue Code

• The Accounting Act B.E. 2543 (2000)

• The Commercial Registration Act B.E. 2499 (1956)

Types of Partnerships in Thailand

The CCC defines two main categories of partnerships:

1️⃣ Unregistered Ordinary Partnership

• A basic partnership where two or more persons agree to share profits from a joint business.

• No registration required.

• The partnership is not a separate legal entity from its partners.

• Each partner has unlimited personal liability for partnership obligations.

👉 Common in informal business arrangements or small-scale operations.

2️⃣ Registered Ordinary Partnership

• Similar to an unregistered partnership, but registered at the Ministry of Commerce (MOC).

• Upon registration, the partnership becomes a juristic person separate from the partners.

• The partnership itself can own property, sue, and be sued.

• Partners remain jointly and unlimitedly liable for partnership debts, but creditors must first claim against the partnership before proceeding against partners.

3️⃣ Limited Partnership

• A hybrid structure with:

  • At least one general partner, who has unlimited liability.

  • At least one limited partner, whose liability is limited to their capital contribution.

• Must be registered with the MOC.

• Only general partners manage and represent the partnership.

• Limited partners may not participate in management; doing so risks losing limited liability protection.

👉 Commonly used for ventures seeking passive investors.

Formation and Registration

Registered Ordinary Partnership & Limited Partnership

Registration process:
1️⃣ Choose a partnership name (must not be identical or similar to existing entities).
2️⃣ Prepare and sign the partnership agreement.
3️⃣ File registration documents at the Department of Business Development (DBD) of the MOC.
4️⃣ Provide details of:

• Partnership name, objectives, registered office.

• Names, addresses, and identification of partners.

• Contribution amounts (cash, assets, labor).

• Names of managing partners.

5️⃣ Pay registration fee (varies by capital amount).

Capital contribution:

• No minimum capital requirement under Thai law.

• Contributions may be in cash, kind, or labor (for general partners).

Liability of Partners

Management and Representation

• Ordinary partnerships: Each partner has authority to bind the partnership unless otherwise agreed.

• Limited partnerships: Only general partners have authority to manage and bind the partnership. Limited partners must not take part in management decisions.

Any restrictions on managing authority should be clearly stated in the partnership agreement and registered particulars.

Taxation

• Partnerships are pass-through entities for tax purposes but have compliance obligations.

• Registered partnerships must:
  ✅ File an annual partnership income return (PND 50)
  ✅ Maintain accounting records and submit financial statements
  ✅ Pay VAT or specific business tax if applicable

Each partner is taxed individually on their share of net profits.

• Unregistered ordinary partnerships are treated as groups of individuals for tax purposes.

Accounting and Compliance

• Registered partnerships must comply with the Accounting Act:
  ✅ Appoint a licensed accountant.
  ✅ Maintain books of account in Thai language.
  ✅ Submit financial statements to the DBD annually.

• Limited partnerships with annual revenue exceeding THB 30 million (trading) or THB 1.8 million (services) must register for VAT.

Foreign Participation and Restrictions

Under the Foreign Business Act (FBA):

• A partnership with half or more of the capital held by foreigners or where foreigners have management control is considered a foreign entity.

• Foreign-controlled partnerships may not engage in certain restricted businesses (e.g., services, agriculture) without a Foreign Business License or BOI promotion.

Foreign general partners in a limited partnership will typically render the partnership foreign for FBA purposes.

Termination and Dissolution

A partnership may dissolve by:

• Expiration of the partnership term.

• Completion of the objective.

• Mutual agreement.

• Death, insolvency, or withdrawal of a partner (unless otherwise agreed).

• Court order (e.g., serious breach of duty).

Upon dissolution:
✅ The partnership enters liquidation.
✅ Assets are used to pay debts, with remaining funds distributed to partners.
✅ Liquidation must be registered with the DBD.

Advantages of Partnerships

• Simplicity and flexibility in formation.

• No minimum capital requirement.

• Suitable for small to medium ventures, professional services, or joint business efforts.

• Limited partnership offers passive investors liability protection.

Risks and Limitations

⚠ Unlimited liability for general partners.
⚠ Limited partners’ liability protection is lost if they participate in management.
⚠ Difficulty attracting significant capital compared to companies.
⚠ Foreign ownership restrictions limit use in certain industries.

Practical Considerations

• A well-drafted partnership agreement is critical to prevent disputes, covering profit sharing, authority limits, withdrawal rights, and dispute resolution.

• Careful structuring is needed to comply with FBA rules where foreign partners are involved.

• Use of a limited partnership structure should be accompanied by clear delineation of management roles.

Conclusion

Business partnerships in Thailand offer flexible solutions for ventures involving multiple parties. However, they bring significant legal responsibilities, particularly regarding liability and compliance. Understanding the nuances between unregistered partnerships, registered ordinary partnerships, and limited partnerships is crucial for choosing the right structure. For foreign investors, additional attention is needed to ensure compliance with ownership restrictions and regulatory requirements.