Thai Business Partnerships

Thai Business partnerships are recognized as a legal form of organization under the Civil and Commercial Code (CCC) and are widely used in small to medium enterprises, professional practices, and joint ventures. Unlike corporations, partnerships in Thailand involve fewer regulatory requirements and offer greater flexibility in structure, but they also come with significant personal liability risks depending on the partnership type.

Partnerships can be formed between Thai or foreign individuals or juristic entities, subject to Thai legal requirements. Foreigners must also navigate Thailand’s Foreign Business Act (FBA) and related restrictions on engaging in certain business sectors.

This article provides an in-depth legal analysis of Thai business partnerships, including types of partnerships, formation procedures, liability issues, tax obligations, and the implications for foreign investors.

1. Legal Basis of Partnerships in Thailand

1.1 Governing Statute

• Civil and Commercial Code (CCC), Sections 1012–1096

• Supplemented by:

  • Revenue Code (for tax treatment)

  • Foreign Business Act B.E. 2542 (1999) (for foreign participation)

Partnerships do not require registration to exist, but registration affects their legal personality and liability.

2. Classification of Partnerships in Thailand

Under Thai law, there are three types of partnerships:

Let’s examine each type in detail.

3. Ordinary Partnership

3.1 Nature and Formation

• Formed when two or more persons agree to carry on business jointly and share profits and losses

• No registration is needed unless it seeks legal personality

• Common in informal or family-run businesses

3.2 Legal Consequences

• No legal personality separate from the partners

• Partners are personally liable for the debts and obligations of the business

• Cannot sue or be sued in its own name

4. Registered Ordinary Partnership

4.1 Registration and Legal Status

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

• Gains juristic person status

• Can own property, enter contracts, and sue/be sued in its own name

4.2 Liability

• Despite being a juristic entity, all partners remain jointly and severally liable with the partnership for debts incurred while they are partners

• Liability is personal and unlimited

4.3 Registration Requirements

• Partnership name, objectives, business address

• Names, addresses, nationalities of partners

• Capital contribution of each partner

• Signature of all partners

5. Limited Partnership (LP)

5.1 Structure

• Must have at least:

  • One general partner (unlimited liability)

  • One limited partner (liability limited to capital contribution)

• Only general partners may act on behalf of the partnership

5.2 Legal Personality

• Becomes a juristic person upon registration with DBD

5.3 Liability Structure

A limited partner who takes part in management may be deemed a general partner in liability.

6. Capital and Contributions

• Contributions can be in cash, property, or labor (for general partners only)

• Limited partners must contribute capital (not labor or services)

• The value of non-monetary contributions must be assessed and recorded at registration

7. Taxation of Partnerships

7.1 Tax Status

• Registered Ordinary Partnerships and Limited Partnerships are treated as juristic persons under the Revenue Code

• Required to:

  • Obtain a Tax ID

  • File corporate income tax returns (PND 50)

  • Register for VAT if revenue exceeds THB 1.8 million/year

7.2 Personal Tax on Distributions

• Profits distributed to partners are subject to personal income tax on top of partnership-level tax

Tax filings include half-year and full-year returns, along with withholding tax reports if payments are made to others.

8. Accounting and Reporting Obligations

• Must maintain books of account and prepare financial statements

• Submit audited financials annually (for limited partnerships and registered ordinary partnerships)

• Financial records must comply with Thai Financial Reporting Standards

9. Termination and Dissolution

A partnership may be dissolved due to:

• Expiration of fixed term (if specified)

• Completion of objective

• Agreement of partners

• Court order (e.g., misconduct by partner)

• Insolvency or death of a partner (unless otherwise agreed)

9.1 Liquidation Process

• All pending obligations must be settled

• Liquidator appointed (by court or partners)

• Final accounts filed with DBD

• Upon completion, partnership is struck from the registry

10. Foreign Participation in Thai Partnerships

10.1 Foreign Ownership Restrictions

• Under the Foreign Business Act, foreigners may not engage in certain restricted businesses unless:

  • A Foreign Business License (FBL) is granted, or

  • The business qualifies for BOI promotion or treaty exemptions

10.2 Foreign Partner Roles

If foreigners collectively hold ≥50% of shares or voting rights, the partnership is deemed a foreign entity under the FBA.

11. Advantages and Disadvantages of Partnerships

✅ Advantages

• Simple to set up and register

• Flexible structure

• Less compliance burden than companies

• Suitable for professional services, small businesses

⚠️ Disadvantages

• Unlimited liability (for general partners)

• Profits taxed at both partnership and individual levels

• Less access to capital and formal credit than limited companies

• Foreign ownership limitations under FBA

12. Comparison with Other Business Forms

Conclusion

Thai business partnerships offer a flexible and legally recognized way to operate a business, especially for closely held operations and professional ventures. However, the choice of partnership type carries significant legal consequences, particularly regarding personal liability and foreign participation.

Registered partnerships and limited partnerships enjoy legal personality and tax recognition, but must comply with accounting, registration, and regulatory obligations. Foreign investors considering partnership structures must also assess the impact of the Foreign Business Act and any sector-specific rules.

Because partnerships in Thailand can result in unlimited personal liability, choosing the right legal structure—and drafting a clear, enforceable partnership agreement—is critical. Legal advice and careful planning are essential for long-term success.