Challenges and ideas for an Expat in opening a small business in Thailand

rice field & hutAlluring landscapes, charming people and rich Asian culture—Thailand is a paradise in many ways. But, like anywhere else, if you don’t have money in your pocket it can be a rough and tough experience.

Even if you’re collecting a steady pension check, social security payment, or trust fund payout, there’s always the fear that the U.S. dollar or another home currency can lose value against the Thai Baht…so it’s important to find some sort of income stream locally.  The  future prospects for the economy in Thailand seem much more optimistic that in the US, the UK or in Western Europe.   A perfect situation would of course to have diverse income flows in several currencies (and maybe a few Bitcoins as well), but perfect is hard to come by.

Starting your own business is one option. But—notwithstanding the truth about entrepreneurship…you either have it, or you don’t—in Thailand there are special considerations to take into account.

Before permanently moving the 7,700 miles from California to Chiang Mai—the “most Thai” of northern cities—in 2011, I owned and operated small businesses in the United States for about 30 years.  For several years prior to making Thailand my permanent home, I spent a considerable part of each year staying here to become more familiar with making this kingdom my home.  In the US, I primarily ran a wholesale distribution company and manufacturers rep agency, and for several years prior to leaving America, a Thai restaurant in the San Francisco Bay area, with my Thai wife, Tena.

Despite a lot of restrictive regulations in Thailand, I actually found that establishing the corporation in Thailand was less cumbersome than back in the U.S., where you’d to report to so many different redundant government agencies.  Regulations also seem to be a bit more flexible in Thailand, based on influence and attitude, amongst other things.

To establish a corporation or partnership (i.e. a Limited Company) in Thailand, a foreigner can own only up to 49% of the equity. That means there must be Thai partners who own the majority. There are possible exceptions if you go through the Ministry of Commerce to set up a Foreign Business License…but these are typically granted for companies that start out with large capital and will employ a lot of Thai people.

Yet, even with only a minority equity share, an expat can still retain control if he/she designs the business so that they are the managing director, and no Thai partner has a large portion. It is essential that you employ professional Thai accountants and a lawyer to set up the company here. It’s also worth noting that expats cannot own land in Thailand…only a condo. Company formation is one of the ways around this. Legal assistance is good and easily available in Chiang Mai and most other Thai cities.

A work permit must be obtained (with fees) and four Thai nationals must be employed for every one foreigner working in the company. And once on a permit, you must pay yourself a minimum of 50,000 baht per month (about $1,630 USD).  That can be cumbersome, so many expats opt for not employing themselves in the enterprise.

Within the framework of a Thai corporation, we have tried several different enterprises, including a tour company, a restaurant, short term condo rentals to visitors of Chiang Mai and a small boutique fashion shop.  Some of these enterprises have been successful and others have not, but they managed to provide a small local income and employment for some of our Thai family.  We are a bit fickle with small businesses and tend to jump at different opportunities as they come up, and we have plenty of ideas still cooking.

A way around Thai restrictions for starting a business is having a sole proprietorship in your home country. Work virtually and flexibly as a contractor writing articles or publishing e-books, or as a small resale business: for example, buying Thai products and exporting them back to your home market.  In doing this, it is important to keep a fairly low profile, because any expat business that eats into Thai businesses can create some official backlash.

The work permit requirement is enforced only if the work involves a Thai company, or directly competes with indigenous firms. A financial consultant employed by a Thai business will most likely need one; likewise a sole ownership travel agency serving foreign visitors, competing with local operators. But, if you are trading US stocks or building websites for American clients online, the Thai laws are vague and more tolerant.

Generally if you don’t impact on Thai businesses you needn’t worry. So, while an expat starting up a little food-cart business side-by-side with Thai street vendors will quickly run into strife, someone establishing a restaurant with Thai partners and employing local staff is “do-able” with a little planning…and an independent computer consulting business for international clients from a home office is very easy to set up.

The trick, as applies everywhere, is to develop a business with a viable market, while working within the rules. Roll with the regulations, don’t rock the boat (an expat will never win), and you too can relax and enjoy the Thai way of life.

EXPAT EXPORTERS

Doi Suthep & Ban Tawai 158Lots of expats here are involved in exporting Thai products. Some sell directly online through the likes of Amazon and eBay, or via a dedicated shopping website. That usually involves pretty hefty shipping charges, so many expat exporters partner with someone at home to distribute individual orders. Shipping a large amount via a full or partial container (charged per square-meter) is much more economical.

container shipFinding unique Thai products for which there’s a steady market back home is key.  Some items that seem to do extremely well are Thai Buddha statues, hand-woven silk and finely carved wood wall art. There’s so much available from Thai artisans that it’s not difficult to find something truly different from other mass-produced products that will always be appreciated at home.

Some can sniff out a fragrant opportunity.  I met an entrepreneur from Seattle who spent much of his time in Thailand raising orchids in his large greenhouse next to his Thai home. The resources are plentiful in Thailand, and the climate is ideal for growing and developing unique colors and strains of the flowers. Orchids are indigenous to Thailand.  Then once a year he would head back to Seattle with a near-full container-load of the finest orchid plants one could find. Within a month, back in his home country, he had it all sold via wholesale channels with enough profits to keep him going till the next trip.”

pic in restaurantA good friend from the San Francisco area pops over to Thailand every few months to scour the famous Chiang Mai Walking Street market to pick up paintings to sell back home on craigslist, ebay and other selling websites. With an easy to get markup of about 200%, he is able to finance his adventures to Thailand plus add nicely to his income. In Thailand, a buyer can deal directly with the artist and cut out any costly middlemen.  Paintings of Buddhist spiritual subjects and hand carved wood designs seem to do best because of their uniqueness back in the US market.

There are so many different possibilities to explore in Thailand for export back home which are very much appreciated and priced here to make them profitable and worth the effort.

For a whole book of information about making money in Thailand, read this…

Home Business For Expat Wives: Building a Successful Home Business Even While Living Overseas - A complete guide for expatriate wives to starting and growing a successful home-based business.

southwind – A cinematic journey thru Southeast Asia

southwind from zoomion on Vimeo.

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14 thoughts on “Challenges and ideas for an Expat in opening a small business in Thailand

  1. This is a very interesting and useful article you posted, and I think the most important advice you provide is to move ahead carefully and make certain that you learn enough while you progress to ensure that your venture is a success. Probably a more conservative approach is best in the beginning.

    Where I come from people make a very good living from opening Chinese temples and they are able to create very large and ornate places to worship which attract people to visit and pray and enjoy the day together. I wonder about if it might be possible to duplicate one of these temples in Thailand for Chinese visitors which are coming in ever increasing numbers to Chiang Mai.

    • A Few Words on the Treaty of Amity

      There is a special agreement between the United States and Thailand to allow American businesses to operate in Thailand “on the same footing as Thai companies.” It is reciprocal, in that Thai companies can do the same in the US. This treaty was signed in 1966, and was due to expire in 2006, but it has been renewed for 3 months every quarter since it was due to expire. The point is that the treaty at this point is a bit tenuous and may go away at any moment. The relationship between the US and Thailand is not the same as it was in ’66 when Thailand greatly assisted the US in their war with Vietnam. During the sixties, there were many treaties between the two nations in many different areas. Rules are now being interpreted with the Treaty of Amity differently at different times by the Thais, so it is essential to have a good Thai attorney working in your behalf to set this up, who also will have the latest word of how it is working.

      The amount of capital that must be in a Thai bank to make the program work has gone up and down. American sole proprietorships (a single person working as a consultant or otherwise alone) under this treaty was not required to employ Thais, but lately have been required to hire 4 Thais for every American work permit. There are types of businesses that are not permitted by Americans under the treaty, such as Land Ownership, Communications, Transportation and pulling out of any natural resources, like wood, precious metals or oil.

      While the Treaty is designed to put the American and Thai companies on equal footing, the Thais enjoy “Most Favored Nation” status with exports to the US having very low (or none at all) tariffs, while US imports into Thailand have very high tariffs. Just try buying a bottle of California wine or Skippy Peanut Butter at the Thai supermarket to see how these high tariffs on US products affect things. It is hardly “equal footing.”

      (This information and more about forming a Thai corporation can be found on an earlier posting to this blog, here: http://americanexpatchiangmai.com/how-expats-can-start-a-business-in-thailand/)

      • Thank you very much for adding more information here about Americans establishing companies/corporations in Thailand. What might be the cheapest easiest way of registering a business entity if one were an individual who wanted to set up a company for trading purposes, and had not yet decided on any narrow specific field of commerce. For example is it important to actually own a business to engage in business, such as buying and selling, exporting-importing, consulting, marketing and similar services. In the U.S., some individuals will set up a single company so that they can engage in a wide range of activities. Is there a section on this blog or other sites which offers basic practical advice regarding establishing a small business in Thailand?

        • Or might it be better to already have a business entity registered in another country, and then use this business and name to operate in Thailand? Or is doing so within the rules and regulations of Thailand?

        • Awhile back I did write in this blog about setting up a Thai company for an expat: http://americanexpatchiangmai.com/how-expats-can-start-a-business-in-thailand/
          Maybe that can be useful for you. It has to be remembered that in Thailand, rules and regulations are flexible based on who you know and how you treat them. Back in the US, everything is by the book and there is little deviation, so it takes a bit of adjustment to have your entrepreneurial mind fit into the Thai way of doing things. And, of course, all farangs have an instant disadvantage that they will never be able to change (just being a farang). There is a definite advantage to having a close Thai partner (like maybe a spouse) to make a team with the same goal in business.

  2. Interesting.
    My Indian husband & I have thought of expanding our Buddhist art gallery business into Thailand.
    We have quite a few regular Thai clients that buy Nepali Buddhist statues, ritual objects, & paintings (like thangkas & paubhars).
    Just an aside, income tax here in Nepal is 5%

  3. So how might a person creating original artwork fit in there? I paint fine art acrylics on canvas, was thinking of setting up a gallery selling my work, plus possibly adding local Thai artists work. Is this something Thailand would welcome, or is this competition even though my work wouldn’t look like anyone else’s? Would it help to establish a sales entity in my home country of U.S.? I currently just sell as I travel on our boat. Would I still need to hire 4 employees or would carrying Thai artists’ work count as having employees? How much do you think the employee salaries would be for things like sales, housekeeping, artist’s helper (setting up canvases, etc)? Do you have any idea how much a gallery rental might cost, say 700 sq ft in an area that would appeal to fine art buyers? Sorry for so many questions. Thanks so much.

    • Those are all pretty good questions. There is a pretty extensive list of jobs a farang cannot do, which you can find here: http://americanexpatchiangmai.com/how-you-can-earn-a-living-in-thailand/. It does not list an artistic painter as being one of them, but a lot of craft-work is prohibited. You might be on thin ice with that one if a work permit enforcer wanted to push it. But as you know, there are many artists in Thailand selling their work very cheap (too cheap, really) and it would be difficult for an America artist to earn up to a typical farang level in Thailand. The market in the US is very attractive for a seller because art is not cheap. It is profitable for many (and was for me for quite a few years) to buy artwork in Thailand for sale in the US. Plus there is a demand for exotic Asian art, including religious paintings (Buddhism).
      A commercial rental for a gallery in Thailand is likely to be quite low in cost. We currently have a shop about the size you mentioned on one of the busier upscale streets in Chiang Mai and our rental is 10,000Bht (about $333 USD) per month, but again you will not be in a great market for artwork (everything in that direction is too cheap here). I would be inclined to sell in markets that can command a good price and decent profit levels.
      My wife and I sold artwork in the US through our upscale Thai restaurant near San Francisco that we owned. We displayed work on the walls — all brought over from Thailand — and had small tags next to them offering them for sale. It became a nice addition to the restaurant, usually sold one piece a day and dining customers liked to see the new artwork (we would add items as things sold) in the restaurant. It was a win-win situation for us. Others have done well selling in the US via craigslist or a website. If you stay here in Thailand, it would be great to have a partner that can do the selling back in the US. These are, of course, just my ideas and you might be able to come up with other solutions.
      As far as having a legit Thai company and hiring the appropriate number of Thai employees, you will be opening up the business to scrutiny for sure. If you are able to do business fairly under the radar and not ruffle feathers (either competitors or government authorities), be fairly generous to Thai authorities (customs or licenses, etc), you are likely to never be bothered.
      I do understand that a full time employee in Thailand is 40 hours, and the minimum wage is 300Bht per day.

      • Thanks for all the great insights into doing this. I don’t currently have anyone in the States to handle a business for me, besides which, the galleries all seem to take 50%, and often charge extra for advertising, etc., which I’m trying to get around. Even at $2000 per painting, it’s hard to make and sell enough to make up for their cut in addition to expenses and U.S. taxes, etc. So you feel that there are so many Thai artists that no one would want to buy an expatriot’s work at those prices? If you don’t mind my asking, did you get 50% commission on the work you sold thru your SF restaurant? I’ve thought about going thru a lot of other venues to sell, but still, I would have to find someone I could trust to handle such a complicated aspect as getting outlets, keeping them stocked, dealing with damage, etc. That’s one reason I want my own gallery. But it doesn’t really sound like Thailand is the place for it, does it? I’m not against setting up legally with Thai partners if I could find people who wouldn’t interfere with the business or expect a huge cut, and the employee cost doesn’t seem bad. But might need a gallery in a higher cost area. Still wouldn’t be as expensive as the States.

        • I certainly do not want to discourage you in whatever direction you try. You certainly can’t accomplish anything without jumping in the pool and give it your best shot, but you need to know what you are up against. Take a walk down Chiang Mai’s weekend Walking Street Market or Bangkok’s Chatuchak Market and you can see beautiful large paintings for less than a hundred dollars US. When we sold artwork, we would always at least triple our out-of-pocket cost when we bought the artwork, and often would get four times cost (not taking into account shipping — which was often via airline luggage). We would never settle for a 50% gross profit level. Our selling of artwork easily covered our cost of travel and gave us a nice profit (which was all in addition to the income from our restaurant). We did quite well, and got to know Thai artists that would produce work especially for us based on our personal preferences.
          We also sold elaborate hanging wood carvings and a other artwork.

  4. Pingback: Expat opens a small business in Thailand | ExpatAmericans.net

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