Top 7 Legal Mistakes Foreign Entrepreneurs Make When Starting a Business in Thailand

gentlelawlawfirm
Jul 14
3 min read

Top 7 Legal Mistakes Foreign Entrepreneurs Make When Starting a Business in Thailand

Thailand presents a dynamic opportunity for international entrepreneurs — but it also has a complex legal landscape. At GENTLE LAW IBL, we’ve advised hundreds of foreign-owned companies across industries, and we've seen the same avoidable mistakes lead to costly setbacks.

This legal guide will walk you through the top 7 legal mistakes foreign entrepreneurs make when starting a business in Thailand, and how to legally and strategically avoid them — based on real laws and practical experience.

⚠️ Mistake #1: Using Thai Nominees to Circumvent Ownership Laws

Some foreign investors attempt to bypass the Foreign Business Act B.E. 2542 by using Thai “nominees” to hold majority shares (51%) on their behalf. This is not only illegal — it's a serious criminal offense.

Risks include:

Criminal charges under Sections 36–37 of the Foreign Business Act
Forced company dissolution
Blacklisting or deportation of the foreign director

✅ Solution: Use legally recognized methods such as:

BOI Promotion under the Investment Promotion Act B.E. 2520
Treaty of Amity (for U.S. citizens)
Genuine Thai shareholders with legally binding shareholder agreements

⚠️ Mistake #2: Choosing the Wrong Company Type

Many foreign entrepreneurs mistakenly register a structure that limits operations:

Representative Offices can’t generate revenue
Branch Offices require high capital and strict reporting
Thai Partnerships expose owners to personal liability

✅ Solution: The most suitable structure for most foreign SMEs is a Private Limited Company with an appropriate shareholding and paid-up capital structure. Legal guidance is critical to ensure compliance with the Civil and Commercial Code and the Foreign Business Act.

⚠️ Mistake #3: Underestimating Visa and Work Permit Requirements

Having a Thai company doesn’t automatically entitle foreign directors or staff to work legally.

Common errors:

Not meeting the 4 Thai employee : 1 foreigner ratio (standard under the Department of Employment rules)
Insufficient paid-up capital (typically THB 2 million per foreigner)
Applying for visa/work permit too late
Performing work beyond the permitted job scope

✅ Solution: Plan your Non-B visa and Work Permit strategy in parallel with company registration. Consider BOI structuring if hiring foreign talent is essential.

⚠️ Mistake #4: Using Copy-Paste Contracts or No Contracts

Using free online templates or having no contracts at all puts your business at legal risk — especially in Thai courts.

Real disputes we've resolved:

Thai co-owner selling assets without consent due to vague agreements
Staff leaking client data due to lack of confidentiality clauses
Investors backing out with no binding terms

✅ Solution: Draft contracts in accordance with Thai law, with clear dispute resolution clauses. Use dual-language formats (Thai and English) if needed.

⚠️ Mistake #5: Ignoring Thai Accounting and Tax Regulations

Foreign owners often delay or overlook:

Monthly filings for VAT, Withholding Tax (PND forms)
Annual audits required by the Revenue Department
Social security registration
Tax-deductible invoicing practices

✅ Solution: Engage a legal-accounting team from the start. Ensure monthly filings are submitted on time, with proper documentation under Thai Revenue Code.

⚠️ Mistake #6: Mixing Business and Personal Finances

Receiving company income into a personal Thai bank account may seem convenient, but it violates principles of good governance and triggers tax scrutiny.

✅ Solution: Open a corporate bank account under the company’s legal name. Keep all income and expense records transparent for auditing and tax filing.

⚠️ Mistake #7: Not Getting Professional Legal Advice Early

Too many foreign entrepreneurs rely on second-hand advice from forums, friends, or YouTube. This leads to misunderstandings and costly legal missteps.

✅ Solution: Consult with a law firm like GENTLE LAW IBL from day one. We specialize in guiding foreign-owned businesses with localized legal, visa, tax, and corporate strategy — all in one place.

📌 Summary Table: How to Avoid Foreign Entrepreneurs Business Thailand Legal Mistakes

Legal Area	Best Practice
Ownership	Use BOI, Treaty of Amity, or real Thai shareholders
Company Structure	Choose Private Limited Company
Visas/Permits	Plan alongside incorporation
Contracts	Draft under Thai law with dual language
Tax & Accounting	File monthly, not just annually
Banking	Use a corporate account only
Legal Guidance	Hire local legal advisors early