Why a Sole Proprietorship Thailand Business Owners Choose Carries Real Risk
A sole proprietorship Thailand law recognizes is the most commonly used business structure here — but it comes with unlimited personal liability that puts all of the owner’s assets at risk.The sole proprietorship is the most commonly used form of engaging in business in Thailand. It is an unincorporated commercial business owned and operated by a single natural person, the proprietor.
All of the sole proprietor’s assets — both those used in the business and those used purely for personal purposes — are subject to unlimited liability for any business transaction the proprietor engages in. In other words, the creditors of a sole proprietor can enforce their claims against everything that individual owns. In this regard, there is no distinction between the private individual and his or her business operations.
A sole proprietor’s income is taxed at the personal income tax rates, with the exemptions and deductions applicable to all individuals. Furthermore, a sole proprietor is required to collect “value added tax” on the sale of goods or provision of services, but is exempted from this requirement if the business’s annual income does not exceed THB 1,800,000, per Thailand’s Revenue Department.
A non-Thai individual is not, strictly speaking, prohibited from engaging in business as a sole proprietor. However, other legal issues under immigration and labor law — which generally require a non-Thai to obtain a particular visa and work permit to work in Thailand — can make such an endeavor impossible as a practical matter. The sole proprietorship is therefore not a popular way for non-Thais to do business in Thailand, but it remains a popular choice for Thais.
Anyone considering a sole proprietorship Thailand law permits should weigh this unlimited liability exposure carefully against structures like the private company limited, which offer the same ease of operation for smaller businesses while limiting personal risk to the amount actually invested.