The question that decides everything
Before you incorporate anything, one question has to be answered honestly: what does your company actually sell, and who pays the invoice?
Thai law does not treat manufacturing, trading and services the same way, and the restrictions on foreign-owned businesses attach to the activity carried on here. Get the classification right and your route is clear. Get it wrong and you discover the problem in year three, during diligence, a bank review or a licence renewal.
This guide is about classifying your specific business — not about explaining the legal framework, which our foreign investor guide already covers in full.
General information only, not advice on a specific matter. Capital thresholds, fees and the list of restricted activities are published in the investor guide and change over time — we confirm the current position for your activity.
1. The classification interview
These are the questions we ask to place an activity. You can answer most of them yourself right now, and the answers usually make the route obvious.
- What is sold — goods, services, or a bundle where the service is really the product?
- Who issues the invoice — the Thai entity, or the parent abroad?
- Who is the customer — third parties in Thailand, affiliates in the group, or customers outside Thailand?
- Where is the work physically performed — here, abroad, or split?
- Do goods take title in Thailand, or does the Thai entity never own them?
- Are there staff here, and doing what?
- Is there a warehouse, inventory or a fixed place of business?
- Do you act for affiliates, for third parties, or both?
- Who bears the commercial risk on each transaction?
- What will this look like in three years — because a structure chosen for the pilot is usually still in place when the business scales
The most common classification failure we see: a company incorporated from a template, with objects copied from another business, that only later looked at what it was really doing.
2. "We only serve other foreign companies here"
This comes up constantly, especially from sourcing, supply-chain and coordination companies set up to serve a parent's other operations in Thailand.
It does not put you outside the rules. The restrictions attach to the activity carried on in Thailand and to who owns the company carrying it on — not to the nationality of your customers. A support company serving only foreign clients here is still carrying on that activity here.
The same applies to "we only invoice from head office" and "our staff are technically employed by the parent". Both are worth examining honestly, because both are frequently true in form and not in substance — and substance is what gets looked at.
3. The four routes a service or trading business realistically chooses between
Our investor guide sets out the full range of pathways. Of those, a service, trading or sourcing business is usually choosing between four:
Thai-majority joint venture. A genuine partner with genuine participation. Works well where the partner brings something real — customers, licences, local operations. Works badly when the "partner" is a name on a share register.
Foreign Business Licence. A discretionary application, not a registration. Right for some activities and worth the timeline; not a default answer.
A promoted activity. Where what you do falls within a promoted category, this can be the cleanest route to majority or full foreign ownership, and it brings other benefits with it. Worth testing before assuming an FBL is the only option.
Redesigning the activity. The most underused option. Sometimes a small change to who invoices, where work is performed, or which entity holds what, moves the business into a different classification entirely — legitimately, because the substance changes with it.
See the investor guide for the remaining pathways and the current thresholds.
4. When we advise a client not to apply for an FBL
Not often discussed by advisers who charge for the application. We say no when:
- A promoted activity is available and gets you there faster and with more upside
- The activity can legitimately be redesigned into an unrestricted classification
- The application would be weak on the merits and the timeline would strand the business
- The commercial control you want can be achieved through a genuine joint venture with proper governance
- The activity, honestly described, is one we do not think should be presented as something else
5. What a formation agent offering you a Thai 51% is really selling
You will be offered this. It is worth knowing what it is.
The package typically comes with reassurance documents: a side letter, undated share transfer forms, a share pledge, a loan agreement recording money that was never really lent, and sometimes preference shares with lopsided voting.
Ask one question: if the Thai shareholder refused to cooperate tomorrow, what could you actually enforce?
If the answer depends entirely on that paperwork holding up, you have not been sold a structure. You have been sold an arrangement that works while everyone is content. These surface at predictable moments — diligence on a sale, a bank review, a licence renewal, or a falling-out with the shareholder — and always at the worst time.
We do not build these. What we will do is tell you which lawful route achieves the commercial control you were actually looking for, and what it costs in time.
If you already have such a structure and want to move to something defensible, that is a sequencing problem with tax and licensing consequences at each step. It is solvable, and it is much easier before an acquirer or a regulator raises it than after.
6. Specific traps for sourcing, supply-chain and agency companies
- Warehousing. Holding stock in Thailand changes the analysis, even where the Thai entity never takes title.
- Invoicing on behalf of the parent. Whether the Thai entity is a party to the sale or a service provider to it is the whole question.
- Acting for affiliates. Serving group companies is not automatically outside the restrictions.
- Staff performing work for the parent's customers. Look at who they actually serve, not who signs their payslip.
- Growing into a different activity. A representative function that gradually starts negotiating and closing has changed what it is.
7. What we need to classify your business in one meeting
- What you sell, and a sample invoice or draft contract
- Group structure — who owns what, and where the parent sits
- Where the customers are and who they are
- Headcount plan and what those people will do
- Whether goods are involved, and whether they will be stored or take title here
- Any existing Thai entity's registration documents and objects
- Your target start date and what is already committed to it
With that we can usually tell you at the meeting which route is open, which we would recommend, and roughly what each costs in time.
Summary
| If your situation is | Start with |
|---|---|
| Not yet incorporated | The classification interview — before the company exists |
| Incorporated on a template | An honest review of what the business actually does now |
| Offered a Thai 51% package | Asking what you could enforce if the shareholder walked |
| Told an FBL is your only option | Testing whether a promoted activity fits |
| Holding a structure you are unsure about | A sequencing plan, before an acquirer finds it |
Classification is cheap before incorporation and expensive afterwards. It is the one decision in a Thai market entry that is hardest to reverse.
We deliver classification opinions in Chinese, Japanese, Korean and English. Initial consultation is free — call +66 92 254 2045, WhatsApp +66 94 384 5556, or send us the details. See also company registration and business licences.
This guide is published by Suwanvara Law Firm — a Khon Kaen law firm established in 1986. General information only, not legal advice on a specific matter.