Suppose you and two friends agree to open a company providing services. One friend asks, "How much money do we need to prepare?" You cannot answer, because you are not sure whether that means the capital shown on the company certificate, the money you must spend before opening, or the money you must hold until the first customer pays the first instalment. These are three separate pots of money, paid at different times, and the law treats them differently.
This guide follows on from how much is left from each sale. Once you know what the business actually keeps per sale, it is time to separate the types of money and decide when each will be needed. The last step before taking your first customer is in the first customer checklist.
The core answer
Separate the money into three pots. The first is registered capital, the shareholders' promise of how much they will invest, which may be paid in instalments. The second is start-up spending, a one-off cost to get ready to sell, such as a premises deposit, equipment, fit-out, licences and a website. The third is working capital, which you must hold to cover regular expenses until customers pay. Then write a month-by-month table showing when each pot has to be paid.
The rule (Thai law). A limited company is a company whose capital is divided into shares of equal value, and a shareholder is liable only up to the amount still unpaid on their shares (Civil and Commercial Code section 1096). The first call on the shares must not be less than the minimum proportion set by law (section 1105). Shares must be paid for in money, except where the law and the resolution of the company's founding meeting allow payment in property or labour (sections 1119 and 1108). A shareholder cannot set off a debt the company owes them against the unpaid part of their shares, and the company is a legal entity separate from its shareholders, so a shareholder loan has to be documented separately from payment for shares, and a loan above the statutory amount needs written evidence (section 653).
Our practical view. Do not set registered capital without looking at who will pay what and when. Do not use registered capital as a sign that the business has enough money, because the money actually circulating may come from paid-up share capital, shareholder loans, bank loans or revenue, which are recorded differently and bind people differently. Write a plan showing where each pot comes from, when it is paid, and who is responsible if it does not arrive.
Registration fees and first-year costs are in first-year costs after registering a company. The registration steps are in company registration for Thai owners. This guide covers only how to separate the money and time it.
1. Three pots of money that are often confused
| Pot | What it is | What it is used for | Who it binds |
|---|---|---|---|
| Registered capital | The total value of shares the shareholders promise to invest | Shows the size of the capital and fixes ownership proportions | Shareholders to the company |
| Start-up spending | One-off spending before selling starts | Premises deposit, equipment, fit-out, licences, website, first stock | The company to sellers and landlords |
| Working capital | Money to pay regular expenses while waiting for customers to pay | Wages, rent, utilities, materials, advertising | The company to everyone who must be paid on time |
A common problem is comparing registered capital with the money the business needs, then thinking that a high registered capital means there is enough money, or that a low one means little money is needed. In fact the money you can use depends on what has actually been paid into the company and on any other sources you add, not on the figure registered.
2. Registered capital: the shareholders' promise
A limited company divides its capital into shares of equal value, and each shareholder must pay for the shares they subscribed (Civil and Commercial Code section 1096). Three key points:
- It can be paid in instalments. The first call must not be less than the minimum proportion set by law (section 1105). The company can call the rest later, under the conditions and call procedure set by law and the articles. Check the latest announcements and forms of the Department of Business Development before you plan.
- Shareholders are liable up to the unpaid part of their shares. Capital still owed is a real liability, payable when the company calls for it, not just a number.
- Payment is mainly in money. Shares must be paid for in full in money, except where section 1108 of the Civil and Commercial Code and the resolution of the founding meeting allow shares to be issued in return for property or labour (section 1119). That route needs a specific procedure and most promoters do not use it, so take advice first.
A shareholder cannot set off a debt the company owes them against the unpaid part of their shares. So if you lent the company money and still owe on your shares, you must pay for the shares in full when called; you cannot deduct the loan yourself.
In some situations the law or an agency sets an additional minimum capital, for example a business with foreign shareholders, applications for work permits for foreigners, or certain types of licence. Always check the specific rules for your business and do not guess a figure. For changes to capital after registration, such as an increase or reduction, see changes after company registration.
3. Start-up spending: one-off before selling
Start-up spending is what you must pay to be ready to sell. Go through it item by item:
- Premises deposit and advance payments. A lease may require rent in advance and a security deposit. A deposit is refundable on the terms of the lease.
- Equipment and tools. Computers, machinery, furniture, which are assets used for several years.
- Fit-out and refurbishment. Including labour and materials.
- Licences and business-specific registrations. Check before selling which licences your business needs. See business licences.
- First stock and starting materials.
- Website, systems and brand. Including checking the name and trademark.
- Company set-up costs. As detailed in the first-year costs guide, not repeated here.
The principle is to buy what is necessary for the first sale and defer what can be bought once there are sales, because everything paid before you have customers is money that is tied up. If the idea has not yet been tested, go back to testing the idea before a large investment.
4. Working capital: the gap between paying out and getting paid
Working capital is the money you need to hold because spending comes before income. If you take a job, then have to buy materials, pay workers and issue an invoice, and the customer pays several weeks later, the cash you must set aside is the spending over that whole period. A simple way to think about it:
- List all regular monthly expenses (rent, wages, services, utilities, accounting, advertising).
- Estimate how many months you may not have full income coming in, from the start of selling until the first group of customers pays.
- Minimum working capital is the monthly regular expenses multiplied by that number of months, with a margin in case customers pay late.
The cost-per-sale figure you worked out in the previous guide tells you how many sales a month are needed to cover fixed costs. For the cash cycle of a business that is already running, taxes that fall due before money comes in, and ways to speed up collection, see profitable but short of cash.
5. Timetable: when each pot is needed
This table is an example outline you can adapt to your business. It is text only, with no amounts.
| Period | Money needed | Source to decide in advance |
|---|---|---|
| Before registration | Name check, document preparation, adviser's fees, premises deposit that must be reserved early | Promoters' personal money, with records kept so the company can confirm the items later |
| At registration | Registration fees, first call on the shares, bank account opening | Share money that shareholders pay into the company account |
| Before the first sale | Equipment, fit-out, licences, website, first stock, insurance | Paid-up share capital, shareholder loans or credit |
| First months of selling | Wages, rent, materials, advertising, accounting | Working capital set aside, first instalment of revenue |
| While waiting for customers to pay | Taxes to be remitted, regular expenses | Reserve funds, and revenue when collected on time |
Every row should name the person responsible for that money and the date it is needed. If the source column is blank, the plan is not finished.
6. Where the money comes from, and how each is recorded
| Source | Status in the company's books | Documents to have | Points to watch |
|---|---|---|---|
| Share payments from shareholders | Capital, not a debt to be repaid on a fixed date | Proof of payment for the shares, shareholder register | Shareholders are liable for unpaid share capital; shareholders cannot set off debts against it |
| Shareholder loan | A debt of the company to the shareholder | Written loan agreement, repayment date, interest (if any) | Above the statutory amount, written evidence is required (section 653); tax effects depend on the facts |
| Bank or financial institution loan | A debt of the company to the lender | Loan agreement, security, guarantee | The bank may ask directors or shareholders for a personal guarantee, which increases personal liability |
| Outside investors | New shares or a loan under the agreed terms | Investment agreement, shareholders' agreement, registration details | Effect on shareholding and control; see share split between a money partner and a labour partner |
| Revenue from customers | Income | Invoices, receipts, tax invoices (if relevant) | Cash may arrive later than you expect |
A practical observation: money from shareholders with no document saying whether it is payment for shares or a loan often turns into a dispute later, when shareholders fall out or when the company has to prepare financial statements and file tax. Write it down clearly on the day of transfer.
7. Company money is not your money
Once registered, the company is a legal entity separate from its shareholders and directors. The property and money in its bank account belong to the company. Using company money for personal expenses, even temporarily, muddles the books and risks the following:
- A director's loan. An undocumented item may have to be recorded as an amount owed to the company and has tax consequences.
- Performance of directors' duties. Directors have a duty to look after the company's property. Using money for the wrong purpose may later be questioned by shareholders or creditors.
- Keeping liability separate. If personal and company money are heavily mixed, creditors and opposing parties may argue that the company is not really a separate legal entity.
To prevent this, open a bank account in the company's name, run all income and expenses through it, and if you need to pay a shareholder or director, do it in a proper form, such as remuneration under a resolution or a dividend when there are distributable profits. Speak to an accountant first. For first-year bookkeeping, see company accounting in the first year.
8. Money spent before registration
Before registration the company is not yet a legal entity. A person who signs a lease, places an order or hires someone in the name of a company that has not yet been formed may be personally liable to the other party. Money paid beforehand is not automatically the company's money either. If you want the company to reimburse you or take over the contract, keep the payment documents and arrange for the company to confirm the item after registration.
For details on taking over contracts and promoter liability, see pre-incorporation contracts and promoter liability, which this guide does not repeat.
9. A hypothetical example: letters instead of amounts
Suppose two shareholders open a company making made-to-order gifts. They set registered capital A and agree to pay the first call on the shares A1, which is not less than the legal minimum proportion. The remainder, A2, is still unpaid. (In the Thai original the letters are ท, ท1 and ท2.)
- Start-up spending is about B (ล in the Thai original), for example a premises deposit, tools and first materials.
- Regular monthly expenses are about C (ร in the Thai original), and the first customers are expected to pay about two to three months after selling starts, so working capital should be not less than C multiplied by two to three.
If A1 is less than B plus working capital, the company is short of money even though registered capital A looks large. The options are for shareholders to pay more on their shares when called, or for shareholders to lend under a written agreement, or to apply for credit, recognising that a bank may ask for a personal guarantee. Do not treat A2 as money the company already has, because the shareholders have not paid it and it must wait for a call under the proper procedure.
10. Checklist before transferring money into the company
- Separated the money into three pots: registered capital, start-up spending and working capital
- Written a table showing when each pot is used and where it comes from
- Every shareholder knows how much they must pay for their shares, when, and that they are liable for the unpaid part
- Checked whether the business, the shareholders or the licences needed carry an additional minimum capital requirement
- Shareholder loans have a written agreement with clear repayment terms
- Company money is not used for personal expenses, and there is a separate bank account in the company's name
- Kept evidence of money paid before registration, so it can be confirmed or reimbursed later
- Spoken to the bank or lender before signing a personal guarantee
- Spoken to an accountant about recording share payments, loans and payments to shareholders
Further reading
- How much is left from each sale: work out first whether the business keeps enough per sale
- First-year costs after registering a company: for registration fees and charges
- Company registration for Thai owners: for the registration steps
- Profitable but short of cash: when the business is running but cash is tight
- Pre-incorporation contracts and promoter liability: for money and contracts before the company exists
- Changes after company registration: for capital increases or later amendments
- From idea to first customer: checklist: the next step before taking work
Registered capital, start-up spending and working capital are separate pots of money. Before transferring money into the company, be clear where each comes from, when it is paid, and what document records it.
We help structure company set-ups, prepare registration documents and draft agreements on shareholder funding. For an initial consultation, call +66 92 254 2045 or send us the details. See also company registration and accounting and tax.
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.
