Thai Business Partnership. Partnerships are a common, flexible way to do business in Thailand — from small service teams to project joint ventures — but their legal architecture, liability profile and regulatory interactions differ from corporations. This guide explains the main partnership vehicles, the formation mechanics, governance and financing traps to avoid, regulatory and foreign-investment considerations you must test early, and practical exit and dispute tools you should build into every agreement.
Types of partnerships you will see — pick the one that fits the risk profile
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Ordinary (unregistered) partnership — partners carry unlimited personal liability for partnership obligations. In practice this is rare for commercial projects because of its high personal risk.
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Registered ordinary partnership (ห้างหุ้นส่วนสามัญนิติบุคคล) — the partnership registers at the Department of Business Development (DBD) and becomes a juristic person, but partners still remain jointly and severally liable for debts unless otherwise agreed.
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Limited partnership (ห้างหุ้นส่วนจำกัด) — the common commercial choice where at least one partner is a general partner (unlimited liability and management control) and others are limited partners (liability limited to their capital contribution and restricted from management). A limited partnership must be registered at the DBD to preserve the limited liability of limited partners.
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Contractual joint venture (JV) — not a formal legal entity but a project-level contract between parties (often foreign and local) to share revenue, costs and management for a defined scope or period. Contractual JVs are simple to set up but require heavily detailed agreements because they do not create separate corporate shields.
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Corporate JV (company form) — many investors prefer a limited company (private company limited) as a JV vehicle because it provides a clearer separation of liability, easier financing, and recognised corporate governance.
Formation & registration — the operational steps
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Choose form: limited partnership vs company vs contractual JV. Ask: do you need limited liability? outside financing? BOI incentives? FBA exposure?
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Name reservation & registration (DBD): registered partnerships must file a partnership declaration, partnership agreement, and particulars of partners with the DBD. Limited partnerships must register limited partners to protect their limited liability.
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Capital & contributions: record cash, in-kind, and services contributions precisely in the partnership agreement and the DBD filing where relevant (valuations for in-kind contributions are often scrutinised later).
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Tax registration: register for corporate income tax, VAT (if turnover triggers), and withholding obligations. Partnerships are generally transparent for tax in some contexts but treated as juristic persons for certain filings — get tax mapping early.
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Banking & KYC: open a partnership bank account in the partnership name; banks usually require DBD extracts, tax ID and proof of signatory authority.
The partnership agreement — the single document that makes (or breaks) a partnership
Treat the partnership agreement as the operational and dispute-avoidance manual. Key clauses to include:
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Purpose & scope (clear project boundaries and permitted activities).
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Capital, contributions & capital calls (timing, valuation, and remedies for default).
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Governance & decision-making (management by general partner vs partner committee, quorum rules, reserved matters requiring supermajorities).
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Profit & loss allocation (formula or waterfall; allocation for tax transparency).
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Management fees & remuneration for the managing partner(s).
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Limited partner protections (information rights, approval thresholds, anti-dilution, transfer restrictions).
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Change-of-control / transfer mechanics (pre-emptive rights, tag/drag rights, creditor protections).
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Exit mechanics & valuation (buy-sell formulas, third-party valuation, put/call triggers).
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Deadlock resolution (escalation, expert determination, mediation, final arbitration seat).
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Confidentiality & non-compete (carefully drafted to be enforceable under Thai law).
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Warranties & indemnities and limitation of liability carve-outs (be realistic about caps and exceptions).
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Governing law & disputes (Thai law is normal for on-the-ground enforcement; arbitration seat and local-court carve-outs for interim measures are commonly blended).
A poorly drafted agreement — vague capital-call remedies, missing deadlock resolution, or undefined exit valuation — is the number-one cause of partnership collapse.
Liability, management control and limited partners
If you are a limited partner, you protect limited liability only by staying out of management. Practical lines that trigger loss of limited status include signing contracts on behalf of the partnership, controlling daily operations, or public representation as a manager. Put explicit negative covenants in the agreement and enforce them: keep management firmly in the hands of designated general partners or an appointed management committee.
Foreign partners — FBA, BOI and practical ownership limits
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Foreign Business Act (FBA): determine whether the partnership’s activity is on List 2/3 of the FBA. Even where a partnership has a Thai general partner, Thai authorities will look at substance (who funds, who controls, who benefits). Use clean funding trails, documented board practice and local management to avoid being treated as a foreign-controlled entity.
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BOI promotion: for promoted activities BOI can permit 100% foreign ownership and work-permit facilitation — a powerful reason to consider a company or corporate JV instead of a partnership for major projects.
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Land & asset rules: foreigners should not assume partnership ownership confers rights in land — the Land Code and related rules govern land titles. If the partnership will own land, get specialist land and FBA advice early.
Financing & security — how lenders look at partnerships
Lenders prefer a separate corporate borrower with clear asset security. If a partnership needs bank finance:
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Expect to grant personal guarantees from general partners.
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Lenders may seek charges over partner interests or equipment and receivables; confirm that such security is enforceable and registers properly.
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For limited partners, negotiating non-recourse or limited-recourse finance provisions and escrow structures for capital calls reduces exposure.
Tax & accounting realities
Partnerships must keep proper accounting books, file tax returns, and issue partner allocations. Thailand treats partnerships variably for corporate income tax and withholding: check whether the partnership is taxed as a juristic person or transparent for specific items. VAT registration, employer withholding and social security obligations must all be handled at formation. Early coordination with a Thai tax adviser avoids unexpected tax bills.
Governance & dispute prevention — practical steps
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Monthly management reports and accessible bookkeeping reduce suspicion.
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Independent audit or quarterly reviews if limited partners are passive investors.
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Escrow for sensitive transfers and escrowed holdbacks for warranty remediation.
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Pre-agreed mediation/arbitration with a neutral seat and Thai-court interim relief carve-outs — this combination gives enforceability and urgent preservation powers.
Exit, dissolution & liquidation
Plan exits early: common exit devices are time-based buyouts, IPO or trade sale, put/call options, and drag/tag. For limited partnerships, ensure the partnership agreement sets out the dissolution sequence, winding-up rules, and priority waterfall (liquidation costs, creditors, capital repayment, profit splits). If insolvency risks exist, appoint a professional liquidator and understand the priority of employee claims and secured creditors.
Practical checklist — the first five things to do
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Decide vehicle: limited partnership vs company vs contractual JV based on liability, funding, licence needs.
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Draft a full partnership agreement with capital calls, governance and deadlock resolution — don’t rely on a short memorandum.
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Map regulatory exposure (FBA, BOI, licences, land) and assemble a funding trail before capital is deployed.
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Register at the DBD (if limited partnership) and obtain tax IDs, VAT if required, and a local bank account.
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Set governance operations (management committee, reporting cadence, escrow arrangements) and procure a Thai-lawyer and tax adviser to draft and hold originals.
Final practical advice
Partnerships give flexibility but transfer risk onto the people behind them. Use legal drafts to convert informal trust into enforceable certainty: precise contribution records, clear management boundaries, documented funding trails and robust exit mechanisms are the difference between a resilient partnership and a costly dispute.