Why Opening a Business in Thailand Does Not Work

7/22/2013

If you make good money in Thailand, you are set up for a great life and everyone knows this. So if you try and buy an existing business, such as an “established bar,” you have to ask yourself why anyone would sell a profitable business in Thailand. Buying businesses in Thailand almost never works out well. Even if it was profitable, it likely depended a great deal on the personal relationships the owner and the manager had with its customers. Those customers will not just give you the benefit of the doubt, and so any past performance is not even close to being indicative of future results.

And the documents you see for past revenues and/or “profit and loss statements” can’t be trusted. If someone sells you their business and it turns out that everything they told you was a complete lie, what are you going to do about it? You don’t have the benefit of a fair system like you might at home, and if anything goes wrong you’re really limited in your options. Also, lawyers will be licking their chops over trying to broker a business-sale and it’s very common that they overcharge and don’t deliver.

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“Ok, I won’t buy a business; I’ll just start one from scratch.” If only it were that easy. First, you can only own 49 per cent of a business here. Seriously, you’re not even allowed to own 50 per cent of a business that you will put all of the funds and work into. I should be able to stop right there as going any further will be overkill. Why in the world would you want to go into business if you can’t even own it? But there are lines of men eager to put 51 per cent of their businesses into their Thai girlfriends’ names so I’ll continue to further educate you on the numerous other pitfalls. But in case you didn’t draw the conclusion by now, you can’t stop your Thai partner from taking the business from you. You may be in love or you may think she’s in love with you, but that doesn’t actually matter. Any relationship can sour, and when it does, there goes your business. Knowing that she owns the business, she might not exactly be scared of the relationship ending, and it may even motivate her to end it. This really doesn’t even matter unless the business is at least somewhat successful, which it probably won’t be. But to know that, even if you surpass all obstacles and make a nice business, it can be stolen out from under you and you can’t do much to stop it… that should make an impact on you.

The business visa and the work permit associated with it is also tricky, and although it’s hard to actually get a grasp on how to properly do this, we know that it involves mountains of paper work, government fees, legal fees, accounting fees, and a decent amount of money held up in a Thai bank account (perhaps 3 million baht) which won’t be earning you interest. It’s a nasty process, and if you are operating illegally then you open yourself up to deportation, fines, blacklisting, and in the worst case a short stint in a Thai prison that’s sure to change your life.

If that’s not enough to stop you, please understand the general attitude amongst the Thai people and the Thai police. They want you to come here and spend money; they do not want you to come here and make money. They don’t see it as though you will be creating jobs; they see it as though you will be hurting Thai business owners that you will compete with. This means at times you’ll face issues with Thai police and Thai mafia that just give you “fines” or “regulation fees.” It doesn’t matter how you look at it, these will come, and if you don’t pay then you are risking your livelihood. If you do pay, then they know they can keep coming back. You really need to make an alliance with someone (police, army, Thai mafia, Russian mafia) to protect you from other soliciting groups, and this alliance will come with a monthly fee. Also, if you have a lease on your space with a Thai landlord, don’t expect the law to go to bat for you if the Thai breaks the lease and either tells you to leave or doubles your rent at the first sign of you actually doing well. The law will always favor the Thai citizen, and who knows what unethical things might be done outside of court if you are actually fighting a matter inside of court.

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You may have deep pockets and you may be able to square a lot of these issues with the best lawyers in town. I think you’re better off keeping that money or risking it in a better business climate, but let’s assume that you’re willing to spare no expense in terms of making it possible. What kind of business would you start here that would work and have the profit potential to warrant a large investment? Exporting used to be an easy way to take advantage of your two-country base. You would find some businesses in your home country and offer them inventory and supplies at a deep discount at Asia prices. Unfortunately China now owns this type of market, and sites like Alibaba.com make it easy for any retailer or wholesaler in the West to meet English-speaking employees at Chinese factories. Your business in Thailand can’t compete with the Chinese factories. What about restaurants and hotels? The competition will be considerable and the off-season months will be a killer. The disadvantages you face compared to the Thai businessman are great and overwhelming to say the least.

I do need to make it clear that there are some small-business men who have succeed legally in Thailand, and possibly even in the bar/Gogo/restaurant type of industries. A really well run service in the entertainment industry can succeed, like this one. But In almost every case like this, the men were well-connected in Thailand and had significant business experience in the restaurant, bar, or strip-club scene in their country.

For every one of these success stories there are probably fifty people who seemed to know what they were doing and failed. Still, extremely well-connected, funded and experienced business players have made it work here and I’m sure more will come. I guess what I would take out of that is that doing business in Thailand may eventually become possible if you make the right connections and friends over the course of years, and learn every trick in the book so you don’t have to learn the hard way.

*Also consider that it is actually quite expensive to dissolve a business in Thailand. It’s like the cherry on top of a failed business here.

The bottom line: this is not a good place to open a business, and if you don’t want to take my word for it do some “Googling” to read about the million-and-one horror stories. Also keep in mind that shame and embarrassment prevent most from admitting their mistakes here. Many bar owners are just happy not to lose money with their business, and that’s actually pretty difficult to pull off!

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17 Comments

Sury Mukherjee

7/22/2013 02:22:18 am

The above piece is so well written and truthful in a step by step manner .Looks like they are short sighted and do not understand the concept of fair play and fair return of investment.May be that country is good for spending pocket change on sweet little nothings on frivolous things but not for investing hard earned money and for solid future and family.God bless America.

Scott Mallon link

7/22/2013 02:40:46 am

They're not always short-sighted Sury, believe this. Those who have a modicum of intelligence can do quite well in Thailand.

chris link

7/22/2013 02:32:29 am

Actually you can setup a business in thailand with 40,000 baht with the right lawyer. then it's 15000 baht for a work permit every year. It's a Non O Visa not a Business Visa different things. You don't need 3million baht tied up anywhere? wtf? Nasty process, takes a phone call dude and sign the paperwork.
You also do own the company you set it up so you own 100% of voting shares. the nominees of the company is really irrelevant even if one of the nominees is your girlfriend. yes, you own it 100%!

7/22/2013 03:57:28 am

The Treaty of Amity and Economic Relations also allows for American citizens and businesses to maintain a majority shareholding or to wholly own its company in Thailand, and thereby engage in business on the same basis as would a Thai national. None of this 51/49 garbage.

As far as setting up a business and getting a non-immigrant O visa, it is my understanding that the Thai government has begun to crack down on businesses operating without the 2 million company registration capital.

7/22/2013 02:20:04 pm

Scott,Thank you,the amount of tourist traffic there is so enormous,any kind of business related to tourist will be great.I wish I knew how to make gelato and italian ice with Thai flavors.Another thing,do you get Thai citizenship if you marry a Thai woman and for how long minimum.

Neil McCallum

7/22/2013 06:39:36 pm

Hi Scott. That was a extremely well written article, that breaks down the problems of starting a business in Thailand, and leaves you with no doubts as to just how hard the process is. I have known people who have started businesses in Thailand, and almost to a man there businesses have failed for one or more of the reason's that you site, but people continue to try, and to be fare some have succeeded, but not many. Some guys come over here thinking that they can start a bar or open a restaurant with there Thai girlfriend, but as you say that is fraught with problems, I would never start a business in Thailand even if i had all of the knowledge that i needed, it is just too much work for not enough returns.

Neil.

7/22/2013 10:09:27 pm

Bars and restaurants in Thailand are among the riskiest investments a person can make. The only people I know who have had success with these businesses had prior experience and were willing to dump a ton of money into them. Getting a girlfriend involved in a bar = trouble.

Robert

7/23/2013 02:52:38 am

Thanks Scott I was thinking of buying a bar in phuket, like you said if its that good why would they want to sell if its making loads of money,
I will forget that THANKS.

7/23/2013 03:14:44 am

I know the owner of the Rockhard-a-GoGo and one other bar on Soi Bangla. Both are making excellent money but they've owned the bars for many, many years, know their stuff inside and out, and have shelled out a boatload of money to make their money. They're the exceptions. I had another friend who owned a small bar that used to be in Nana Plaza and he was lucky to break even every month. In his own words, it was a lot of work to have a place for his buddies to go drinking and to barely make his money back.

Phil

8/16/2013 12:26:49 am

Bill Heinecke is an American who became a Billionaire in Thailand. His father worked in the foreign service and Bill went to high school in Bangkok and talked himself into the job of advertising manager of the Bangkok World newspaper while he was 17 and still in school.

He became a Thai citizen in 1991. His company, Minor International, is the largest hotel operator in Thailand and it operates 1,2000 restaurants in Asia and the Middle east. An amazing character...Google him.

I can think of other exceptions to the rule of “don't do business in Thailand” but they pretty much all arrived with big bankrolls. I'd say, listen to Scott and be very careful...make your money in a safer business climate and spend it in Thailand.

8/16/2013 12:05:57 pm

Thanks Phil. I read up on him and is story is very interesting. I don't believe doing business in Thailand is impossible but I do think it takes something extra that is unnecessary in the west. Much more patience as well.

In his case I think his success has a lot to do with being here since he was in high school and of course, being a shrewd businessman. You know the old saying, "How do you make a little money in Thailand? Spend a lot of it."

Amy

6/17/2015 03:07:58 pm

Hi Scott,
What do you know about the suppliers for restaurants and hotels in Thailand? I am an American looking to replicate a private label packaging business which I currently have in Egypt (so this is not my first business start up in a developing market). We supply sugar and table top items as well as anything that needs to be packaged with a hotel or cafe logo on it.

6/17/2015 11:17:52 pm

Hi Amy,

As the established hotels and restaurants usually have their suppliers already in place, I think you're going to have a hard time. Nepotism and kickbacks are normal but if you're going to get in with any place it's probably going to be with the new or soon-to-open. You're not the first person to ask me about this sort of venture; I've had 3 or 4 others ask me about this so it's not as if there is a shortage of suppliers.

salvatore giudice

9/29/2015 11:29:43 am

You can own 100% of the business if you are an American and you file the business under the Treaty of Amity and Economic Relations when you open it. Again, this benefit is only for Americans.

The Thailand Treaty of Amity aims to provide significant advantages for US investors to run businesses in Thailand for both corporations and individuals. In particular, the Thailand Treaty of Amity provided the US two major trade advantages:

The Thailand Treaty of Amity permits American companies to hold majority of the shares or the whole company, branch office or representative office located in Thailand.
American companies may engage in business on the same basis as Thai companies, and are exempt from most of the restrictions of foreign investment imposed by the Alien Business Law of 1972.
While the Thailand Treaty of Amity provides the above-mentioned advantages, the US citizen is also subjected to several restrictions stipulated in the treaty. The Thailand Treaty of Amity prohibits American investors from engaging in the following reserved activities:

Communications
Transportation;
Fiduciary functions
Banking involving depository functions;
Land Ownership, Exploitation of land or
Other natural resources; and
Domestic trade in indigenous agricultural products.
The following requirements must apply:

A minimum of 51% of shares must be held by American citizens
A minimum of 50% of directors must be American citizen(s)

9/30/2015 10:10:44 am

I guess you didn't see that I wrote this already.

Also, it is not quite as simple as just opening a business and since you're American, you benefit. As you noted, there are several categories of business that are prohibited. The company needs to be set up by exact guidelines and it's best to use a lawyer. It's not as easy as people might think. But it is an option.

Silver Soul

9/27/2018 02:53:41 pm

i think,lot of people do well in thailand, the only people who dont do well are the ones in entertainment business,Bars-Restaurants-Massage parlours- spas- 20 room hotels are the ones who close up within a year or try to cook the books and sell,if you think out of the box and do something different apart from the list above,you would do well,every soi has tons of restaurants -bard and hotels,i am doing business in thailand fro past 7 years in computers and accessories,i make a net profit of 100 to 130k THB a month,my investment was less than a million.so there are huge opportunities here,buy 90% of the people who want to do business here choose the same business which everyone already has done over and over and over with zero results.why?
Because its easy, get a place,decor from ikea,and get started.thats all it is,a no brainer business.thats why thousand are there everywhere.
you want to make money and be successful,you need to do and be different,or else you just wasting your money and time and then complain.

Mikael link

1/22/2019 02:03:29 pm

I think business really depends on how you manage it. Thailand is one of the most visited places so I think there is a good side of doing business there and take advantage of their tourism. Like build a transient rooms, restaurants, nightclub. There should be traffic specially for foreigners who comes to Thailand for fun and entertainment as it's cheap to them, they should spend.

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