News & Update

Many foreigners who fell in love with Thailand’s intrinsic beauty and charm want to have a legal reason for staying in the Kingdom permanently. Some opt for marriage with Thai nationals and the others try the avenue of doing business in Phuket, Thailand. And depending on the type of business venture an expatriate would like to have in Phuket, Thailand, setting up from scratch can be pretty easy and straightforward for as long as you comply with all the legal and financial requirements of operating a business in the island. After all, the costs involved are significantly lower by western standards.

For those who have stayed in Thailand long enough, they have a pretty good idea of what could be beneficial for a foreign investor – setting up a company from scratch or just buying an existing business from a Thai entrepreneur for instance. The latter may seem to be the easy and quick option. An existing business has an existing established customer base, location, existing inventory and trained employees, all of which one would need to build up when they start their own business.

While buying an existing business provides value for the foreign entrepreneur, there are also some traps that need to be avoided. The following are important information one must have when planning to buy a business in Phuket, Thailand:

• Taking over an existing business comes with the thought that no immediate drastic operational changes should be made if the purpose is to run the business and improve it in terms of sales activities. There have been many cases like when an established French restaurant is being transformed into an Italian pizzeria and in the end did not work well as existing customers may be lost as a result of such changes. You will also lose potential income during the renovation period. Remember that when buying an existing business you are paying for the existing customer base and turnover. So you should focus your attention on that – improving the customer base and turnover.

• You should check the existing lease agreement for the space being occupied or rented. Most of the small businesses do not own the property where the business is located. They are under a lease agreement with the property owner. The usual practice in Thailand is to have a lease agreement for three years. Thailand law requires a business to be registered with the Land Department if they lease the space for more than 3 years. This may trigger an alarm with the Revenue Department. Check the terms and conditions of the written lease agreement and that of any existing ‘under-the-table’ agreement with the property owner. You might be aware of the stipulations covered in the lease agreement, but may be surprised with additional demand for key money at the time of lease renewal.

• Check out all existing and expired rental or lease agreement of the business you are buying to make sure that the continuous operations of the business will be possible and provided for in the written and unwritten agreement. The last thing you need is receiving a notice to vacate the warehouse premises immediately.

If you are able to check out all these things, the next important consideration for an expat is to be in Phuket, Thailand during the negotiation process. This process will require a broker, a lawyer and an accountant to sort out all the legal and financial documentation requirements. They will also be able to help determine the viability and feasibility of such undertaking.

Consulting a law firm or an accounting firm in Phuket will guarantee compliance from all the government requirements for foreign and local investors. An accountant knows all the weaves of business financing, a broker is knowledgeable in leasing space for business, while a lawyer is well versed when it comes to legalities. To ensure that every business turnover will be legal and binding, hiring professionals will eliminate ‘under-the-table’ agreements.