Thai Business Partnership often begins with choosing the right legal structure. Among the available options, the business partnership is a popular choice for small ventures, professional practices, and certain joint undertakings. Thai law recognizes several types of partnerships, each with distinct characteristics in terms of liability, formation, and regulatory obligations. Understanding these differences is critical for both Thai and foreign entrepreneurs considering a partnership structure.
This article provides an in-depth examination of Thai business partnerships, including their legal framework, types, formation procedures, liability implications, tax treatment, and practical considerations.
Legal Framework
Thai business partnerships are governed by the Civil and Commercial Code (CCC), specifically Sections 1012–1096. The law sets out the formation requirements, rights and duties of partners, liability, dissolution procedures, and other essential rules.
Partnerships are classified as:
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Unregistered ordinary partnerships
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Registered ordinary partnerships
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Limited partnerships
Each form has distinct legal implications, particularly regarding the liability of partners and the partnership’s legal status.
Types of Thai Business Partnerships
1️⃣ Unregistered Ordinary Partnership
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An unregistered ordinary partnership arises automatically when two or more persons agree to share profits from a joint business.
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The partnership has no separate legal entity; it is seen as an aggregation of partners.
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Partners have unlimited and joint liability for partnership debts.
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The partnership cannot own property or enter contracts in its own name; everything is in the partners’ joint names.
Key features:
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Simple formation: no registration required.
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Full liability: creditors can pursue partners personally for debts.
2️⃣ Registered Ordinary Partnership
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Formed when an ordinary partnership is registered with the Ministry of Commerce (via the Department of Business Development, DBD).
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Gains juristic person status, allowing the partnership to:
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Own property
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Sue or be sued in its own name
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Enter contracts in its own name
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Partners remain jointly and unlimitedly liable for partnership debts incurred during their tenure as partners.
Key features:
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Separate legal entity from partners.
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Registration gives more structure and credibility to the business.
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Suitable for small businesses seeking formal recognition without forming a company.
3️⃣ Limited Partnership
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A limited partnership consists of:
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At least one general partner: has unlimited liability and manages the partnership.
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At least one limited partner: liability limited to their contributed capital, no authority to manage.
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The limited partnership must be registered with the DBD to gain juristic person status.
Key features:
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Clear division between managing and passive partners.
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Attracts investors wishing to limit exposure.
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The general partner carries personal liability for partnership debts.
Formation and Registration Process
Ordinary Partnership (Registered) and Limited Partnership
1️⃣ Prepare the partnership agreement — specifying partners, capital contribution, business objectives, profit-sharing arrangements.
2️⃣ Reserve the partnership name with the DBD.
3️⃣ Register with the DBD at the provincial or central office where the partnership’s head office is located.
4️⃣ Submit required documents:
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Application form
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Partnership agreement (for limited partnership, including contribution details of limited partners)
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Copies of partners’ ID cards/passports
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House registration of the office location
5️⃣ Pay registration fees (based on registered capital).
Once registered:
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The partnership receives a registration certificate.
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The partnership must register for tax and, if applicable, VAT.
Liability of Partners
Type of Partnership | Liability of Partners |
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Unregistered ordinary partnership | Unlimited and joint personal liability for debts and obligations. |
Registered ordinary partnership | Unlimited and joint liability for obligations incurred while a partner. |
Limited partnership | General partner: unlimited liability; Limited partner: liability limited to capital contribution. |
Partners can be held personally liable for business obligations, including contracts, debts, and tortious acts, depending on their role and the partnership type.
Taxation of Partnerships
Under Thai law:
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Registered ordinary partnerships and limited partnerships are treated as juristic persons for tax purposes.
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Taxed similarly to companies:
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Subject to corporate income tax (CIT) at 20% on net profits.
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Required to file annual audited financial statements.
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Subject to VAT (if annual revenue exceeds THB 1.8 million) and withholding tax obligations.
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Unregistered ordinary partnerships are taxed at the partner level — income is aggregated with personal income for tax purposes.
Rights and Duties of Partners
Ordinary Partnership
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Partners have equal rights in management unless agreed otherwise.
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Each partner can bind the partnership in the ordinary course of business.
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Profits and losses are shared in proportion to contributions unless specified differently in the agreement.
Limited Partnership
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General partners manage and represent the partnership.
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Limited partners may not take part in management; doing so exposes them to unlimited liability.
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The contribution of limited partners is protected unless they breach management prohibitions.
Dissolution of Partnerships
A partnership may dissolve:
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By agreement of the partners.
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Upon completion of its business objective.
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If unable to continue business (e.g., bankruptcy).
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Upon death or insolvency of a partner (unless otherwise agreed).
Upon dissolution:
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A liquidation process is conducted to settle debts, sell assets, and distribute remaining assets among partners.
Foreign Participation in Partnerships
Foreigners may participate in Thai partnerships, but:
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Partnerships engaging in activities restricted under the Foreign Business Act (FBA) require a Foreign Business License (FBL) unless exempt (e.g., under treaties or BOI promotion).
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If a partnership is majority foreign-owned or foreign-controlled, it is considered a foreign entity for FBA purposes.
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Limited partnerships with foreign general partners may face restrictions in certain business sectors.
Practical Considerations
✅ Clear partnership agreements — Essential to define roles, contributions, decision-making powers, profit-sharing, and dispute resolution mechanisms.
✅ Due diligence on partners — As partners may incur liability for each other’s actions, it is crucial to choose partners carefully.
✅ Registered vs unregistered — Unregistered partnerships are simple but offer no legal entity status and increase personal liability exposure.
✅ Consider alternatives — For businesses with higher liability risk or foreign ownership, a limited company (Co., Ltd.) may offer better protection and flexibility.
Conclusion
Business partnerships in Thailand provide a flexible and accessible structure for joint ventures, family businesses, and professional practices. However, they also come with significant legal implications regarding partner liability, taxation, and regulatory compliance. Whether forming an ordinary or limited partnership, careful structuring, clear agreements, and compliance with registration requirements are essential to protect the interests of all parties involved and ensure smooth business operations.