For Thai entrepreneurs who start their businesses on their own—whether selling online, freelancing, running a shop, or providing various services—the sole proprietorship form is more popular because it is convenient and easy to start. However, as time passes, income grows, and the business expands, tax planning and credibility become important issues. This raises the question: should you register as a juristic person? And which option is more suitable for your business? 

This article will analyze the pros and cons and provideecommendations to help entrepreneurs make the most appropriate decisions based on theircurrent business situations, ensuring smoother business operations. 

Which type of juristic person registration is suitable for our business?

Understanding the basic differences between a “sole proprietorship” and a “juristic person.” 

Individual It means that an individual runs a business in their own name, such as selling products online, opening a phone repair shop, or doing graphic design work. They can register a trade name for the store, but the owner remains personally responsible for all aspects of the business, including profits, debts, and tax obligations.

Corporation It refers to an organization with a legal status separate from the individual, such as a limited company or limited partnership. This requires registering as a juristic person with the Department of Business Development, maintaining systematic accounting, and having limited liability according to the invested capital.

Comparison of the advantages and disadvantages of each business structure to consider:

 Things you need to consider before registering a company, based on accounting and tax factors. 

1. Consider the current applicable tax rates. 

You need to compare the personal income tax rates you currently pay, which range from 5% to 35%, with the maximum corporate income tax rate of 20%. If your personal income tax rate exceeds 20%, this could be a reason to consider registering a company. 

2. Operating as an SME juristic person (SME company). 

The Revenue Department has established special provisions for SMEs to alleviate tax burdens and improve cash flow for juristic persons operating as small and medium enterprises. These provisions are designed to encourage investment and include the following main conditions: 

2.1 Registered and paid-up capital not exceeding 5 million baht, and 

2.2 Having revenue from the sale of goods and services not exceeding 30 million baht. 

3. When the business income reaches the VAT registration threshold of 1.8 million baht. 

Once VAT registration is required, it is based on the business’s revenue, not profit. Whether as an individual or a juristic person, if annual revenue from the sale of goods and services exceeds 1.8 million baht, VAT registration is mandatory. This affects tax obligations, including issuing tax invoices upon sales, preparing input and output tax reports, and submitting the VAT return form (Por.Por.30) to the Revenue Department every month. 

These three main accounting and tax factors will help you understand and decide whether to register a company or continue operating as a sole proprietorship. 

Analysis from the “tax” perspective: a factor that many people often overlook.

One of the key differences is the tax rate, which directly affects the net profit of the business. Therefore, understanding how to establish an efficient accounting system and proper tax planning is crucial for business operations. 

For sole proprietors (individuals)

They must file taxes under the personal income tax system, which uses a progressive rate: the higher the income, the higher the tax rate, ranging from 5% to 35%. 

Read on! With this amount of income, here’s how the tax is calculated. 

For juristic persons (companies)

If registered as a juristic person, such as a company or limited partnership, corporate income tax will be applied at a fixed rate.

• Net income not exceeding 3 million baht: 15%
• Net income exceeding 3 million baht: 20%

Reference: Revenue Department (กรมสรรพากร) https://www.rd.go.th

Legal Responsibilities 

When operating a business as a sole proprietor, if the business incurs debt, the owner is fully responsible even if it means using personal assets to repay the debt. In contrast, a juristic person is legally separate from its owners, with laws limiting shareholders’ or partners’ liability only to the amount they have invested. This mechanism is crucial for reducing the personal risk of entrepreneurs.

 Precautions and Additional Obligations When Operating as a Juristic Person

Operating a business as a juristic person comes with obligations that entrepreneurs need to prepare for, including:

• You must maintain a systematic and transparent accounting of all income and expenses, ensuring that every step of the operation is accurate and verifiable. 
• You are required to hire a certified auditor to submit accurate annual financial statements. 
• You must file withholding tax and value-added tax (VAT) returns if your income exceeds 1.8 million baht.
  There are ongoing expenses such as accounting service fees, tax-related fees, and legal service charges.
  

In summary With a good management system, handling this becomes straightforward and helps increase business transparency. Registering as a juristic person is not as complicated as many think; rather, it is an important tool that supports stable business growth, enhances credibility, and enables effective financial planning. Therefore, if you are currently operating as a sole proprietor, carefully assessing your situation and planning to transition to a suitable business structure could be a key decision that drives your business toward long-term sustainability. 

If you need advice or services for legally registering a juristic person, including accounting, tax, and related documentation, you can contact experts to help your business move forward with confidence and stability at every step. Contact us now. 

Contact Us 

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