Comprehensive Guide to Business Incorporation in South Korea

Virtually anyone, whether an individual or a foreign entity, can establish a business or incorporate a company in South Korea. The selection of the business entity depends on the nature of the operations and compliance with relevant legal frameworks and regulations. To ensure high-quality service, the process of starting, registering, and incorporating businesses in South Korea is overseen by certified Korean legal professionals.

Foreign entities or individuals without South Korean residency have four main options for starting and registering a business in the country:

1. Local Corporation

This registration option is available for both Korean-owned and foreign-owned companies and is the most common form of incorporation in South Korea. It is open to foreign nationals as well as Korean citizens, with no minimum capital requirement, unlike Foreign Direct Investment Companies (described below). A domestic Korean company can be established under several types of business structures:

• Joint Stock Company (주식회사)

A Joint Stock Company (Chusik Hoesa) is the preferred structure for foreign investors wishing to set up subsidiaries in South Korea. It is the only entity in South Korea that can issue shares publicly. Shareholders’ liability is limited to their initial investment, and shares can be freely transferred with board approval. The company must hold annual general meetings of shareholders, and a statutory auditor must oversee the management and financials.

• Limited Liability Company (유한회사)

A Limited Liability Company (Yuhan Hoesa) is another common business structure in South Korea, accommodating up to 50 shareholders. Shareholders are not personally liable for company debts beyond their capital contributions. Establishing a Limited Liability Company in South Korea requires minimal prerequisites, including at least one director and one shareholder of any nationality, no minimum paid-up capital, and a registered office address.

2. Foreign Direct Investment Company

Foreign individuals and entities can establish a local corporation as a Foreign Direct Investment Company (FDI). This option applies to various business types previously mentioned. A minimum capital investment of 100 million KRW is required. FDI companies may receive certain legal benefits depending on their activities, unlike standard local Korean corporations.

3. Branch Office

A Branch Office in South Korea acts as an extension of its foreign headquarters and is legally considered part of the parent company. Branch offices can engage in profit-making activities in Korea and are subject to the same tax laws and rates as domestic Korean companies.

4. Liaison Office

Similar to a Branch Office, a Liaison Office is part of a foreign corporation. However, its role is restricted to non-commercial activities such as market research and promotion for the parent company. Despite its limited scope, it must be registered with the appropriate tax office. A Liaison Office is often chosen by foreign investors who want to establish a presence in South Korea and evaluate the market before starting full-scale business operations.

Conclusion

Pearson & Partners Korea specializes in assisting with the establishment and incorporation of foreign businesses in South Korea. From the initial consultation to the final setup, we offer comprehensive support, helping you choose the most suitable company registration structure. Our services include document preparation, certification, authenticated translations, power of attorney, bank account setup assistance, VAT registration, and support with visa applications for foreign executives.