On April 3, 2024, the Ministry of Trade, Industry, and Energy, in partnership with KOTRA’s Foreign Investment Ombudsman, held a meeting with CEOs of foreign-invested companies and representatives from foreign chambers of commerce in Korea. The objective was to discuss initiatives to enhance the investment environment and drive Foreign Direct Investment (FDI) in the country. The government aims to attract $35 billion in foreign investment for 2024 and is committed to implementing measures that encourage more foreign companies to invest in Korea.
The Minister highlighted that "Korea has increased government funding and raised financial support limits for foreign-invested companies. Additionally, new legislation has been introduced to help foreign firms recruit local talent." This article will outline the procedures for foreign investors and entrepreneurs looking to incorporate a company in Korea.
To establish a company in Korea, several steps must be completed:
1. Capital Allocation:
Determine the initial capital based on the legal structure and industry of your business. Access to the required funds or a financing strategy is essential.
2. Business Proposal:
Develop a comprehensive business proposal detailing the business model, market analysis, target customers, and financial forecasts to outline strategic plans.
3. Identification Documentation:
Prepare identification documents, such as passports or identity cards, for all individuals involved. Foreign nationals may need additional documentation, including visas or Alien Registration Cards (ARCs).
4. Office Setup:
Every company in Korea must have a registered office. This can be a physical location or a virtual office that provides an official business address and support services.
Foreign investors have several business entity options when incorporating in Korea:
1. Limited Company:
The most common option, providing shareholders with limited liability.
2. General Partnership:
All partners share unlimited liability and responsibility for debts. Ownership transfers require unanimous consent.
3. Limited Liability Partnership:
Partners may choose between limited and unlimited liability roles. Limited partners cannot be involved in daily operations.
4. Joint Stock Company:
Shareholders’ liability is limited to their capital contribution. Annual shareholder meetings are mandatory.
5. Branch Office:
This operates under the parent company’s jurisdiction and is not a separate legal entity, but conducts business in Korea.
6. Representative Office:
Fully owned by foreign companies, this office is limited to market research and promotional activities without engaging in sales.
Understanding these options is essential when deciding on the structure that best fits your business needs.
1. Choosing the Right Business Structure
Selecting the appropriate structure is crucial for liability and management purposes.
2. Selecting a Company Name
Choose a unique and memorable company name that reflects your brand and meets local registration requirements.
3. Registering the Company Name
Ensure the chosen name is registered with the South Korean company registry.
4. Drafting Articles of Association
Outline the company’s purpose, shareholder rights, and decision-making procedures in a notarized document.
5. Submitting Documentation
Submit incorporation documents to the relevant authorities, including the certificate of incorporation and fees.
6. Obtaining a Business License
Acquire the necessary business license to operate legally in Korea.
7. Tax and Social Security Registration
Register with the National Tax Service and National Pension Service to meet tax and social security obligations.
8. Ongoing Compliance
Ensure compliance with ongoing legal obligations, such as filing annual reports and holding shareholder meetings.
Foreign investors can follow these steps to incorporate an LLC:
1. Notify the Foreign Exchange Bank (FEB):
Submit a notification of investment intention and identity proof to an FEB branch.
2. Transfer Capital:
Transfer capital from overseas or deposit it locally into a temporary account, then obtain a bank certificate confirming the deposit.
3. Register the Company:
Submit incorporation documents to the Korean court, providing details on directors, auditors, and shareholders.
4. Register with the Tax Office:
Complete the tax registration with relevant authorities.
5. Open a Corporate Bank Account:
Transfer the capital from the temporary account to the company’s bank account.
6. Register as an FDI Company:
File for Foreign Direct Investment (FDI) registration within 30 days of completing the capital deposit.
Incorporating a company in Korea involves navigating government regulations and selecting the right company structure based on your business goals. With careful planning and compliance, foreign investors can successfully establish their presence in Korea’s dynamic economy.
Pearson & Partners provides comprehensive support for the Korea company incorporation process, ensuring smooth registration and regulatory compliance. Contact us today for expert guidance tailored to your business needs. Contact us for more information.