Key Steps for Starting a Business in South Korea: Structure, Tax, and Forex Market Reforms

South Korea is preparing to introduce major reforms to its foreign exchange market, representing the most significant changes since the 1998 financial crisis. Key updates include extending trading hours until 2 AM to overlap with the London market close, with future plans for 24-hour trading. Additionally, approved foreign financial institutions will gain direct access to Seoul’s forex market, reducing the reliance on non-deliverable forward (NDF) markets. Major banks such as KB Kookmin, Shinhan, Hana, and Woori are expanding their teams to register overseas branches as foreign financial institutions (RFIs), enhancing their global presence in the South Korean won market.

Furthermore, the introduction of corporate forex electronic trading platforms, like Hana Bank’s 'Hana FX Trading System,' is expected to increase market stability by improving liquidity and reducing volatility. These changes offer foreign investors fresh opportunities to expand their market influence and optimize trading strategies in South Korea's evolving forex environment.

Choosing a Business Structure in South Korea

Selecting the right business structure is essential for efficient operations, ownership, and taxation. The key options include:

1. Subsidiary: A separate legal entity owned by a parent company, offering autonomy and limited liability. This is a popular choice for foreign companies entering South Korea.
2. Private Company (Yuhan Hoesa): A limited liability company (LLC) offering flexibility in management and taxation. Foreign direct investments over 100 million KRW classify it as foreign-invested under the Foreign Investment Promotion Act, although it is treated as a domestic entity under commercial law.
3. Branch Office: An extension of the parent company without separate legal status, subject to specific reporting obligations.
4. Liaison Office: Engages only in non-commercial activities like market research and promotion, regulated by the Foreign Exchange Transactions Act.

Choosing the appropriate structure depends on factors like company size, industry, and goals. Consulting legal and financial professionals in South Korea is key to making informed decisions and ensuring regulatory compliance.

Steps to Start a Business in South Korea

1. Choosing a Company Name: Ensure the name is in Korean and unique, and verify its availability through the Korean Intellectual Property Office (KIPO).
2. Establishing an Escrow Account and Allocating Capital: Set up an escrow account and deposit the required capital, laying the financial groundwork for your business.
3. Submitting Internal Documents: Prepare and submit internal documents such as bylaws and resolutions, necessary for registration.
4. Corporate Registration Certificate: Once issued, this certificate confirms your company's legal status in South Korea.
5. Acquiring the Corporate Seal Card: Required for signing documents and conducting official business transactions.
6. Registering with the Tax Office: Complete your business registration with the tax authorities, providing company details for tax compliance.
7. Opening a Business Bank Account: Obtain a business bank account using your corporate registration certificate and identification documents.
8. Starting Business Operations: After completing all steps, you can officially commence operations and execute your strategies in South Korea.

Conclusion

Starting a business in South Korea offers substantial opportunities in a thriving market. From choosing the right business structure to navigating regulatory requirements, having a clear understanding of the process is essential.

Pearson & Partners offers expert guidance in company formation and tax accounting, helping businesses expand successfully in South Korea. For customized support, visit Pearson & Partners and embark on a successful business venture in this dynamic market.