Korea Business Incorporation: Essential Guide to Starting a Company in South Korea’s Evolving Market

South Korea is set to introduce significant reforms to its foreign exchange market, marking the biggest changes since the 1998 financial crisis. Key updates include extending trading hours until 2 AM to overlap with the close of the London market, with plans to eventually enable 24-hour trading. Approved foreign financial institutions will soon have direct access to Seoul’s forex market, reducing dependence on non-deliverable forward (NDF) markets. Leading banks such as KB Kookmin, Shinhan, Hana, and Woori are strengthening their teams to register overseas branches as foreign financial institutions (RFIs), broadening their influence in the South Korean won market.

Moreover, the launch of corporate forex electronic trading platforms, like Hana Bank’s 'Hana FX Trading System,' aims to enhance market stability by increasing liquidity and reducing volatility. These developments offer foreign investors new avenues to expand their influence and refine trading strategies within South Korea's evolving forex landscape.

Choosing a Business Structure in South Korea

Choosing an optimal business structure is crucial for operational efficiency, ownership, and tax management. The main options include:

1. Subsidiary: A separate legal entity owned by a parent company, providing autonomy and limited liability. This is a common choice for foreign companies entering South Korea.
2. Private Company (Yuhan Hoesa): A limited liability company (LLC) that offers management and tax flexibility. Foreign direct investments over 100 million KRW classify it as foreign-invested under the Foreign Investment Promotion Act, though it is treated as a domestic entity under commercial law.
3. Branch Office: Acts as an extension of the parent company without separate legal status but has specific reporting obligations.
4. Liaison Office: Only engages in non-commercial activities like market research and promotion, regulated by the Foreign Exchange Transactions Act.

Selecting the right structure depends on factors such as company size, industry, and objectives. Consulting legal and financial experts in South Korea is essential for making informed decisions and ensuring regulatory compliance.

Steps to Start a Business in South Korea

1. Choose a Company Name: The name must be in Korean, unique, and verified for availability through the Korean Intellectual Property Office (KIPO).
2. Set Up an Escrow Account and Allocate Capital: Establish an escrow account and deposit the necessary capital as a financial foundation for the business.
3. Prepare and Submit Internal Documents: Complete documents such as bylaws and resolutions required for registration.
4. Obtain a Corporate Registration Certificate: This certificate confirms the company’s legal status in South Korea.
5. Acquire a Corporate Seal Card: Needed for official document signing and business transactions.
6. Register with the Tax Office: Register the business with tax authorities for compliance.
7. Open a Business Bank Account: Use the corporate registration certificate and ID documents to set up a business bank account.
8. Begin Business Operations: Once all steps are completed, the business can officially begin operations in South Korea.

Conclusion

Establishing a business in South Korea offers substantial potential in a growing market. From choosing the appropriate business structure to meeting regulatory requirements, understanding the process is crucial.

Pearson & Partners Korea  provides expert assistance in company formation and tax services, supporting businesses in their South Korean expansion. For tailored assistance, visit Pearson & Partners and start your journey in this dynamic market.