On April 3, 2024, the Ministry of Trade, Industry, and Energy, together with KOTRA’s Foreign Investment Ombudsman, convened a meeting with the CEOs of foreign-invested companies and representatives from foreign chambers of commerce in Korea. The purpose was to explore new initiatives aimed at improving the investment environment and boosting Foreign Direct Investment (FDI) in Korea. The government has set an ambitious goal of attracting $35 billion in foreign investment for 2024 and is determined to implement strategies that make it easier for foreign companies to enter the Korean market.
The Minister of Trade highlighted Korea's recent efforts to increase financial support and raise limits for foreign-invested companies. Moreover, new laws have been introduced to help foreign firms recruit local talent. This article serves as a step-by-step guide for foreign investors and entrepreneurs who are considering incorporating a company in Korea.
If you're looking to start a business in Korea, several key steps must be followed:
1. Capital Allocation
The amount of initial capital will depend on the legal structure and industry of your business. Ensuring access to necessary funds or a solid financing strategy is essential.
2. Business Proposal
Prepare a detailed business proposal that outlines your business model, market analysis, target audience, and financial forecasts. This will serve as a strategic guide for your venture.
3. Identification Documentation
Gather identification documents for all individuals involved, such as passports or ID cards. Foreign nationals will likely need additional paperwork, including visas or Alien Registration Cards (ARCs).
4. Office Setup
All businesses in Korea must have a registered office. This can be a physical or virtual office, which provides a formal business address and administrative support.
Foreign investors can choose from several types of business entities when incorporating in Korea:
1. Limited Company
A common structure that offers shareholders limited liability.
2. General Partnership
In this structure, all partners share unlimited liability and responsibility for debts. Ownership transfers require unanimous consent.
3. Limited Liability Partnership (LLP)
Partners can select between limited or unlimited liability roles. Limited partners are restricted from participating in daily operations.
4. Joint Stock Company
In this structure, shareholders' liability is limited to their investment, and annual shareholder meetings are mandatory.
5. Branch Office
Operates under the parent company and is not a separate legal entity. This structure allows the branch to conduct business in Korea.
6. Representative Office
A fully foreign-owned entity, this office is limited to conducting market research and promotional activities without engaging in sales.
The process of incorporating a company in Korea involves several crucial steps:
1. Choosing the Right Business Structure
Select the most suitable structure based on liability and management preferences.
2. Selecting a Company Name
Choose a unique company name that reflects your brand and meets local regulations.
3. Registering the Company Name
Ensure that your selected name is properly registered with Korea’s company registry.
4. Drafting Articles of Association
Prepare a notarized document outlining the company's objectives, shareholder rights, and decision-making processes.
5. Submitting Documentation
Submit all necessary incorporation documents, including the certificate of incorporation and any applicable fees.
6. Obtaining a Business License
Acquire the relevant business license to legally operate in Korea.
7. Tax and Social Security Registration
Register with both the National Tax Service and the National Pension Service to ensure compliance with tax and social security requirements.
8. Ongoing Compliance
Stay compliant with ongoing legal obligations, such as filing annual reports and holding shareholder meetings.
Setting up a company in Korea involves navigating legal frameworks and choosing the business structure that best fits your goals. With careful planning and adherence to local regulations, foreign investors can successfully establish a strong presence in Korea's dynamic economy.
For expert assistance in navigating the incorporation process, Pearson & Partners Korea offers comprehensive services to ensure smooth registration and regulatory compliance. Contact us for tailored advice suited to your business needs.