Korean Company Setup: How to Start a Business in Korea

South Korea has become a top choice for international entrepreneurs looking to establish their business in Asia. As one of Asia's Four Tigers, the country boasts a strong economy and a strategic location between China and Japan, making it an ideal destination for business formation. This article outlines the key steps and requirements for setting up a company in South Korea, whether you’re a first-time entrepreneur or a seasoned business professional.

Types of Business Entities in South Korea

South Korea offers a variety of business structures tailored to different needs based on the size and ownership of the company. The most common types include:

• Joint Stock Company (Chusik Hoesa): This is the most popular option for foreign investors, allowing public share issuance with liability limited to the investment. It requires an annual shareholder meeting and is ideal for large enterprises.
• Limited Liability Company (Yuhan Hoesa): Preferred by small to medium-sized enterprises, this structure allows for up to 50 shareholders. It requires minimal criteria, such as one director and one shareholder of any nationality. Foreign investors must invest a minimum of 100 million won under the Foreign Investment Promotion Law (FIPL).
• Partnerships: South Korea recognizes General Partnerships (Hapmyeong Hoesa), Limited Partnerships (Hapja Hoesa), and Limited Liability Partnerships (Hapja Johap), each with different rules on ownership and liability.
• Branch Office: Foreign companies can establish branch offices in South Korea. These branches operate as extensions of the parent company, sharing liabilities and facing no restrictions on investment or ownership.
• Liaison Office: Designed for non-commercial purposes like market research and development, liaison offices are not allowed to generate revenue or engage in sales activities.

Key Steps to Set Up a Company in South Korea

To successfully establish a company in South Korea, follow these essential steps:

1. Reserve a Company Name: Ensure the name is available and not in use by another business.
2. Prepare Articles of Association: For private or public companies, this document outlines the company’s governance structure.
3. Submit Documents to the Companies Register: Complete the registration by filing all necessary paperwork.
4. Open a Bank Account: Choose a financial institution to open a corporate bank account.
5. Obtain a Tax Identification Number: Register with the tax authorities to comply with South Korea’s tax regulations.
6. Apply for Industry-Specific Licenses: Depending on the industry, additional permits or licenses may be required.

Timeline for Registration

For all business entities, at least one shareholder and one director are required, and there are no restrictions on nationality or residency for non-residents. The registration process typically takes around two weeks, but opening a bank account and obtaining licenses could extend this period to about three weeks.

Requirements for Foreign Investors:

Minimum Share Capital

While there is no legal requirement for minimum share capital for private companies, it is recommended to allocate at least USD 5,000, depending on the business sector.

Foreign Investor Regulations

Foreign entrepreneurs can set up a local company, branch office, or liaison office, all of which must adhere to Foreign Direct Investment (FDI) regulations. For local companies, a minimum investment of 100 million won (approximately USD 80,000) is required. Initial notifications to the Foreign Direct Investments Board are mandatory.

Foreign entrepreneurs must also register with Korean tax authorities, even if they are not fully registered companies. Securing an entrepreneur visa and an alien registration card is essential to access local services such as banking and healthcare. Obtaining an alien registration card is also the first step toward gaining permanent residency in South Korea.

Conclusion

With its advanced economy, business-friendly environment, and strategic location, South Korea is an excellent destination for entrepreneurs looking to expand in Asia. The process of setting up a company is straightforward, thanks to simplified registration procedures and flexible business entity options. However, adhering to FDI regulations is essential for foreign investors. If you're looking for expert guidance, Contact Us, our team of professionals can assist you in navigating the complexities of company formation, ensuring a smooth and successful start to your venture in South Korea.