Setting Up a Business in South Korea: A Comprehensive Guide for Foreign Investors

Practically anyone, whether an individual or a foreign entity, can initiate a business venture or incorporate a company in South Korea. The type of business entity established is determined by the nature of operations and adherence to relevant legal frameworks and regulations. Our certified Korean legal professionals oversee the process of initiating, registering, and incorporating businesses in Korea to ensure the highest quality of service.

Foreign entities or individuals without residency in South Korea have four main options for starting and registering a business or company in the country:

1. Local Corporation

This registration category applies to Korean-owned companies and is the most common form of incorporation in South Korea. It is open to both foreign nationals and Korean citizens. Unlike Foreign Direct Investment Companies (discussed below), there is no minimum capital requirement for registration. A domestic Korean company can be established under any of the following business types:

• Joint Stock Company (주식회사)

A Joint Stock Company (Chusik Hoesa) is the preferred entity for foreign investors setting up subsidiaries in South Korea. It is the only business entity in South Korea that publicly issues shares. Shareholders have limited liability based on their initial capital investment. Shares can be freely transferred with board approval. Annual general shareholder meetings are mandatory, and a statutory auditor oversees the company’s management and accounts.

• Limited Liability Company (유한회사)

A Limited Liability Company (Yuhan Hosea) is another popular business type in South Korea, accommodating up to 50 shareholders. Shareholders are not personally liable for company debts beyond their share capital. Establishing a Limited Liability Company in South Korea requires at least one director and shareholder of any nationality, no minimum paid-up capital, and a registered office address.

2. Foreign Direct Investment Company

Foreign individuals and companies can choose to establish a local corporation as a Foreign Direct Investment Company (FDI). This option applies to various business types mentioned earlier. A minimum capital of 100 million KRW is required. FDI companies may receive certain advantages under Korean law based on their specific activities, unlike standard local Korean corporations.

3. Branch Office

A Branch Office in South Korea operates as an extension of its foreign headquarters and is legally considered one entity with the parent company. Branch offices can conduct profit-generating activities within Korea and are subject to the same tax laws and rates as domestic Korean companies.

4. Liaison Office

Similar to a Branch Office, a Liaison Office is recognized as a foreign corporation but its primary function is non-commercial, focusing on tasks such as market research and promotional activities for the parent company. Despite its limited scope, registration with the appropriate tax office is mandatory. It remains a favored option for foreign investors to establish a presence and assess the South Korean market before formal business activities.

Conclusion

Pearson & Partners Korea specializes in facilitating the establishment and incorporation of foreign enterprises in South Korea. From the initial consultation onward, we provide comprehensive support, helping you choose the optimal company registration structure. Our services include document preparation, certification, authenticated translations, power of attorney, bank account setup assistance, VAT registration, and support with visa applications for foreign managerial personnel.