Setting Up a Company in South Korea for Foreign Investors

The Bank of Korea has adjusted its 2024 real GDP growth forecast upward from 2.1% to 2.5%, crediting robust export performance. In the updated economic outlook released on May 23, the Bank noted that the first quarter growth rate significantly exceeded initial market expectations, coming in at 1.3% compared to the anticipated 0.6-0.7%. Governor Rhee Chang-yong attributed this upward revision to strong global IT sector performance and robust growth in the U.S. economy, which collectively contributed to a 0.3 percentage point increase. This optimistic economic outlook positions South Korea as an increasingly attractive destination for foreign entrepreneurs and investors considering business expansion. This article outlines the procedures for foreign investors or entrepreneurs to set up a company in Korea.

Procedure for LLC Formation

1. Business Registration Declaration at the Bank (5 Working Days)

The first step in forming an LLC involves declaring the business registration at a bank. During this process, companies deposit the paid-up capital into an escrow account, establishing a secure financial foundation. This step, completed within five working days, initiates the formation process.

2. Document Preparation (Ongoing)

After establishing the financial foundation, the next critical step is preparing the necessary registration documents. This involves compiling essential company details, activities, and meeting legal requirements. Given its complexity, this phase requires careful attention to detail and is ongoing.

3. Submission to the Registry Office

Once the registration documents are ready, they are submitted to the Registry Office. This is a pivotal step in the formation process, as the documents are scrutinized to ensure compliance with Korean business regulations.

4. Opening a Corporate Bank Account and Online Business Banking (5 Working Days)

Following the capital deposit, the next phase involves opening a corporate bank account and setting up online business banking. This process, completed within five working days, establishes the LLC's financial infrastructure in line with Korean banking regulations.

5. Issuance of Tax Registration Number (2 Working Days)

The final step, following submission to the Registry Office, is obtaining a tax registration number. This streamlined process takes just two working days, enabling the LLC to commence legal and financial operations.

Foreign Direct Investment (FDI) with a Paid-Up Capital of 100 Million KRW

Foreign Direct Investment (FDI) involves a foreign entity or individual either establishing a new corporation or acquiring shares in an existing domestic company. This investment approach fosters long-term economic partnerships with local businesses and enables sustained economic involvement. When the investment surpasses 100 million KRW and the foreign investment ratio exceeds 10%, foreign entities face fewer restrictions in conducting business within the domestic market. This flexibility encourages foreign investors to engage in South Korea's business activities with minimal constraints, promoting economic collaboration and growth.

Essential Documents for LLC Formation

Application Form

• Company Name
• Paid-Up Capital Amount
• Business Activity
• Tenancy Agreement for Business Address in Korea

The application form collects essential details required for LLC formation, ensuring regulatory compliance and transparency.

Director's Information

• Passport
• Proof of Address
• Letter of Acceptance (provided by Pearson)
• Seal Impression (provided by Pearson)

Director's information, including passport details and documents provided by Pearson & Partners, is crucial for the registration process.

Shareholder's Information

• Passport
• Proof of Address
• Shareholders' Resolution to Consent to Register a Company in Korea (provided by Pearson)

If the Shareholder is a Corporation:

• Certificate of Business Registration
• Memorandum of Articles and Association
• List of Shareholders
• Passport of Corporate Shareholder's Representative

Shareholder information highlights the collaborative aspect of LLC formation. If the shareholder is a corporation, additional documentation is required to ensure compliance and transparency.

Conclusion

Opting for a Limited Liability Company (LLC) is a strategic choice for businesses aiming to expand into South Korea. This structure allows companies to establish a significant market presence without the need for a local head office. The LLC formation process ensures businesses comply with South Korean regulations and supports property development. Due to the intricate relationship between registration fees and authorized share capital, careful financial planning is essential.

Pearson & Partners provides extensive support throughout the LLC formation process, including incorporation and tax accounting services. For expert guidance on legal requirements, regulatory compliance, and strategic decision-making in South Korea, contact us.