Starting a Business in South Korea: Types, Steps & Requirements

South Korea is a prime destination for foreigners looking to start a company in Korea. As a leading economy in Asia and one of the Four Asian Tigers, South Korea offers a strategic location between China and Japan. Its favorable business environment, efficient company registration processes, and rapid setup make it an attractive option for establishing a business. This guide will cover the necessary steps and requirements for successfully setting up a company in South Korea.

Types of Business Entities for Setting Up a Company in South Korea

In South Korea, the choice of business entity for company formation depends on factors such as the company’s size and ownership structure. Entrepreneurs can select from several legal structures based on whether they plan to operate as sole proprietors or partner with local or international investors. The available options include:

• Joint Stock Company (Chusik Hoesa): The most common choice, allowing for public share issuance and limited liability for shareholders. Share transfers are subject to board approval, and an annual general meeting is required.
• Limited Liability Company (Yuhan Hoesa): Preferred by many, especially for closely-held businesses. It limits liability to the amount invested, requires at least one director and shareholder, and has no minimum capital requirement. Foreign investors must invest at least 100 million won to qualify under the Foreign Investment Promotion Law (FIPL).
• Partnerships: Available in three types—General (Hapmyeong Hoesa), Limited (Hapja Hoesa), and Limited Liability (Hapja Johap). General partnerships have unlimited liability, while limited liability partnerships offer limited liability. Limited partnerships do not have separate legal status.
• Branch Office: Allows foreign companies to expand into South Korea. Branch offices are extensions of the parent company and inherit its liabilities, with no investment or ownership restrictions.
• Liaison Office: Provides a non-commercial entry point into the South Korean market, limited to activities like market research and cannot engage in revenue-generating activities.

Steps for Company Formation in South Korea

To start a company in South Korea, follow these steps:

1. Reserve your company name.
2. Prepare the Articles of Association.
3. Submit these documents and other required paperwork to the Companies Register.
4. Open a company bank account.
5. Obtain a tax identification number.
6. Apply for any necessary industry-specific licenses.

Regardless of the entity type, you must have at least one shareholder and one director. There are no specific citizenship or residency requirements for these roles. The registration process typically takes about two weeks, though opening a bank account and obtaining licenses might extend this timeframe.

Foreign investors are advised to consult local experts to streamline the process and ensure a smooth start to their business operations.

Requirements for Company Registration in South Korea

• Minimum Share Capital: There is no mandatory minimum share capital for private companies, but a minimum investment (at least USD 5,000) is required depending on the sector.
• Special Requirements for Foreign Investors: Foreign entrepreneurs can choose from options such as local company incorporation, branch office establishment, or liaison office setup. These options are subject to Foreign Direct Investment regulations, requiring a minimum investment of KRW 100 million (approximately USD 90,000) for local companies and an initial notification to the Foreign Direct Investments Board. Foreign investors also need an entrepreneur visa and may need an alien registration card for stays longer than six months, which is the first step toward potential permanent residency.

Conclusion

South Korea’s advanced economy and strategic location make it an attractive choice for entrepreneurs. The company formation process is efficient, with various business structures to suit different needs. Foreign investors must comply with Foreign Direct Investment regulations to ensure a smooth setup.

For expert guidance on setting up your company in South Korea, contact us. Our team is ready to help you navigate the complexities and achieve a successful business launch in South Korea.