Step-by-Step Guide to Korea Company Registration: Business Types and Requirements

South Korea stands out as a prime destination for entrepreneurs looking to establish a business, thanks to its prominent position as a leading Asian economy and its advantageous location between China and Japan. The country’s simplified company registration process makes it particularly appealing for business formation. This guide provides a detailed overview of the steps and requirements for registering a company in South Korea, whether you're an aspiring entrepreneur or an experienced business owner.

Business Entity Types in South Korea

South Korea offers a variety of business structures to meet different needs, determined by factors like company size and ownership. Common options include Joint Stock Companies (Chusik Hoesa), Limited Liability Companies (Yuhan Hoesa), Partnerships, Branch Offices, and Liaison Offices. It’s important to note that private companies cannot include "hoesa" in their names, as this term is reserved for corporations.

Joint Stock Company (Chusik Hoesa)

The Chusik Hoesa is the most popular business structure in South Korea, especially among foreign investors looking to establish subsidiaries. It allows for the issuance of public shares and limits shareholder liability to the amount of capital invested. Share transfers require board approval, and an annual general meeting of shareholders is mandatory.

Limited Liability Company (Yuhan Hoesa)

The Yuhan Hoesa offers simplicity and flexibility, making it a preferred option for many. Shareholders are not personally liable beyond their initial investments, and there are no requirements for minimum capital. This structure requires at least one director and shareholder, and it must have a registered office address. Foreign-owned companies fall under the Foreign Investment Promotion Law (FIPL), which requires a minimum investment of 100 million won.

Other Business Entity Types

South Korea also supports other business structures, including partnerships, branch offices, and liaison offices.

Partnerships

There are several types of partnerships in South Korea, each with different features related to liability and operation:

• General Partnership: Partners have unlimited liability, and ownership transfer requires unanimous agreement.
• Limited Liability Partnership: Combines features of partnerships and LLCs, offering liability protection.
• Limited Partnership: Includes both general and limited partners but lacks separate legal status.

Branch Offices

Foreign companies can set up branch offices in South Korea under the parent company's name, sharing its liabilities. There are no limitations on ownership or investment.

Liaison Offices

Liaison or representative offices are designed for foreign businesses to enter the South Korean market. These offices are limited to non-commercial activities such as research and development, and cannot engage in sales or generate revenue.

Steps to Register a Company in South Korea

Starting a company in South Korea involves the following steps:

1. Choose a Legal Structure: Select the most suitable business entity type.
2. Reserve Company Name: Secure the desired company name.
3. Prepare Documentation: Draft necessary documents, including the Articles of Association.
4. Submit to Companies Register: File the required paperwork.
5. Open a Bank Account: Set up a company bank account at a local bank.
6. Obtain a Tax Identification Number: Register for a tax identification number.
7. Apply for Licenses: Obtain any industry-specific licenses that may be required.

Registration Requirements and Foreign Investor Considerations

While there is no mandatory minimum share capital for private companies, it’s recommended to allocate sufficient funds based on the business sector.

Foreign investors have several options for establishing a business in South Korea:

• Local Company Incorporation: Create a new company under South Korean law.
• Branch Office: Set up a branch of an existing foreign company.
• Liaison Office: Establish a representative office for non-commercial activities.

These structures fall under Foreign Direct Investment (FDI) regulations, which require specific compliance steps, such as a minimum investment of 100 million won (approximately USD 90,000) for local companies. The FDI process involves notifying the Foreign Direct Investment Board.

Foreign investors also need to secure an entrepreneur visa to operate a business and may require an alien registration card for long-term stays, which serves as official identification for various activities.

Conclusion

With its strong economy and strategic location, South Korea is an attractive destination for entrepreneurs. Its streamlined company registration process and flexible business structures simplify the path to business formation. However, foreign investors must ensure they comply with FDI regulations. For further assistance, Pearson & Partners Korea can provide professional guidance that can help navigate the complexities of setting up a company in South Korea, ensuring a smooth start for your venture.