Steps to Establishing a Korean Limited Liability Company

On April 3, 2024, the Ministry of Trade, Industry, and Energy, together with the KOTRA Foreign Investment Ombudsman, convened a meeting involving CEOs of foreign-invested companies and representatives from foreign chambers of commerce in Korea. The meeting aimed to discuss initiatives enhancing Korea's investment climate and promoting Foreign Direct Investment (FDI). Korea targets attracting $35 billion in foreign investment for 2024, with commitments to implement measures supporting increased investments from foreign firms.

The Minister of Trade, Industry, and Energy emphasized, "Korea has increased government funding and raised the maximum financial support limits for foreign-invested companies. Additionally, new special legislation assists foreign-invested companies in recruiting local talent." This article will detail the procedures for establishing a company in Korea tailored for foreign investors and entrepreneurs.

Requirements for Setting Up a Company in Korea

Establishing a company in Korea requires fulfilling several prerequisites:

1. Capital Allocation: Determine the initial capital needed, which varies by legal structure and industry. Ensure access to funds or develop a financing strategy.

2. Business Proposal: Prepare a comprehensive business proposal detailing the business's nature, market analysis, target demographics, and financial projections. This document demonstrates industry knowledge and outlines growth strategies.

3. Identification Documentation: Gather identification documents for all parties involved, including passports or identity cards. Foreign nationals may need additional documents like a valid visa or Alien Registration Card (ARC).

4. Office Establishment: Korean companies must have a registered office address, which can be a physical location or a virtual office providing professional services and a business address without physical presence requirements.

Types of Business Entities in South Korea

Foreign investors exploring business opportunities in South Korea can choose from seven distinct business structures:

1. Limited Company: Predominantly chosen by foreign investors, it operates as a for-profit corporation with limited liability for shareholders.
2. General Partnership: Each partner assumes unlimited liability and jointly shares responsibility for debts, requiring unanimous approval for ownership transfers.
3. Limited Liability Partnership: Partners have the option of limited or unlimited liability roles, with limited partners restricted from making operational decisions.
4. Joint Stock Company: Shareholders' liabilities are confined to their invested capital. Shares can be transferred upon board approval, with mandatory annual shareholder meetings.
5. Branch Office: Functions under the parent company's jurisdiction, engaging in local business activities without forming a separate legal entity.
6. Representative Office: Fully owned and managed by foreign entities, it serves as a promotional and market research entity, restricted from direct sales activities in South Korea.

Understanding these business entities is crucial for foreign investors in South Korea, influencing liability, management, and operational decisions during the company registration process.

Considerations for Registering a Business in South Korea

1. Choosing the Right Business Structure: Select the appropriate structure based on liability considerations and alignment with business objectives.
2. Selecting a Company Name: Choose a unique and memorable name that reflects your business identity and isn't currently in use by another entity in South Korea.
3. Registering the Company Name: Register your chosen company name with the South Korean company registry to ensure its uniqueness and prevent unauthorized use.
4. Drafting the Articles of Association: Prepare the articles of association detailing the company's purpose, shareholder and director rights, and decision-making procedures. Notarize this document before proceeding with incorporation.
5. Submission of Required Documents: Submit the articles of association and other necessary documents, including the South Korean certificate of incorporation, to relevant authorities. Payment of incorporation fees is required.
6. Obtaining a Business License: Obtain a business license from appropriate authorities post-incorporation to legally operate in South Korea.
7. Registering for Tax and Social Security: Register your company for tax and social security purposes with the National Tax Service and National Pension Service to fulfill legal obligations and manage employee contributions.
8. Compliance with Ongoing Legal Requirements: Ensure ongoing compliance with legal and reporting obligations, including annual reporting and shareholder meetings, to maintain legal standing.

Seeking professional legal and financial advice during the business establishment process in South Korea is advisable. Expert guidance can assist in navigating regulatory requirements, ensuring proper registration, and adherence to applicable laws.

Steps to Establishing a Korean Limited Liability Company

Foreign individuals aiming to establish a limited liability company in Korea can follow these standard procedures for company registration:

1. Notify the Foreign Exchange Bank (FEB)

Notify the Foreign Exchange Bank (FEB) of your investment intention in South Korea by submitting a notification form and proof of identity at an FEB branch. Proxy representation with power of attorney is acceptable.

2. Transfer of Share Capital

Transfer your investment capital by either remitting funds from overseas to a temporary account at an FEB branch or physically bringing it and depositing directly. Obtain a bank certificate confirming custody of the capital, crucial for subsequent procedures.

3. Company Registration

File for company incorporation with the Korean court, meeting requirements based on company type and invested capital. Submit necessary documentation regarding directors, auditors, and shareholders. Upon approval, receive a certificate of incorporation.

4. Registration with the Tax Office

Complete company registration with the tax office, submitting required documents according to your specific circumstances.

5. Open a Corporate Bank Account in South Korea

Transfer the invested capital from the temporary account to the company's designated bank account.

6. Register as a Foreign Direct Investment Company with FEB

Register your company as a Foreign Direct Investment (FDI) entity with the FEB within 30 days of completing capital payment. Submit an application form, certificate of exchange/deposit, and incorporation registration transcript.

Conclusion

Establishing a business in South Korea involves navigating government registration procedures and obtaining a business license, choosing a company type that fits your business characteristics and shareholder structure. Understanding these complexities is crucial given South Korea's dynamic economy and evolving regulatory landscape.

Pearson & Partners specializes in guiding businesses through the process of setting up in South Korea, offering tailored expertise to meet your specific needs. With our extensive experience in managing company incorporation intricacies, we ensure a streamlined process with the South Korean Companies Registry. Contact us today for personalized assistance on incorporating your company in South Korea.