Why South Korea is the Best Destination for Your Business

South Korea is a prime destination for foreigners interested in setting up a company. As one of Asia's most advanced economies and a key member of the Four Asian Tigers, South Korea offers a strategic location between China and Japan. This favorable positioning, combined with its efficient company registration process, makes it an attractive choice for business establishment. This guide outlines the steps and requirements for successful company formation in South Korea, whether you're a new entrepreneur or an experienced business owner.

Types of Business Entities in South Korea

When forming a company in South Korea, the type of business entity depends on factors like company size and ownership structure. Entrepreneurs can choose from various legal structures based on their intent to operate as a sole owner or in partnership with local or foreign investors. Available options include:

• Joint Stock Company (Chusik Hoesa): Ideal for foreign investors setting up subsidiaries, this entity allows for public share issuance, limits shareholders' liabilities to their investments, and permits share transfers with board approval. An annual general shareholder meeting is required.
• Limited Liability Company (Yuhan Hoesa): Suitable for closely held entities with up to 50 shareholders, where liability is limited to the amount invested. It requires at least one director and shareholder of any nationality, with no minimum capital requirement.
• Partnerships: Available in three types—General (Hapmyeong Hoesa), Limited (Hapja Hoesa), and Limited Liability (Hapja Johap)—each offering different liability structures.
• Branch Offices: Extensions of foreign parent companies with no investment or ownership restrictions.
• Liaison Offices: Limited to non-commercial activities like market research and not permitted to generate revenue.

Steps for Forming a Company in South Korea

To initiate the company formation process, follow these steps:

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

You must have at least one shareholder and one director, with no citizenship or residency requirements for these roles. The business registration process typically takes about two weeks, while setting up a bank account and obtaining licenses may extend the timeline.

Requirements for Company Registration in South Korea

Minimum Share Capital Requirement

One of the advantages of forming a company in South Korea is the absence of a mandatory minimum share capital for private companies. However, you must allocate the required amount (at least USD 5,000) based on the sector in which you plan to operate.

Special Requirements for Foreign Investors

Foreign entrepreneurs have several options for fully controlling their business in South Korea, including:

• Local company incorporation
• Establishing a branch office
• Setting up a liaison office

These options are governed by Foreign Direct Investment (FDI) laws and come with specific compliance requirements, such as a minimum investment of KRW 100 million (approximately USD 90,000) for local companies. The incorporation process requires an initial notification to the Foreign Direct Investments Board.

Additionally, foreign investors must obtain an entrepreneur visa to acquire a Korean residence permit. For stays longer than six months, obtaining an alien registration card is usually required, serving as a form of identification and the first step toward potential permanent residency in South Korea.

Conclusion

South Korea's advanced economy and strategic location make it an attractive destination for entrepreneurs. The company formation process is streamlined, with various business structures to choose from. Compliance with FDI regulations is crucial for foreign investors.

For expert assistance with your company formation journey in South Korea, contact us. Our team of professionals is here to help you navigate the complexities of establishing your business and ensure a successful start.