Starting a Business in Korea | Business Registration & Incorporation
South Korea is a great place to set up a company. Not only is the South Korean economy the 10th largest economy in the world, but its geographical location also makes the country the perfect place for foreigners looking to do business in and with East Asia. Almost every individual or foreign company can set up a local company or a branch or liaison office in South Korea. In this article, we will go over the different types of companies and specific procedures for incorporation. Read on to find out more about starting a business in Korea.
Table of Contents
Types of Company Registrations in Korea
Foreign companies or individuals who are not residents in South Korea have three options for setting up a business in Korea: Local corporation/FDI company, Branch office, Liaison office.
1. Local Corporation / FDI Company
This defines a local company that has received at least 100M KRW (roughly 85,000 USD) in foreign investment, categorizing it as a Foreign Capital Invested Company or Foreign Direct Investment (FDI) Company. As the Korean government wants to attract foreign investments, laws towards FDI companies are very beneficial. For example, you can receive an investment visa (D-8), or your company can apply for tax exemption under some special circumstances.
There are several types of local corporations you can establish:
- Partnership Company (합명회사, Hapmyung Hoesa)
– This type of company requires two or more partners who maintain unlimited liability.
- Limited Partnership Company (합자회사, Hapja Hoesa)
– This type of company requires two or more partners, but unlike a Partnership Company, a few partners can maintain limited liability. Still, there should be at least one partner who maintains unlimited liability.
- Joint Stock Company (주식회사, Chusik Hoesa)
– This type of company requires one or more shareholders. Shareholders do not bear any direct liability and are only liable within the limit of the value of their shares. This is the most common type of company in Korea (93.2% of all companies in Korea), also under FDI companies. Usually, a Joint Stock Company ends with Corp. / Ltd / Co., Ltd.
- Limited Company (유한회사, Yuhan Hoesa)
– This type of company is basically the same as Joint Stock Companies, but much simpler. The procedure for establishment is simpler, you don’t need a board of directors, and an auditor is not mandatory either. Since “Limited Liability Company (LLC)” was only recently introduced in Korea (in 2011), Limited Companies has been mainly played the role of LLC in Korea instead.’
- Limited Liability Company (유한책임회사, Yuhan Chaekim Hoesa)
– This type of company is similar to a limited liability company (LLC) in the United States. It was newly introduced in Korea in 2011.
- Limited Liability Partnership (합자조합 Hapja Johap)
– This is technically not a type of company, but a partnership. The form is very similar to a Limited Partnership Company, but the legal entity is bound to the partners. It is comparable to an LLP in the US.
2. Branch Office
Local corporations/FDI companies are registered as local, Korean companies. On the other hand, if you establish branch offices of a foreign corporation in Korea, those branch offices are registered as foreign corporations (though you don’t need capital to register them). The foreign headquarters and the Korean branch office are a single legal entity. Branch offices can enter into profit-making activities in South Korea and have to adhere to the same tax laws as South Korean companies. They receive fewer benefits than FDI companies.
3. Liaison Office
Similar to the Branch Office, the Liaison Office is seen as a foreign corporation. However, where Branch Offices are allowed to make a profit, Liaison Offices are only allowed to carry out non-sales activities, such as R&D, market research, business development, after-sale service, and advertisement on behalf of the foreign company.
Business Registration Procedure in Korea
Registering a business in South Korea might seem like a daunting task, especially as there are many regulations you need to follow. Luckily, attorneys like us at Seoul Law Group are happy to help you every step of the way. Below we describe the procedure to incorporate an FDI Company, a Branch Office, and a Liaison Office to help you understand the process and how we can help.
1. FDI Company Registration Procedure
Before registering your FDI Company, you have to follow several legal steps to register the foreign investment. The steps and requirements may vary based on the type of investment to be made, but below are the standard procedures. In general, it takes around 7 days from bringing in the investment to finishing the incorporation of the company.
- Notification of foreign direct investment to the Foreign Exchange Bank.
- Carrying-in of investment capital.
- Incorporation of the company & registration of incorporation to the court
- Business registration to a tax office
- Account transfer of investment capital
- Registration of FDI company
1.1 FDI Notification
Foreign investment into South Korea is governed by a set of well-defined regulations contained in the Foreign Investment Promotion Act (FIPA) and backed by rules and regulations issued by the Ministry of Economy and Finance (MOEF). Therefore, it is very important to carefully follow the rules to register your foreign investment.
During FDI notification, you or your proxy need to inform the Foreign Exchange Bank (FEB) that you will make an investment into South Korea.
- Who? FDI notification can be done either by yourself or by your proxy. For a proxy, power of attorney is required. Seoul Law Group has a lot of experience with registering FDI as a proxy and is happy to assist to make this process easier.
- Where? Foreign Exchange Banks.
- Required documents? FDI notification form, and a certificate to prove your identity (If you are a person, a copy of your passport. If you are a corporation, a business license and a copy of company representative’s passport.)
- Processing time? Will be processed on the spot.
1.2 Carrying-in of FDI Capital
After your FDI notification has been processed, you have to carry in the capital. You can do this in two ways:
- Overseas remittance: after the investment capital is remitted to a FEB in Korea, the capital will be converted to KRW and deposited into a temporary account.
- Hand-carried through customs: you can also bring the capital in person and deposit it, in person, at the FEB.
Later, the capital will be transferred to a temporary “share subscription account”. The bank will issue a certificate verifying that it has custody of the capital. This certificate is necessary to register the incorporation.
1.3 Registration of Incorporation
After you have incorporated your company, you have to register the incorporation with the Korean court for it to be recognized officially.
The requirements for corporate registration depend on what type of company you established and how much capital you have. For instance, if you established a joint stock company and your capital is over one billion KRW, you would need at least three directors (including the CEO) and at least one auditor. But if your capital is less than one billion KRW, then you only need one director and one auditor. The necessary documents also depend on whether each partner / executive / shareholder is a Korean or a foreigner, and whether they are currently in Korea or abroad.
1.4 Business Registration
When you have registered the incorporation, you have to register your business at the tax office. The necessary documents vary depending on your specific situation, so we cannot say them collectively.
1.5 Account Transfer of Investment Capital
Once your business is incorporated and the business registration procedures have been completed, the remitted FDI capital will be transferred from the temporary account into the company account.
1.6 FDI Company Registration
Finally, you have to register your company as an FDI company with the Foreign Exchange Bank.
- When? Within 30 days from the date on which the payment was completed.
- Where? The institution where the FDI notification was filed.
- Required documents? Application form for FDI registration, Certificate of exchange/deposit of foreign currency, Transcript of incorporation registration.
2. Branch Office & Liaison Office Business Registration Procedure
The process to establish a Branch Office and a Liaison Office are very similar. There are some small differences, but to establish both offices, you have to adhere to the following steps:
- Notification to the Foreign Exchange Bank or Ministry of Economy and Finance
- Branch registration to the Commercial Registry Office of the District Civil Court
- Business registration to the Korean Tax Authorities
- Opening a bank account
After submitting all required documents, it takes around 7 days to finalize the establishment of a Branch Office.
2.1 Notification to the FEB or Ministry of Economy and Finance
To establish a branch or liaison office in Korea, a foreign company is usually required to notify the FEB of its proposed investment in Korea. But if the company aims at a few specific businesses stipulated by the law (e. g. financing, securities, or insurance), you should notify the Ministry of Economy and Finance, not to FEB.
To do this, you need to submit the following documents. Except for the Branch Application, all documents need to be notarized.
- Branch Application
- A Power of Attorney to appoint an agent of the head office, conferring upon them the authority to prepare, execute, and file documents required to establish a foreign branch. Seoul Law Group can be appointed as Power of Attorney to ensure that all activities will be done legally and smoothly.
- A Power of Attorney to provide a branch representative the power to establish and operate the Korean Branch Office.
- Certificate of Corporate Registration from the regulatory institutions in the country of the company headquarters. If this document is not available, you can also submit a Certificate of Corporate Information.
- A business plan that shows what kind of business you are going to do in Korea
2.2 Registration with the Court
Following the Korean Commercial Act, a Branch Office needs to be registered with the district court as a legal entity. All commercial activities will be carried out under the name of this legal entity.
You need the following documents to register with the Commercial Registry Office of the District Civil Court. Please note: all documents need to be notarized.
- A copy of the Articles of Incorporation of the foreign corporation that is establishing the Korean branch.
- A Certificate of Corporate Information.
- A Certificate of Corporate Resolution approving the establishment of a branch in South Korea and appointing a branch representative.
- A Power of Attorney to appoint an agent of the head office, conferring upon them the authority to prepare, execute, and file documents required to establish a foreign branch. Seoul Law Group can be appointed as Power of Attorney to ensure that all activities will be done legally and smoothly.
- Acceptance of appointment signed by the branch representative.
- A copy of passport and Certificate of signature of the branch representative if they are a foreigner (A copy of resident registration, a seal, and certificate of seal impression if they are a Korean)
2.3 Registration with the Korean Tax Authorities
Besides registering with the FEB and the district court, you also need to register with the Korean tax authorities. Upon completion of the registration, the branch office will receive a tax identification number, after which it is allowed to perform its activities in Korea.
You need to prepare the following documents:
- A designated form that reports the establishment of the Korean branch office.
- A certificate of Corporate Resolution approving the establishment of a branch in South Korea and appointing a branch representative.
- Court registration certificate.
- Approval certificate from the FEB regarding the establishment of the Korean branch.
- A copy of the office lease contract.
- A copy of the Articles of Incorporation of the foreign corporation that is establishing the Korean branch.
- A balance sheet with a detailed description.
- A copy of the Korean branch representative’s passport.
- In the case of a business that requires special permission, a copy of the permit
2.4 Opening a bank account.
Upon registering your Branch Office or Liaison Office with the FEB, the district court, and the tax authorities, you can open a bank account and complete your office establishment.
Do you need to use a Korean lawyer when registering a business?
Although it is not necessary to hire a Korean lawyer when registering a company in South Korea, we strongly recommend it. There are strict rules and regulations regarding foreign investment, and many steps need to be taken to register your company or local branch legally. It is not always easy to understand the regulations for foreigners coming into Korea. At Seoul Law Group, we are specialized in helping foreigners understand these regulations. We can help you make sure that you understand every step of the process, and that all documents are prepared properly so that your company will be established without any delays or difficulties.
Frequently Asked Questions
It is not required but definitely recommended. It is not easy for foreigners to understand the specific rules and regulations to establish a company or local office, and lawyers, such as Seoul Law Group, can offer specialized help to ensure that the entire process goes smooth and fast.
Basically, there are 3 types of businesses a foreign national can open in Korea. A Local Corporation / FDI Company has received at least 100M KRW in foreign investment and is registered as a local, Korean company. A Branch Office is registered as a foreign entity and can carry out profit-making activities. A Liaison Office is also registered as a foreign entity, but cannot make a profit and is used for R&D purposes, to do market research, etc.
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We appreciate your gracious words, and we remain committed to continuous improvement. If you ever have any legal inquiries in the future, please do not hesitate to contact us at info@seoullawgroup.com. We are here to assist you with any questions or concerns you may have . Thanks you for your support.
We appreciate your gracious words, and we remain committed to continuous improvement. If you ever have any legal inquiries in the future, please do not hesitate to contact us at info@seoullawgroup.com. We are here to assist you with any questions or concerns you may have . Thanks you for your support.
We appreciate your gracious words, and we remain committed to continuous improvement. If you ever have any legal inquiries in the future, please do not hesitate to contact us at info@seoullawgroup.com. We are here to assist you with any questions or concerns you may have . Thanks you for your support.
We appreciate your gracious words, and we remain committed to continuous improvement. If you ever have any legal inquiries in the future, please do not hesitate to contact us at info@seoullawgroup.com. We are here to assist you with any questions or concerns you may have . Thanks you for your support.
Thank you for alerting us to this matter. I must inform you that we did not initially activate this feature. To assist us in conducting a thorough investigation, could you kindly provide additional details and forward any relevant screenshots to info@seoullawgroup.com? We are committed to resolving any potential issues promptly and efficiently.
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