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Incorporating a company in South Korea involves registering the business with the government and obtaining a business license. The type of company you can set up company in South Korea will depend on the nature of your business and the number of shareholders you have.
In recent years, setting up South Korea companies has become a popular destination for international investors due to their rapid economic growth and stability. The country’s gross domestic product (GDP) ranks in the top 10 globally, and it has been ranked 5th out of 190 economies in terms of ease of doing business by the World Bank in its 2021 annual ratings. South Korea’s advanced education systems and research and development capabilities have also contributed to its strong economy, and the country is a top 10 market for eCommerce.
If you are considering setting up a company in South Korea, it is important to be aware of the complexities and challenges involved in the process. The fast-paced economy and constantly changing regulatory requirements can make navigating the process of incorporating a company challenging.
Fortunately, our team of consultants at Relin Consultants has complete knowledge of how to start a business in South Korea and can help address any concerns you may have. We understand the complexities and challenges of South Korea company formation and can guide you to help ensure a smooth process with the South Korea Companies registry.
Contact us at Relin Consultants for more information and to receive assistance with your South Korea company incorporation. Relin Consultants provide South Korea company incorporation services.
KEY REQUIREMENTS FOR INCORPORATING A SOUTH KOREA COMPANY
TIMELINE OF OPENING COMPANY IN SOUTH KOREA
Shareholder and Shares
It is mandatory to appoint at least one shareholder. 100% foreign ownership is permissible.
Share Capital
The minimum paid-up capital for foreign investors to set up South Company Limited Company (Yuhan Hoesa) is KRW 100 million (US$70,000) to qualify under the FDI Act. A company that does not require to be qualified as FDI company can be registered with a minimum paid-up capital of US$10,000.
Directors
No resident director requirements in South Korea. Any individual can act as the sole director and shareholder of the company.
Company Secretary
Foreign investors are recommended to appoint a company secretary although acting as the company representative is not mandatory.
Virtual office or Physical office space
The company must have a virtual office or a physical office.
TYPES OF BUSINESS STRUCTURES IN SOUTH KOREA
There are seven types of business structures available for foreign investors who are looking to set up a company in South Korea:
Limited Company (Yuhan Hoesa):
This is the most common business entity for foreign investors in South Korea. It is a for-profit corporation that can have up to 50 shareholders, whose liability is limited to the amount of their share capital.
General Partnership (Hapmyong Hoesa):
In this type of partnership, each partner has unlimited liability and is jointly responsible for the entity’s debts. Transfer of ownership requires unanimous approval of all members.
Limited Liability Partnership (Hapja Hoesa):
Members of this type of partnership can choose between limited and unlimited liability. Limited liability partners are not allowed to make business decisions on behalf of the partnership, while those with unlimited liability manage the day-to-day business duties.
Joint Stock Company (Chusik Hoesa):
In this type of corporation, shareholders’ responsibilities are limited to the amount of their capital investment in the company. Stocks are freely transferable with permission from the board of directors, and shareholder meetings are held at least once a year to discuss financial results and dividends.
Branch Office:
This business is fully owned and controlled by a parent company and operates within the boundaries set by the parent firm. It can conduct local business activities such as billing clients and executing sales contracts but is not a separate legal entity.
Representative Office:
A representative office is a type of liaison office that is 100% foreign-owned and controlled. It is not allowed to make direct sales in South Korea but can engage in promotion and market research activities.
Foreign investors need to understand the different business structures available in South Korea and how they differ in terms of liability, management, and other factors to choose the best option for their business before registering a company in South Korea.
COMPARISON OF DIFFERENT BUSINESS COMPANY STRUCTURE IN SOUTH KOREA
| Limited Company | Domestic Branch | Liaison Office | |
| Company Name | No restrictions | Must be the same as the foreign parent's name. | Must be the same as the foreign parent company name. |
| Business activity | No restrictions | Must be the same as a foreign parent company. | Profit-making activities are not permitted. |
| Share Capital | KRW100 million to qualify as an FDI company. Otherwise, US$10,000 is recommended. | No minimum requirement. | No minimum requirement. |
| Legal Liability | Limited Liability | Extend to the Parent Company | Extend to the Parent Company |
| Compliance Requirements | Must prepare accounting and tax records and meet all the quarterly and annual tax filing requirements. | Must prepare accounting and tax records and meet all the quarterly and annual tax filing requirements. | Not necessary |
| Taxation | All profits are made by a domestic corporation. | All profits including domestic source income made by a domestic corporation. | NA |
THINGS TO CONSIDER WHILE REGISTERING A BUSINESS IN SOUTH KOREA
Choose the right business structure
South Korea offers several business structures to choose from, including limited companies, general partnerships, limited liability partnerships, joint stock companies, branch offices, and representative offices. It is important to choose the structure that best fits the needs of your business in terms of liability, management, and other factors.
Choose a company name
You will need to choose a unique company name that is not already in use by another business for your South Korea company registration. It is important to choose a name that is easy to remember and reflects the nature of your business.
Register the company name
Once you have chosen a company name, you will need to register it with the South Korea company registry. This will ensure that your company name is protected and cannot be used by another business.
Prepare the articles of association
The articles of association are a document that outlines the rules and regulations governing the operation of your company. It should include details such as the company’s purpose, the rights and responsibilities of shareholders and directors, and the process for holding meetings and making decisions. The articles of association must be notarized by a public notary before incorporation of South Korea company.
Submit the articles of association and other required documents
Once you have prepared the articles of association, you will need to submit them along with other required documents, such as a South Korea certificate of incorporation, to the South Korea registry. You will also need to pay the incorporation fees at this stage.
Obtain a business license
After the incorporation of a company in South Korea, you will need to obtain a business license from the relevant authorities. This license is required to operate your business in South Korea legally.
Register for tax and social security purposes
You will need to register your company for tax and social security purposes with the National Tax Service and the National Pension Service. This will ensure that your company complies with the relevant legal requirements and can make tax and social security contributions on behalf of its employees.
Comply with ongoing legal and reporting requirements
Once the company’s incorporation is completed and your company is up and running, you will need to comply with ongoing legal and reporting requirements, such as filing annual reports and holding shareholder meetings. It is important to stay up to date with these requirements to ensure that your business remains in compliance.
It is also advisable to seek legal and financial advice when setting up a business in South Korea. This can help you to understand the various requirements and ensure that your company is properly registered and compliant with the relevant laws and regulations.
COMPANY REGISTRATION PROCEDURE OF A KOREAN LIMITED LIABILITY COMPANY (YUHAN HOESA)
A foreigner registering a limited liability company in Korea can refer to the below standard procedures on how to register a company in South Korea.
Step 1: Notify the Foreign Exchange Bank (FEB)
Notify the Foreign Exchange Bank (FEB) of your intention to invest in South Korea. You or your proxy can do this by submitting a notification form and proof of identity to a FEB in the country. The process can be completed on the spot, and a proxy can handle the notification with power of attorney.
Step 2: Transfer of the Share Capital
Bring in your capital for the investment. You can either remit the capital overseas and have it deposited in a temporary account at a FEB, or you can bring it with you in person and deposit it at the bank. A certificate will be issued verifying that the bank has custody of the capital, which is necessary for the next step.
Step 3: Register the Company
Register the incorporation of your company with the Korean court. The requirements for this will depend on the type of company you have established and the amount of capital you have. You will need to provide various documents related to directors, auditors, and shareholders. Once the authorities approve the registration, you will receive a copy of the certificate of incorporation in South Korea.
Step 4: Register with Tax Office
Register your business with the tax office. The specific documents you need to provide will depend on your circ*mstances.
Step 5: Corporate Bank Account Opening in South Korea
Transfer the investment capital from the temporary account to the company account.
Step 6: Register with FEB as a Foreign Direct Investment Company
Finally, register your company as an FDI company with the FEB. This must be done within 30 days of completing the payment, and you will need to submit an application form, a certificate of exchange/deposit, and a transcript of incorporation registration.
FREE TRADE ZONES IN KOREA
Free Trade Zones (FTZs) are designated areas within a country that offer special economic and regulatory benefits to businesses operating within them. In South Korea, there are currently four FTZs: the Incheon Free Economic Zone (IFEZ), the Busan-Jinhae Free Economic Zone (BJFEZ), the Gwangyang Bay Area Free Economic Zone (GBAFEZ), and the Saemangeum Free Economic Zone (SMFEZ).
- The Incheon Free Economic Zone (IFEZ) is located in the city of Incheon and covers an area of over 7,000 acres. It was established in 2003 to become a hub for logistics, international business, and tourism in Northeast Asia. The IFEZ offers a range of incentives to businesses operating within its boundaries, including tax breaks, streamlined regulations, and access to state-of-the-art infrastructure. The IFEZ is home to several major international companies, including Samsung, LG, and Intel.
- The Busan-Jinhae Free Economic Zone (BJFEZ) is located in the southeastern part of South Korea and covers an area of over 3,000 acres. It was established in 2003 to become a hub for shipbuilding, logistics, and advanced manufacturing in the region. The BJFEZ offers a range of incentives to businesses operating within its boundaries, including tax breaks, streamlined regulations, and access to state-of-the-art infrastructure. The BJFEZ is home to several major international companies, including Hyundai, Samsung, and LG.
- The Gwangyang Bay Area Free Economic Zone (GBAFEZ) is located in the southwestern part of South Korea and covers an area of over 3,000 acres. It was established in 2003 to become a hub for shipbuilding, logistics, and advanced manufacturing in the region. The GBAFEZ offers a range of incentives to businesses operating within its boundaries, including tax breaks, streamlined regulations, and access to state-of-the-art infrastructure. The GBAFEZ is home to several major international companies, including Hyundai, Samsung, and LG.
- The Saemangeum Free Economic Zone (SMFEZ) is located in the western part of South Korea and covers an area of over 7,000 acres. It was established in 2011 to become a hub.
Relin Consultants South Korea company formation services include an assessment of the most appropriate Free Zone for your business.
PROS AND CONS OF FORMING A COMPANY IN SOUTH KOREA
DOCUMENT REQUIRED FOR THE SOUTH KOREA COMPANY FORMATION
- An application for business registration
- An application form for seal registration
- Documentation proving the shareholders’ and directors’ identities
- Company’s articles of Association or partnership agreement
- A copy of the company’s tax registration certificate
- Proof of the business address
- Other documents needed by the appropriate government agencies
HOW LONG DOES IT TAKE TO REGISTER COMPANY IN SOUTH KOREA?
Our team of professionals at Relin Consultants will begin the process of reserving your selected company name and drafting the incorporation documents after we have received the necessary verification documents from the directors and shareholders.
To register a company in South Korea, approximately 2 weeks period is required.
WHY CHOOSE RELIN CONSULTANTS FOR SOUTH KOREA COMPANY REGISTRATION SERVICE?
Relin consultants have a team of experts who have detailed knowledge about the South Korea company registration process. We will simplify and speed up the process for you.
Our team will take care of all the documentation, and you won’t have to physically travel to South Korea for the incorporation process. Relin Consultants will also take care of the corporate bank account opening for your newly formed company.
