When looking to invest in Asia, South Korea offers one of the most developed economies in Asia and remains politically and economically stability. It offers a highly business friendly environment, earning it a place in the top 5 on the Ease of Doing Business list by the World Bank. Let us take a look at how to form a company and start a business in South Korea.
Types of Business
There are 5 different kinds of businesses in South Korea, namely:
- Limited Liability Company (Yuhan Hoesa)
- Private Limited Company (Yuhanchaek – Imhoesa)
- Joint Stock Company (Chusik hoesa)
- General Partnership Company (Hapmyunghoesa)
- Limited Partnership Company (Hapjahoesa)
Many foreign companies wishing to enter the South Korean market first opt for a liaison office or branch office, as it is a lot less complicated than registering a business entity, they are however significantly restricted in their scope of activities.
Limited Liability Company (Yuhan Hoesa)
A Limited Liability Company (LLC), known as a Yuhan Hoesa, is the most common type of entity selected for company formation in South Korea. The Yuhan Hoesa is similar to an LLC in other jurisdictions, in terms of its capabilities and scope of activities.
- At least 1 shareholder (with a maximum of 50);
- No board of directors or company secretary is required;
- Minimum investment of 10 million Korean Won (KRW)
- There is a progressive tax system applied for corporate income tax:
- Up to 200 million KRW – 10%
- 200 million to 2 billion KRW – 20%
- Any figure above 2 billion KRW 22%
- A 22% withholding tax is levied on any dividends paid overseas.
Private Limited Company (Yuhanchaek – Imhoesa)
A Private Limited Company is similar to a LLC, however the regulations for each differ.
- Liability of shareholders is limited to their share capital contribution.
- Characteristics are like that of a trade association.
Joint Stock Company (Chusik Hoesa)
This type of entity is the only corporate entity that is able publicly issue shares in South Korea. This is also a common form of entity established by foreign companies, who wish to have a subsidiary in South Korea.
General Partnership Company (Hapmyung Hoesa)
A General Partnership Company, locally known as Hapmyung Hoesa), is an entity which requires at least 2 partners who share unlimited liability.
Limited Partnership Company (Hapja Hoesa)
In a Limited Partnership Company, at least 2 partners are required, where at least 1 will have unlimited liability and the other will have limited liability.
Branch Office in South Korea
Whereas as the abovementioned entities are considered as local legal entities, a branch office is considered as the same legal entity as its overseas parent company. As such, liability for all actions of the branch office are assumed by the overseas entity.
Branch offices are able to conduct commercial activities that generate profits and there is no limit placed on the amount of investment. A branch office is however restricted to the activities of its parent company and cannot conduct activities which exceed those activities.
A Liaison office is not able to engage in commercial activities that generate any profits. This type of entity is only permitted to engage in non-profit making activities, such as:
- Market research
- Other non-commercial activities
Process for Company Incorporation
The particular process for each entity may differ, however you must be sure to meet the particular requirements for that specific and ensure all the correct permits and visas have also been applied for.
Our experts here at INS Global are able to analyze your particular circumstance and provide you with insights to allow you to select the best option available. With requisite knowledge of local regulations and processes, we allow your enterprise to make a more informed decision.
How INS Global Can Help Your Enterprise
With more than 14 years’ experience in the Asian market, INS Global has the expertise to assist your company to enter South Korea and set up your operation. Our team is able to help you register your company, find the right staff and assist with administrative issues such as payroll and tax. Get in contact with our consultants today and let them help you successfully enter the South Korea market.