With a GDP of $2 trillion, South Korea is one of the most developed nations in the world. As such, setting up your business in Korea is a great idea because it is a thriving economy with a customer base with vast disposable income.
Types of Company Registrations in South Korea
There are numerous options available for a foreign company to set up a business in South Korea, but three main options are; Local Corporation / FDI Company, foreign branch, and liaison office.
Local Corporation
This sort of registration is a local company but since the ownership is by a foreign individual or company it’s classified as a Foreign Direct Investment Company (FDI). FDI companies enjoy numerous benefits under South Korea law compare to regular local companies.
FDI Company may be incorporated in one of the following types of business:
- Joint Stock Company (Chusik Hoesa): this is the most used type of corporate form in Korea, also for FDI companies. Normally, a company registered under this form must end with Corp. / Ltd / Co., Ltd.
- Private Limited Company (Yuhan Hoesa): this form of company is limited to up to 50 shareholders and it’s closed to the public. It is occasionally referred to as an LLC.
- Limited Liability Company (Yuhan Chaekim Hoesa): this type of company is similar to a limited liability company
- General Partnership Company (Hapmyung Hoesa): this type of company required two or more partners which has unlimited liability.
- Limited Partnership Company (Hapja Hoesa): unlike the GP, in this type of company, some of the partners may has limited liability.
- Limited Liability Partnership (Hapja Johap): this form of business is comparable to Limited Partnership Company but its legal entity isn’t separated from its members.
Foreign Branch
A Branch is not independently set up in South Korea. It is a department of a foreign company that is registered in its home country. In South Korea, branches don’t require special incorporation, making them easier to start than a local corporation in principle. Branches are less expensive and are permitted to engage in sales activity. They are regarded as a different legal entity, with debts and liabilities, held independently from their parent company but may expand to the parent company in some situations.
Liaison Office
A liaison office is a company that doesn’t carry out business activities in Korea but rather performs a non-sales function such as market research, R&D, and so on. The primary disadvantage of a liaison is the restriction on sales activities. But on the other hand, setting up a liaison office is quite simpler and less expensive.
How to register your company in Korea
Local Corporation / FDI Company
To establish and register a Local Corporation in Korea, the Korea Foreign Investment Promotion Act requires the following processes:
- Foreign investment notification
- Investment capital remittance
- Incorporation registration
- Business Registration
- Transfer of paid-in capital to a business account
- FDI company registration
How to register your branch in South Korea
- Step 1: Notify Assigned Exchange Bank
Branches of foreign corporations must establish a foreign exchange entity for the objective of directing working capital, and also receive approval to establish in Korea.
For a foreign company to establish a branch in Korea, a notification must be sent to the head of the assigned foreign exchange bank, according to Korea Law. Alternatively, the foreign company must register at the Ministry of Strategy and Finance for authorization for the establishment of a financial business. Necessary Documents include:
- Statement form of the establishment of a foreign company’s domestic branch
- Article of association
- Copy of registration or operation permission of headquarters
- General principles of headquarters
- Minutes of the board of directors meeting that specifies the establishment of a branch or liaison office in Korea and the authorization of a Korean representative.
- A certificate of approval for business
- Power of attorney where the incorporation of a domestic branch is commissioned to another individual.
All documents from the home country must be notarized and provided with a Korean-translated copy.
- Step 2: Registering with Court Registry Office
Once notification is verified by the exchange bank, the company has to submit this to a local court registry office. In addition to the confirmation from the bank, the branch must assign a proxy who is responsible for the day-to-day administration of the branch.
- Step 3: Register at Tax Office for Business Registration Certificate
The branch has to register at a tax office to receive a business registration number. This procedure covers registering for taxes such as sales tax and payroll tax.
- Step 4: Open Commercial Bank Account
Once you’ve received the business registration, you can create your company bank account. You will be expected to provide documents such as;
• passport,
• alien registration card,
• office lease agreement, and a few more.
Once the documents are in order, you can move forward with setting up a business bank account with a bank of your choosing.
The process of registering a Liason in Korea is similar to a Branch with minor differences.
South Korea gives a multitude of benefits to foreign investors looking to expand their business into Asia. If you decided to expand your company to this region, contact your Damalion expert now.
