Company registration in South Korea. Service offer

The establishment of a South Korean legal entity by a foreigner is governed by the Foreign Investment Promotion Act and the Commercial Act. Under South Korean law, if a foreigner wants to establish a legal entity that can be registered as a foreign-invested company, the minimum investment must be KRW 100 million. If two or more foreigners invest together, each must invest at least KRW 100 million.

There are three types of corporate forms commonly used by foreign investors:

1. a joint stock company (“Jusik Hoesa” in Korean);
2. a limited company (“Yuhan Hoesa” in Korean); and
3. a limited liability company (“Yuhan Chaegim Hoesa” in Korean).

While joint stock companies have “shareholders” and issue “shares” as equity interests, limited companies and limited liability companies have “members” and issue “membership interests” or “units of contributions”.

A joint stock company has more corporate formalities than a limited company or a limited liability company. For example, most joint stock companies are required to have a board of directors and a statutory auditor. However, these corporate bodies are optional for limited companies and limited liability companies. In addition, the shareholders of a joint stock company are generally not permitted to adopt resolutions in writing. They must adopt resolutions at a general meeting of shareholders. Whereas the members of a limited company or a limited liability company may adopt resolutions by written consent as long as the unanimous consent of the members is provided.

Limited liability companies may appoint managers, who basically have the same powers and authority as the representative director / representative executive officer mentioned above for joint stock companies and limited companies. If a limited liability company has more than one manager, then it may also elect to implement either a “joint” or “several” manager system. Limited liability companies, however, have the added flexibility of appointing not only individuals, but also entities, to act as the manager(s). For example, a member of the limited liability company, whether an individual or entity, may act as the manager.

Directors of a joint stock company and a limited company must be individuals.

In addition to being subject to Korean corporate income tax, a company must withhold taxes on dividends paid to individuals (both resident and non-resident) and foreign companies. Except where an applicable double tax treaty provides otherwise, non-resident individuals and foreign companies are generally subject to a 22% (including the local income surtax) withholding tax on dividend income from a Korean company.

All in all, there are several key factors that will help you choose one corporate form over another:

1. Historically, most foreign investors incorporated a joint stock company in Korea given its “prestigious” perception. If the perception by your local business partners and customers is going to be a key factor to your business in Korea, then a joint stock company may be the appropriate type of subsidiary to form.
2. That being said, there are many multinational companies that have established a limited company in order to be subject to few corporate formalities. Many U.S. investors have also found a limited company to be an attractive alternative to a joint stock company, if it is preferable for their Korean subsidiary to be treated as a partnership or branch for U.S. tax purposes. Although each foreign investor has their own reasons, in many of these cases, the foreign investor’s reputation in the applicable industry and among its business partners and customers was already well established.
3. Since limited liability companies have not been significantly used since their introduction in 2012, there are still some uncertainties in terms of their public perception and how a Korean court would interpret certain corporate governance-related matters. However, we anticipate that more limited liability companies will be formed by foreign investors.
4. After you form your company, you will still have the ability to change its corporate form – i.e. from a joint stock company to a limited company / limited liability company, or from a limited company / limited liability company to a joint stock company, by following certain procedures, such as obtaining court approval, giving public notice and complying with other creditor protection procedures. However, in addition to such procedural requirements, which may take a couple of months to complete, certain taxes may be triggered upon conversion of the subsidiary.

1. Notification of investment
2. Remittance of investment capital (foreign currency)
3. Office rent or purchase
4. Company incorporation
5. Obtaining of authorization from the competent authority
6. Business registration
7. Registration as a foreign-invested company

Once you have selected the type of presence you would like to establish for your business and operations in Korea, we will send you the applicable Checklist to be completed. After we receive the completed Checklist, we will prepare the applicable formation documents and send you detailed instructions on the next steps.