?? Navigating Corporate Structures in Korea: The Limited Company (Yuhan Hoesa) – A Comprehensive Guide for Foreign Investors ????

?? Embark on Your Global Business Expansion: Understanding the Limited Company (Yuhan Hoesa) in South Korea

The Limited Company ("LC" or "Yuhan Hoesa") stands as a preferred entity type for foreign investors, thanks to its simplified structure, operational flexibility, potential for closed ownership, and reliability proven by decades of use by foreign-invested companies. This entity type combines limited liability for its members with a flexible management structure, making it an optimal choice for those aiming to establish or expand their presence in the South Korean market.

Key Features of the Yuhan Hoesa:

• ??? Limited Liability: Members enjoy protection against personal liability, limiting their risk to the extent of their contributions to the company's capital.
• ?? Flexible Capital Requirements: There's no minimum capital requirement for most businesses, but a KRW 100 million minimum is necessary for foreign-invested enterprises to register as a Foreign Invested Enterprise.
• ?? Equity Transfer: It is possible to restrict the transfer of equity units to maintain a closed nature, adaptable to the company’s specific needs.
• ?? Management Structure: A single director can represent the company, with the possibility of appointing more.
• ?? Legal Liability: Shareholders' liability is limited to their investment in shares, safeguarding personal assets from corporate debts.
• ?? Accounting Standards: Companies must maintain records in accordance with Korean GAAP/Korean IFRS, ensuring compliance with local tax laws.
• ?? Taxation: Corporate earnings are subject to taxation, and dividends to shareholders are also taxed, similar to a Joint Stock Company.

U.S. "Check-the-Box" Tax Regulation:

For U.S. investors, the Yuhan Hoesa's eligibility under the "check-the-box" regulation offers a strategic advantage. This rule allows foreign entities to be treated as disregarded entities or as separate corporations for U.S. tax purposes. Electing a Yuhan Hoesa as a disregarded entity can simplify U.S. tax reporting and potentially enhance tax efficiencies for international operations.

?? Establishing a Limited Company:

1. ?? Securing a Business Address: Fundamental for legal and operational setup.
2. ?? Application for Foreign Invested Enterprise (FIE): With a foreign exchange bank in Korea to initiate formal establishment.
3. ?? Capital Injection: To the foreign exchange bank designated in Step 2.
4. ??? District Court Registry: Completing legal formalities.
5. ?? Obtaining a Tax Identification Number: Ensuring compliance with Korean tax regulations. #BusinessSetup #CorporateStrategy
6. ??? FIE Certificate: Complete the FIE registration and receive the certificate from the foreign exchange bank.

Director Requirements: A single director is sufficient.

Statutory Auditor: Not mandatory.

Auditing and Compliance:

The regulatory landscape for Yuhan Hoesa entities has evolved, impacting foreign investors (especially B2C) that previously favored this entity due to its exemption from mandatory external audits. As of fiscal years starting on or after November 1, 2019, a shift in regulations mandates external audits for Yuhan Hoesa entities meeting specific financial thresholds, marking a significant change in compliance requirements. This adjustment aims to enhance transparency and accountability within the corporate sector, especially for larger entities that play pivotal roles in the market.

Key Regulatory Changes:

• Mandatory External Audits: Required for fiscal years commencing on or after November 1, 2019, if they meet particular financial benchmarks outlined below. #RegulatoryCompliance
• Asset or Revenue Size: Entities with total assets or revenues surpassing KRW 50 billion are specifically subject to external audits, highlighting a focus on larger market players.
• Comprehensive Financial Criteria: Additionally, audits are mandated for companies that do not satisfy at least three out of five specified criteria, designed to assess the financial scale and complexity of the entity. These criteria include total assets under KRW 12 billion, liabilities below KRW 7 billion, revenue less than KRW 10 billion, employing fewer than 100 individuals, and having less than 50 members.

In Summary:

Despite the regulatory changes, the Yuhan Hoesa remains a very popular entity form for foreign investors in Korea, offering operational agility, tax efficiency, and the protection it offers to its members. Its "check-the-box" eligibility further enhances its attractiveness for U.S. investors, providing a flexible and efficient vehicle for entering the Korean market or expanding operations.

#ForeignInvestment #BusinessExpansion

Comprehensive Support for Establishment & Maintenance:

For seamless navigation through the establishment and maintenance of your Limited Company, KEA is here to offer expert support every step of the way, ensuring a straightforward and efficient process for your business in Korea. #BusinessSupport

?? Next in Our Series: We will explore the Limited Liability Company (Yuhan Chaekim Hoesa), a relatively new player in Korea's diverse business ecosystem. Stay tuned for more valuable insights!