Setting up a Company in Korea: A Comprehensive Guide for 2024

On April 3, 2024, the Ministry of Trade, Industry, and Energy, along with the KOTRA Foreign Investment Ombudsman, held a significant meeting with CEOs of foreign-invested companies and representatives from foreign chambers of commerce in Korea. The primary objective was to discuss strategies to improve Korea's investment environment and boost Foreign Direct Investment (FDI). The government has set an ambitious target of attracting $35 billion in foreign investment in 2024 and is committed to implementing measures to encourage increased investment from foreign entities.

The Minister of Trade, Industry, and Energy highlighted the government’s proactive stance, stating, "Korea has increased government funding and raised the maximum financial support limits for foreign-invested companies. Furthermore, new special legislation has been enacted to assist these companies in securing local talent."

For foreign investors and entrepreneurs looking to establish a presence in Korea, understanding the process is crucial. Here's a detailed guide to the requirements and steps involved in setting up a company in Korea.

Korea Company Setup Requirements

1. Capital Allocation: Determine the initial capital required, which varies based on your business's legal structure and industry. Ensuring access to necessary funds or devising a financing strategy is essential.

2. Business Proposal: Craft a comprehensive business proposal detailing your business’s nature, market analysis, target demographics, and financial projections. This document is crucial for showcasing your industry understanding and strategic growth plans.

3. Identification Documentation: Prepare identification documents for all involved individuals, such as passports or identity cards. Foreign nationals may need additional documentation, like a valid visa or Alien Registration Card (ARC).

4. Office Establishment: Secure a registered office address in Korea. This can be a physical location or a virtual office, which provides a professional business address and support services.

Types of Business Entities in Korea

Foreign investors can choose from seven distinct business structures:

1. Limited Company: A common entity for foreign investors, where shareholders have limited liability.

2. General Partnership: Partners share unlimited liability and joint responsibility for debts, with ownership transfers requiring unanimous approval.

3. Limited Liability Partnership: Partners can choose between limited or unlimited liability roles, with limited partners restricted from operational decisions.

4. Joint Stock Company: Shareholders' liabilities are limited to their investment. Shares are transferable with board approval, and annual shareholder meetings are mandatory.

5. Branch Office: Operates under the parent company's jurisdiction, conducting local business without being a separate legal entity.

6. Representative Office: Fully foreign-owned and managed, serving promotional and market research purposes without engaging in direct sales activities in South Korea.

Considerations for Registering a Business in South Korea

1. Choosing the Right Business Structure: Select a structure that aligns with your business objectives, considering implications for liability and management.

2. Selecting a Company Name: Choose a unique and memorable name that reflects your business identity and is not already in use in South Korea.

3. Registering the Company Name: Register your chosen name with the South Korean company registry.

4. Drafting the Articles of Association: Prepare this document to outline your company’s purpose, shareholder and director rights and responsibilities, and decision-making procedures. It must be notarized before incorporation.

5. Submission of Required Documents: Submit the articles of association and other necessary documents, including the certificate of incorporation, and pay the required fees.

6. Obtaining a Business License: Secure a business license from the relevant authorities to legally operate in South Korea.

7. Registering for Tax and Social Security: Register with the National Tax Service and the National Pension Service for tax and social security purposes.

8. Compliance with Ongoing Legal and Reporting Requirements: Maintain compliance with legal and reporting obligations, including filing annual reports and conducting shareholder meetings.

Steps to Setting Up a Limited Liability Company in Korea

1. Notify the Foreign Exchange Bank (FEB): Inform the FEB of your investment intention by submitting a notification form and proof of identity.

2. Transfer of Share Capital: Transfer your investment capital to a temporary FEB account and obtain a certificate confirming custody of the capital.

3. Register the Company: File for company incorporation with the Korean court, providing necessary documentation.

4. Register with the Tax Office: Complete company registration with the tax office.

5. Open a Corporate Bank Account in South Korea: Transfer the invested capital from the temporary account to the company’s designated bank account.

6. Register as a Foreign Direct Investment Company with FEB: Register your company as an FDI entity within 30 days of capital payment completion.

Conclusion

Setting up a limited liability company in Korea involves navigating various government registration procedures and obtaining a business license. Choosing the right company type that aligns with your business characteristics and shareholder structure is crucial. Given Korea’s dynamic economy and evolving regulatory landscape, understanding these complexities and potential challenges is essential.

Pearson & Partners specializes in guiding businesses through the Korea company setup process, offering tailored expertise to meet your specific needs. With extensive experience in managing company incorporation intricacies, we ensure a streamlined process with the South Korean Companies Registry. Contact us today for more information and personalized assistance on your journey to incorporate a company in South Korea.

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