Business entities in South Korea
A South Korea business setup can be an interesting option for multinationals wishing to tap into the dynamism of the North Asian markets, but unwilling to face procedural difficulties they would likely encounter in other major economies like Japan and China. The most commonly incorporated entity in South Korea is the limited liability company, but our Clients willing to raise funds will prefer to setup a joint stock company. Alternatively, our Clients may also choose to open either a branch office or a representative office to carry out their activities in the country.
Limited Liability Company (Yuhan Hoesa)
- This is the most commonly entity used for starting a business in South Korea. As always, the company is an entity, separate from owners who, consequently, enjoy limited liability;
- A South Korean LLC must appoint i) a minimum of one director and one shareholder and ii) a minimum used share capital of US$1 while setting up a company in South Korea. A South Korean LLC can be incorporated within 2 weeks.
A Branch office, despite having its own management team, bank account and capital resources, will operate within the confines defined by the parent company. This South Korea business setup is allowed to invoice local customers, sign local sales contracts, and receive income from its customers.
Representative Office (RO)
While a South Korean representative office is 100% foreign owned and controlled, it is not permitted to make direct sales within the country. Such an office will only engage in activities such as i) promoting business of the parent company and ii) market research.
General Partnership (Hapmyong Hoesa)
In a general partnership, all partners will have unlimited liability. Each partner is jointly liable for debts incurred by the entity. Transfer of ownership in this kind of company is limited, as unanimous consent of all members is required before this can be achieved.
Limited Liability Partnership (Hapja Hoesa)
In a limited partnership, members can choose to either have limited or unlimited liability. While, the liability of the limited members will be limited to the amount of their capital investment, they cannot make any business decisions on behalf of the partnership. All day-to-day business responsibilities will be handled by partners with unlimited liability.
Joint Stock Company (Chusik Hoesa)
Stockholders in a joint stock company have liabilities limited to the extent of their capital investment in the company. Stocks are freely transferrable, though this can be subject to approval of the board of directors. These companies are required to hold shareholder meetings at least annually to discuss financial statements and dividends.
|Detail||LLC||Branch Office||Rep Office|
|Total company set up costs||US$11,953||US$12,703||US$9,343|
|Subsequent annual costs (excl accounting and tax fee)||US$3,510||US$1,560||US$2,560|
|How long to set the company up?||2 weeks||2 weeks||2 weeks|
|How long to open company bank account?||2 weeks||2 weeks||2 weeks|
|Issued share capital required||US$1||No||No|
|Allowed to sign sales contracts with South Korean Clients||Yes||Yes||No|
|Allowed to invoice South Korean Clients||Yes||Yes||No|
|Corporate tax payable in South Korea||22%||22%||22%|
|Corporate bank account||SCB or HSBC||SCB or HSBC||SCB or HSBC|
|Can rent office premises in South Korea||Yes||Yes||Yes|
|Allowed to import raw materials?||Yes||Yes||No|
|Allowed to export goods?||Yes||Yes||No|
|Can the entity hire expatriate staff?||Yes||Yes||Yes|
|Do you need to visit South Korea?||No||No||No|
|Resident director required?||No||No||No|
|Resident shareholder required?||No||No||No|
|Minimum number of directors||1||1||1|
|Minimum number of shareholders||1||1||1|
|South Korean resident company secretary||No||NA||NA|
|Tax registration certificate required||Yes||Yes||Yes|
|Individual shareholders allowed||Yes||Yes||Yes|
|Corporate shareholders allowed||Yes||Yes||Yes|
|Public register of shareholders and directors||Yes||Yes||Yes|
|How long to get work permit approved||6 weeks||6 weeks||6 weeks|
|Statutory audit required||Yes||Yes||Yes|
|Annual tax return to be submitted||Yes||Yes||Yes|
|Access to South Korean double tax treaties||Yes||Yes||Yes|
|Draft invoice||View invoice PDF||View invoice PDF||View invoice PDF|