Korea

Country starter pack
Getting started in Korea
35
2.3 POSSIBLE BUSINESS STRUCTURES
Now that you have decided to set up a business in Korea,
there are many elements you need to consider. What
type of business structure will you use? Will you appoint
a local agency, open a branch office, or set up a Korean
subsidiary? And what legal and administrative processes
must you go through to get established? There is no
single business structure that holds the key to unlocking
the Korean market. Cultivating a wide network of local
contacts in Government, while gaining an understanding
of local practices, will help lower your compliance risks
and assist you in choosing the most appropriate business
structure.
There are multiple channels of entry open to foreign
investors; the one you choose must fundamentally
be supported by your company’s business objectives.
Knowing what you’d like to achieve in Korea will help
determine the entry vehicles that can help take you
there. There are three primary ways to set up a business
in Korea: set up an entity in the form of a subsidiary, as a
joint stock company, or a limited liability company. If you
are not wanting to set up an entity then you can always
engage in other forms of selling your product in Korea.
See Chapter 3 for further information on this.
Business structures overview
Subsidiary (JV) Branch Liaison Office
Major governing law Foreign Investment Promotion
Law Commercial Code
Foreign Exchange
Transaction Law
Foreign Exchange
Transaction Law
Minimum capital KRW100 million
• No requirement
• No requirement
requirements at
• May induce operating • May induce operating
establishment
fund from head office
fund from head office
Sales activities Possible Possible Not possible
Loan from overseas
parent/head office
Possible
Not possible
(except Korean branch of
foreign financial institutions)
Not possible
Repatriation of profits
Dividends distributed to
shareholders are subject to
tax withholding in Korea
No tax withholding on profit
repatriation; however, branch
profits tax may apply)
Taxable income Worldwide income Income attributable to the
branch operation
Head office common
expenses
Tax exemption or
credit
Not included in a subsidiary’s
expenses
Applicable depending on the
type of business and type of
investments
May include in the branch’s
expenses in a certain
guidelines
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Korean Joint Stock Company (Chusik Hoesa) or
Limited Liability Company (Yuhan Joesa)
Setting up a subsidiary is a popular choice for foreigners
who want to invest or conduct business in Korea. A
subsidiary may be set up as either a joint stock company
(Chusik Hoesa) or a limited liability company (Yuhan
Hoesa). For the purposes of business operation and
Korean tax obligations, there is no material difference
between them, except that limited liability companies
cannot issue bonds. Joint stock and limited liability
companies are covered by the Foreign Investment
Promotion Act (FIPA) and are the common structures
for establishing a joint venture (JV) between a foreign
investor and a South Korean individual or entity. The
minimum investment required to set up a Korean
subsidiary is KRW 100 million (about $115,000).
• A joint stock company is incorporated by one or
more promoters, with each shareholder’s liability
limited to the amount of contributed capital. This is
the most common type of company in Korea.
• A limited liability company is incorporated by one or
more members, with each member’s liability limited
to the amount of that member’s contribution to the
corporation.