Joint Stock Company(주식회사)
Joint Stock Company (Chusik Hoesa) is the most popular business entity for foreign investors to establish subsidiaries in South Korea. Currently, it is the only business entity that publicly issues shares in South Korea.
As such, stockholders only have limited liabilities in the company, based on their initial capital investment. In addition to that, stocks can also be freely transferable, with approval from the board of directors Hence, general shareholder meetings are required to be held at least once annually. Not only that, but a Joint Stock Company also has to appoint a statutory auditor to supervise the company’s management and accounts.
Limited Liability Company (유한회사)
Limited Liability Company (Yuhan Hosea) is the most preferred type of business in South Korea. It is a closely held company that allows for a maximum of 50 shareholders. These shareholders are not liable for any debts or obligations incurred by the company and their liability is limited to their share capital. The requirements to open a Limited Liability Company in South Korea are minimal. This includes at least one director and one shareholder of any nationality, no minimum paid-up capital for a South Korean LLC, and a legal registered office address. Under the
Foreign Investment Promotion Law (FIPL), a foreign-owned local corporation is recognised as a foreign investor and is required to invest at least 100 million won.
A branch office is an extension of the parent company that is planning to establish a presence in South Korea. As such, the parent company is fully accountable for all liabilities incurred by the South Korea branch office. In addition, a branch office setup does not impose any limit on the amount of investment or ownership. Your South Korea branch office will not have full entitlement to government support or tax incentives as compared to those business entities mentioned above.
A representative office is often meant for foreign investors who do not intend to carry out business in South Korea. As such, they are only allowed to conduct limited and non-commercial activities such as market research and marketing activities for their parent company. However, a representative office is still required to register and report to the jurisdictional tax office. Nonetheless, a representative office is a popular choice for foreign investors who are planning to promote their presence, as well as seeking to explore the potential market before setting up business in South Korea.
| Limited Company | Domestic Branch | Liaison Office | |
|---|---|---|---|
| Company Name | No restrictions | Must be the same as the foreign parent's name. | Must be the same as the foreign parent company name. |
| Business activity | No restrictions | Must be the same as a foreign parent company. | Profit-making activities are not permitted. |
| Share Capital | KRW100 million to qualify as an FDI company. Otherwise, US$10,000 is recommended. | No minimum requirement. | No minimum requirement. |
| Legal Liability | Limited Liability | Extend to the Parent Company | Extend to the Parent Company |
| Compliance Requirements | Must prepare accounting and tax records and meet all the quarterly and annual tax filing requirements. | Must prepare accounting and tax records and meet all the quarterly and annual tax filing requirements. | Not necessary |
| Taxation | All profits are made by a domestic corporation. | All profits including domestic source income made by a domestic corporation. | NA |
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