South Korea is a country that is renowned not only for its outstanding history and cultural heritage but also for its advanced technology and high level economic. Innovation, scientific progress and rapid industrialisation have made it one of the most dynamic and competitive countries in the world. By opening a company in South Korea, a foreigner has a unique opportunity to cooperate with talented professionals, available sources of financing and modern infrastructure.
Advantages of doing business in Korea
Below is a list of the benefits of doing business in South Korea for a quick reference:
- High economical level: The Republic of Korea is the 4th largest economy in Asia and the 13th largest in the world.
- High technological level: South Korea is known for its cutting-edge technology and innovative industry, which provides great potential for the development of technology start-ups.
- Favourable business climate: The government actively supports the business community through simplified registration procedures and tax incentives for start-ups.
- Support for foreign entrepreneurs: Foreigners receive special benefits and support for business projects, which helps to reduce start-up costs.
- Strong infrastructure: Developed transport and information infrastructure ensures easy communication and distribution of goods.
- Strategic location: Geographical location provides easy access to key markets in Asia and the Pacific.
- High level of education: A skilled labour force provides access to talented professionals.
- Innovative spirit: A culture that encourages innovation and the development of new technologies helps start-ups to revolutionise the way things are done.
- Overall quality of life: A high living standard and access to a variety of services make South Korea attractive to foreigners.
- Competitiveness: The efficiency and flexibility of the business environment put up to the competitiveness of companies.
- International influence: International cooperation and cultural exchange make the country a platform for global business.
- Free trade with other countries: To date, agreements have been signed with Australia and the Association of Southeast Asian Nations.
These advantages make South Korea an exciting destination for foreign entrepreneurs looking to grow their businesses and innovate internationally.
Various types of business structures in South Korea: How to choose the best option
In this country, there are a number of different types of business structures, each with its own characteristics and suitable for a particular type of activity. Choosing the type is an important step for a startup or entrepreneur, as it can affect taxation, liability and management.
Joint Stock Company (Chushik Hoesa)
The joint-stock company is a popular form of business organisation in South Korea, especially for large enterprises. It allows you to raise capital through the sale of shares and share ownership and management among shareholders. This structure type is usually suitable for businesses with a significant amount of investment and a need for joint ownership.
Limited liability company (Yuhan Hoesa)
That’s a popular choice for small and medium-sized businesses. It provides more management flexibility and reduces risks for the members. In this structure type, the members are liable for the company's obligations to the extent of their contribution.
General partnership (Hapmyeong Hoesa)
This type of structure is suitable for joint ventures where the partners are actively involved in the management and are liable for the company's obligations. The general partnership includes joint liability and joint decision-making.
This type of business structure involves at least one shareholder, but the members' obligations are limited to their contributions.
Limited liability company (Hapja Johap)
A limited liability company combines the features of a joint stock company and a limited liability company, allowing for more flexibility in the distribution of profits and ownership.
Branch and liaison office
These structures are used to separate the operation of a company in South Korea from its parent company abroad. A branch office can carry out full operations, while a liaison office is limited to a representative function.
The best business structure depends on the specific needs, goals and scale of your business. By choosing the right option, you will be able to ensure the efficient organisation and development of your company in the dynamic business environment of South Korea. Therefore, you should consider consulting business experts at this stage.
Company registration in South Korea involves several steps and procedures. Here is a step-by-step guide to help you through the process:
- Choosing the company type. Determine which type of business structure suits your needs and plans. The choice will affect the taxation, ownership and management of the company.
- Choosing a company name. Make sure that the company name you choose complies with South Korean law and does not infringe on the rights of other companies.
- Registration with the Business Administration Board. Obtain a certificate of registration from the Business Administration Office or the Business Registration Portal. You will need your tax identification number and other required documents.
- Registration with the Ministry of Finance and the Pension Fund. Receive confirmation and obtain a corporation identification number.
- Opening a bank account. Make sure that you have specified the bank of your choice when registering the company.
- Registration for taxation. Register with the tax office to obtain a tax identification number. Pay property tax and other taxes that apply to your business.
- Employee registration. Register your insurance programmes and provide information about your employees to the Pension Fund.
- Obtaining licences and permits. If your business requires additional documents, apply for and obtain them from the relevant authorities.
After obtaining all the necessary documents, licences and permits, you are ready to start your business in South Korea. Please keep in mind that procedures and requirements are subject to change, so it is recommended to refer to official sources and consult with legal advisors before starting the company registration process.
To open a company in South Korea, foreigners need to keep some mandatory documents. As the rules and requirements are subject to change, it is also recommended to consult official sources or legal advisors before starting the incorporation process. Here is a general list of papers:
- Application for company registration: This contains information about the company name, type of business and other details.
- Copies of passport and identification number: Proof of identity and citizenship is required.
- Business plan: A detailed description of your business, its goals, strategy and action plan.
- Documents confirming your legal status: If you are representing a legal entity, you may need to provide proof of company registration in South Korea and the status of the organisation.
- Investment details: If you are investing money or have plans to invest in a company, you will need information about the sources of funds.
- Bank statement: This is a confirmation of your financial solvency, as well as the availability of start-up capital.
- Lease or ownership agreement: A document confirming the location of your company.
It is worth noting that translations of documents into Korean may also be a requirement, and the governing bodies may require notarization or apostille. By collecting all the necessary documents and following the official requirements, you will be able to successfully register a company in South Korea.
Taxes for Korean companies
The taxation system in South Korea distinguishes between different types of taxes for companies. Here are some of the main ones:
- Corporate Income Tax: This is the main tax, where the rate is 10-25%, depending on the amount of profit. There are certain exemptions for new companies and those investing in certain regions or industries.
- Value Added Tax (VAT): The standard VAT rate in South Korea is 10%, but some goods and services may be exempt or taxed at a reduced rate.
- Property Tax: This percentage is levied on property owners and can vary from location to location.
- Real Estate Tax: This tax is levied on property owners and is usually based on the assessed value of the property.
- Special Excise Tax: It applies to certain goods such as alcohol, tobacco, cars, etc.
Regarding benefits for foreign companies:
- New companies: Certain categories may be exempted from or receive a reduced rate of corporate tax for some time.
- Foreign investors: Some regions or industries may provide incentives for investors who choose to locate their business in South Korea.
- Tax treaties: South Korea has tax treaties with other countries, which helps to avoid double taxation.
Financial reports are a key part of business management, providing entrepreneurs and investors with the necessary insight into a company's financial position and performance. These reports help to assess the profitability, solvency and growth of an organisation. The most important financial statements include the balance sheet, income statement, statement of changes in equity, solvency, cash flows and notes with additional information.
Establishing a company in South Korea by foreigners requires some mandatory steps and the submission of relevant documents. The country offers a promising entrepreneurial atmosphere and opportunities for foreign businesses due to its developed infrastructure, favourable investment conditions and wide markets.
It is important to prepare thoroughly and, above all, to define your goals. If you do each thing correctly, you will have no problems with company registration in South Korea and the process will go quickly and without errors. We recommend that you get professional advice to plan your start-up properly.
You will need a name registration certificate, copies of a business licence, a lease agreement, and documents confirming the nationality/citizenship of the company's shareholders.
There are various programmes and opportunities for foreigners to receive financial support or investment. Government and private funds can provide funding for start-ups and innovative projects. There are also special investment visas for foreign entrepreneurs who plan to develop businesses in South Korea.