Company Formation in South Korea

 

1. Foreign Capital-Invested Company

• Subsidiary of the Overseas Company (Separate legal entity separate from the foreign company)
• Opportunity to obtain a D-8 Investment Visa.
• Easier remittance of funds to parent.

Foreign Capital-Invested Company may be formed with the following types of businesses under the Korean Commercial Code :

 

Joint Stock Company; Co. Ltd.; Corp.; Ltd.
Joint Stock Company is the only corporate entity that is allowed, at the present, to publicly issue shares.  The vast majority of incorporators in South Korea choose the Joint Stock corporate form.  It is also the most common corporate form for foreign companies establishing subsidiaries in South Korea.

 

Limited Liability Company; LLC

Korean LLC is very similar to a U.S. LLC.  It is intended to provide the advantages of LLC and Joint Stock Company. The liability is limited, shares are freely transferable between members, bonds may be issued, no capitalization requirements are imposed, no director or auditor requirements are imposed and the entity has easy exit requirements.

 

Limited Partnership; LLP
With a Limited Partnership one or more partners must maintain unlimited liability and one or more partners may maintain limited liability.  The entity is responsible to pay Korean corporate taxes and thus may not be treated as a pass-through entity.

 

Partnership
In a Partnership Company, two or more partners form the partnership.  The partners must maintain unlimited liability. The entity is responsible for corporate taxes and thus is not a pass-through entity.

 

Limited Liability Partnership; LLP
Limited Liability Partnership is similar to Hapja Hoesa.  With a Hapja Johap one or more partners may have unlimited liability and one or more partners may maintain limited liability.  The critical difference between Hapja Hoesa and Hapja Johab is that Hapja Johap, like Johap (partnership) is not a separate legal entity. The tax treatment issues are not yet resolved; however, we doubt that it will be subject to double taxation, thus, we assume that it will be treated as a pass-through entity.  The form, after the tax treatment issue is resolved, may be, in most cases, a more advisable solution than the Yunhan Hoesa form for those that may benefit from the pass-through nature of the entity.

 

 

2. Domestic branch of a foreign company

 

2.1. Branch Office

• Considered the same legal entity as the Headquarters.
• Overseas manager is appointed as a manager of the branch.
• The conduct of the Branch can be imputed on the Headquarters.
• May engage in profit making in Korea.

 

2.2. Liaison Office

• May not engage in profit making in Korea.
• Intended for a company to engage in R&D, advertisement, research and explore the entry into the Korean market.