Starting a business in South Korea: your bridge across Asia-Pacific

A limited liability company (LLC), or Yuhan Hoesa, is a popular form of business entity that is designed to provide its members with limited liability while maintaining operational flexibility. The liability of each member (shareholder) is limited to the amount of share capital they invest in the company. LLCs are allowed 100% foreign ownership and can be established with few formalities. This structure is commonly selected by small and medium-sized enterprises, with profits subject to corporate income tax at the entity level.

The stock company (SC), or Chusik Hoesa, is another common corporate entity for foreign investors establishing subsidiaries in South Korea. Allowing 100% foreign ownership, it is typically chosen by companies seeking to raise capital and expand operations and is favoured by large enterprises and multinational corporations. An SC's share capital is divided into stocks owned by its shareholders who can be individuals or companies – with their liability limited to their share investments. As with an LLC, profits are subject to corporate income tax at the entity level.

A branch office is an extension of a foreign parent company and is authorised to carry out revenue-generating activities in South Korea. It isn't a separate legal entity and operates as part of the "parent" company, which remains fully liable for its obligations and liabilities. Importantly, under the Foreign Exchange Transactions Act, the branch office will be recognised as a permanent establishment and will be taxed on Korean-sourced income as if it were a domestic company.

A liaison office (or representative office) enables a foreign company to establish a non-commercial presence in South Korea. Its activities are restricted to non-revenue-generating business such as building relationships, promotional activities and market research on behalf of the parent company. This model is typically used by firms evaluating market entry or supporting regional operations without incurring the obligations of a full legal entity. Liaison offices aren't subject to corporate tax as they do not earn income.

Setting up a business in South Korea involves a range of costs, which vary depending on several key factors. These include the chosen entity, your specific business activity and the location you want to set up in.

Our team can provide cost estimates tailored to your specific needs, helping you understand the overall scope of the setup.

• Registration and licensing fees: Costs associated with company incorporation in South Korea with the relevant authorities, such as the District Court.

• Other relevant taxes and fees: These typically include Local Education Tax, certain fees in metropolitan areas and nominal court filing costs.

• Capitalisation costs: To qualify as a foreign-invested company, which is required for certain entity types and to obtain specific visas, you typically must invest at least KRW 100 million (around US$75,000).

• Visa costs: Expenses related to applying for employment visas for expatriate employees, such as the F-2 Resident Visa or D-8 Corporate Investment Visa.

• Office space rental: Costs for leasing office space, which can vary significantly depending on the location, size and quality of the premises, especially in metropolitan areas such as Seoul.

• Professional fees: Costs for engaging professional services, such as legal counsel, business setup consultants and accounting services.

• Other potential costs: These may include translation costs, bank charges and other miscellaneous expenses.

At Hawksford, our approach to entity formation in South Korea is structured and aligned with your specific needs and objectives. Throughout the process, our team can work with you to manage requirements and help to reduce delays.

We typically begin with a comprehensive consultation to gain a thorough understanding of your business objectives, operational requirements and long-term goals. This will allow us to provide guidance on the legal structure, location and incentives best suited for your business.

Based on the initial consultation, our team can prepare a strategic plan that sets out an efficient and effective approach to establishing your business. This includes guidance on company formation and registration in South Korea, corporate structuring and any legal considerations relevant to your industry and activities.

We can then assist with the preparation and processing of the required documentation, helping to ensure it is accurate and compliant with South Korean regulations. This includes drafting legal documents, completing application forms and securing necessary approvals from the relevant authorities.

We can also oversee your company name registration, arrange the opening of a capital account where needed for the injection of paid-up capital and manage sector-specific licensing and investment notifications. Throughout the process, we can liaise with the local authorities to secure approvals and complete the necessary formalities.

We can assist with employment visa applications, managing the documentation and liaising with the authorities on your behalf.

For corporate bank account opening in South Korea, we can provide guidance on the required paperwork to support a smooth and efficient process. With our experience supporting a wide range of clients, we are familiar with the documentation and requirements of leading banks.

Beyond the initial setup phase, our team is committed to providing ongoing support to ensure a seamless and successful business establishment in South Korea. This includes helping with office setup logistics and other essential services necessary for your business operations.

We can also support you with ongoing accounting and tax compliance, including corporate tax, value added tax (VAT) registration and filing, financial statement preparation and bookkeeping.

The overall timeline for setting up a business in South Korea can vary depending on a range of factors. Factors include the chosen legal structure; complexity of your intended business activity and the specific licensing requirements associated with it; the requirements of your chosen location; and the level of efficiency of the relevant authorities.

We're dedicated to expediting the setup process and providing you with realistic and well-defined timelines for each stage, ensuring that you can plan effectively and commence your business operations as planned.

• Chosen legal structure: The choice of entity type can influence the timeline. However, differences are relatively minor, with incorporation typically completed within a matter of weeks.

• Complexity of business activity: Business activities that require special approvals from specific government entities may take longer to process.

• Special economic zone requirements: Each economic zone has its own specific requirements, which, while typically not onerous, can affect the overall timeline.

• Efficiency of document processing: The efficiency with which documents are submitted and processed by the relevant authorities can also play a role.

With a number of factors to coordinate, setting up a business in a new jurisdiction can be an onerous process. With our understanding of the incorporation requirements in South Korea, we have the capacity and capability to guide you through your entity set-up. We can also assist with documentation to help ensure it is accurate and complete, minimising delays.

• Initial planning and document preparation: Typically 1 to 2 weeks.

• Company registration: Generally between 2 and 4 weeks from receipt of all documentation in Seoul.

• Visa processing (if applicable): Usually takes 1 to 3 months.

• Bank account opening: Typically up to 4 weeks after incorporation of the entity.

Our team can keep you informed throughout, in line with these estimated timeframes, so you can prepare for your expansion with greater certainty.