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Business Entities

How to organize your business in Korea?

The following principal types of commercial entities are permitted.

Company

There are four classes of company, outlined as follows:

a. Limited company:

Chusik Hoesa- A company incorporated by three or more promoters, with each shareholder's liabilities
limited to the amount of contributed capital. This type of entity is the most commonly used in Korea.

Yuhan Heosa- A company incorporated by one or more members, with each member's liability limited to the amount of that member's contribution to the company.

b. Unlimited company:

Hapmyong Hoesa- A company incorporated jointly by more than two members who bear jointly and severally its obligations, if the assets of the company are insufficient to satisfy fully those obligation;

Hapja Heosa- A company composed of members with unlimited liability and members with limited liability.

Partnership

Partnership are not legally recognized in Korea.

Joint venture

A joint venture is generally established as domestically incorporated company(Chusik Hoesa), whose shareholders have limited liability for the obligation of the company.

Branch

A foreign corporation is allowed to establish a branch in Korea. The Commercial Code requires that the branch be registered with the civil court; in addition, the Foreign Exchange Transaction Act requires the branch to report its establishment in Korea and obtain approval from the Foreign Exchange Bank in advance.

Representative office

A foreign corporation is allowed to open a representative office (which is deemed to be a noncorporate entity) with limited functions.

Liaison office

A foreign corporation can establish a liaison office, which is not allowed to carry out income-generating business activities in Korea.

The types of entity most commonly used by foreign investors doing business in Korea are companies limited by shares (i.e., Chusik Hoesa) and branch offices. Foreign companies wishing only to have representation in or only to procure goods from Korea may favor a representative or liaison office, as these may operate on a nontaxable basis.

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