Types of Business Entities Established by Foreign Nationals
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There are four ways for foreign nationals to engage in business activities in Korea: (1) establishing a local corporation; (2) opening a private business; (3) opening a branch; and (4) opening a liaison office. The first two types are mainly governed by the Foreign Investment Promotion Act, and the other two are regulated by the Foreign Exchange Transactions Act. Among the four types of business entities, a liaison office shall not engage in business activities that generate profit in Korea.
| Type of Business |
Governing Law |
Note |
Investment Capital |
| Local Corporation |
Foreign investment Promotion Act |
Foreign Invested
Company |
Min.:KRW100million |
| Private Business |
Foreign Exchange
Transactions Act |
Domestic Branch of a
Foreign Company |
| Branch |
Differences between Foreign invested company (including local corporation and private business) and branch
| Type of Business |
Foreign Invested Company |
Domestic Branch of a Foreign Company
|
| Governing law |
Foreign Investment Promotion Act |
Foreign Exchange Transactions Act |
| Corporation type |
Domestic corporation |
Foreign corporation |
| Identity |
Foreign investors and foreign invested companies are separate entities (independent accounting & settlement) |
The head office and the branches are of a single entity (consolidated accounting & settlement) |
| Min.(Max.) Investment Amount |
Min.: KRW 100million
Max.: No limitation |
No limitation |
|
Delegated agency to process
notifications and grant permits
|
Invest KOREA, KOTRA’s overseas KBCs (Korea Business Center), head office and branches of foreign exchange bank in Korea (NOTIFICATION ONLY) |
Branches of foreign exchange banks in Korea (Notification), Ministry of Strategy and Finance (Business Permit for financial business, etc.) |
Differences between local corporation and private business
| Type of Business |
Local Corporation |
Private Business
|
| Appropriate scale |
1. Convenient financing
2. Complicated incorporation procedures
3. The decision-making process takes time.
4. Liability is limited to the invested capital.
5. Ownership and management can be separated. |
1. The owner of the business takes all profits made.
2. Simple business establishment procedure
3. Fast decision-making process
4. The owner holds unlimited liability.
5. Limited financing capacities |
| Registration |
Registration required |
Registration not required |
| Minimum number of promoters |
1 or more |
Owner of the business |
| Investment amount |
No less than KRW 100 million |
* Foreign corporations cannot be registered as private businesses in Korea.
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