Foreigners can start a business in Korea (including the establishment of corporations) by acquiring new or existing stocks as prescribed by the Foreign Investment Promotion Act, or by establishing a domestic branch or liaison office in Korea as prescribed by the Foreign Exchange Transaction Act. A foreign-invested company is a domestic corporation established under the Commercial Act. It is classified as either an unlimited partnership company, a limited partnership company, a limited liability company, a limited company, or a stock company. The most common types of corporations established by foreign investors are limited companies and stock companies

A local corporation, in which a foreigner has invested not less than KRW 100 million for managerial participation and acquired not less than 10 percent of the company’s newly issued or existing stocks with voting rights, is recognized as a foreign-invested company under the Foreign Investment Promotion Act and thereby constitutes a domestic corporation established under the Korean Commercial Code. A branch office or a liaison office of a foreign corporation shall be divided depending on whether the office conducts business activities or not, and shall be governed by the Foreign Exchange Transactions Act. A branch office is a foreign corporation that carries out business activities of the head office. On the other hand, a liaison office is a foreign corporation that cannot carry out business activities but instead conduct market surveys, marketing activities, etc.

Comparison of Foreign-Invested Companies, Domestic Branches of Foreign Companies, and Liaison Offices

CategoryForeign-Invested CompanyDomestic BranchLiaison Office
Governing LawForeign Investment Promotion ActForeign Exchange Transaction ActForeign Exchange Transaction Act
Type of CorporationDomesticForeignForeign
Recognized as FDIYesNoNo
Company NameNo restrictionsIdentical to that of headquartersIdentical to that of headquarters
Scope of Business ActivitiesNo restrictions, within the permitted scopeSame activities as headquarters; within the permitted scopeProfit-making activities are not permitted; the purpose of establishing business contacts only
Minimum Investment AmountKRW 100 million1)N/AN/A
Legal LiabilityLimited to domestic corporationsExtend to headquartersExtend to headquarters
IndependenceLegally independentSubordinated to headquartersSubordinated to headquarters
Domestic LoansPossible depending on the credit rating of the domestic corporationAlmost impossibleImpossible
Establishment Procedures1. Notify FDI
2. Remit investment funds
3. Register corporation
4. Register business license
5. Register foreign-invested company
1. Notify domestic branch establishment
2. Register corporation
3. Register business license
1. Notify domestic branch establishment
2. Register identification number
Accounting and TaxationMust record and maintain bookkeeping according to Korean Accepted Accounting Principles; obligated to receive external audits on certain conditionsMust record and maintain bookkeeping according to Korean Accepted Accounting Principles; not obligated to receive external auditsNot obligated to record bookkeeping
Corporate Tax RateLiable to taxationLiable to taxationN/A
Taxable IncomeAll profit made by a domestic corporationAll profit including domestic source income made by a domestic corporation; branch tax applicable to some countriesN/A
Tax BenefitsTax benefits for foreign-invested companies and SMEs according to the Restriction of Special Taxation ActN/AN/A
  • A foreigner may establish a corporation by investing less than KRW 100 million. This case is not recognized as FDI and is subject to the notification of stock acquisition as prescribed by the Foreign Exchange Transaction Act (Attached Form No. 7-6 of the Regulation on the Foreign Exchange Transaction).

Stock Companies

Shareholders who have invested in a company hold the limited liability of their investment amount. Transfer of stocks is easy. Corporate bonds can be issued, and stocks can be listed.
Most domestic corporations choose this type.

Limited Companies

Employees hold the limited liability of their investment amount only, thus, do not hold the responsibility to creditors. Transfer of shares may be restricted under the articles of association.
As limited companies were previously exempted from external audits, many foreign-invested companies, that were reluctant to disclose company information, chose this type. Limited companies, however, are now subject to audits according to an amendment of the Enforcement Decree of the Act on External Audit of Stock Companies applicable from the fiscal year that commenced on November 1, 2018.

Comparison of Stock Companies and Limited Companies

Stock CompanyLimited Company
PurposeSuitable for large companies;
easy to invite shareholders
Suitable for SMEs;
composed of a minority with mutual trust
Minimum Investment AmountNo restrictions
(KRW 100 million in the case of FDI)
Same as for stock companies
Equity UnitKRW 100 or moreSame as for stock companies
Transfer of CapitalNo restrictionsApproval by the general meeting of employees required
Issuance of BondsYesNo
Board of DirectorsYesNo
Number of DirectorsAt least 3 directors
(at least 1 director when total capital is less than KRW 1 billion)
At least 1 director
Number of AuditorsRequired
(except when total capital is less than KRW 1 billion and a non-investment executive is listed)