South Korea offers several incentives for international investors to open a subsidiary in the country. However, you’ll still need to understand all the various regulations and laws to make sure you stay compliant.
How to establish a South Korea subsidiary
Companies expanding to South Korea should consider a variety of factors before choosing where to base their headquarters. Start by looking at essential business facets such as industry type and any existing trade relationships. Further, South Korea has legal requirements for customs and imports. Companies will need to get the required licenses and permits as well as export and import documentation.
All official documents in South Korea will be in Korean, but international business is often done in English. Even so, knowing the local language is imperative in South Korea, so it’s best to hire a translator or an employee who speaks the language if you are not proficient in Korean.
Finally, when deciding on a location for your headquarters, you should consider South Korea’s free economic zones. Companies can obtain additional incentives or tax benefits by setting up a South Korea subsidiary in one of those zones.
The steps to set up a South Korea subsidiary include:
- Reserving a preferred company name
- Making a company seal
- Choosing a bank for capital deposit
- Registering in the Registry of Companies
- Paying social security registration fees
- Opening a commercial bank account
- Establishing an office
- Filing rules of employment
- Applying for a business license in South Korea (if required)
- Finding and appointing a local company secretary
- Designating a registered address
- Appointing a director
South Korea subsidiary laws
You can choose from 3 different business structure options when setting up your South Korea subsidiary — a limited liability company, an international branch, or a liaison office.
Incorporating as a private limited liability company is one of the most common options and must follow specific subsidiary laws. Most companies have no statutory minimum capital requirement. The exception is foreign-invested enterprise status which typically requires KRW 100M and 10% ownership per foreign investor.
A D-9-4 trade-management visa requires a minimum KRW 300M investment for an individually owned private business. Incorporated Korean companies typically use D-8-1 status instead. Or, if you want to apply for an entrepreneur visa, the usual category is D-8-4. The required application form depends on your route and location.
Benefits of establishing a South Korea subsidiary
Establishing a South Korea subsidiary allows you to start working in the country. A limited liability company also protects both the parent company and the subsidiary. The parent company does not have to worry about any losses incurred by the subsidiary, and the subsidiary can operate under an independent structure that fits South Korea’s culture. You can expect to be fully incorporated within six to 10 weeks and fully operational within 12 weeks.
However, there are subsidiary alternatives such as G-P. We can help you begin operations in a matter of minutes instead of the months, bypassing entity setup.
Other important considerations
Companies may need additional capital beyond the initial investment, which means you must also budget a large amount of resources to cover unexpected expenses. Finally, you will need a thorough understanding of South Korea’s subsidiary laws to remain compliant, or partner with a global growth expert to ensure smooth operations in South Korea.
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