Expats Doing Business in Korea (Part 1 of 3)
Typically in Korea, foreigners wishing to establish a Foreign Direct Investment (FDI) company with at least W100 million paid-in-capital will do so in the form of what is called a “JooShikHoeSa” (Company Limited). The establishing of a local corporation in Korea by a foreigner (as either an individual or corporation) is regulated by the Foreign Investment Promotion Act and the Commercial Act. For a local corporation to be recognized as a foreign-invested company under the Foreign Investment Promotion Act, a foreigner must invest at least W100 million in the local corporation and acquire at least 10 percent of the company’s stocks with voting rights.* (Check out Korea Tax Expert for professional advice.)
I found incorporating as a JooShikHoeSa is a bit old fashion, and instead will often recommend to incorporate as a “YooHanHoeSa” (Limited Company/Limited Liability Company). This type of company is very similar to the JooShikHoeSa but is slightly more flexible to set up and generally more comfortable than the JooShikHoeSa. The following lists specific reasons why I recommend the YooHanHoeSa over the JooShikHoeSa:
- A single-employee company is possible from establishment
- Having Sole Director and/or Sole Shareholder is ok
- There is no need to publicize your Financial Statement at all — it’s compulsory to publicize your financial statement when your sales revenue exceeds 10 million USD when incorporated as a JooShikHoesa.
- There is no need to get a Statutory Financial Audit. According to Korean Law, an external audit is mandatory when your sales revenue exceeds 10 million USD if incorporated as JooShikHoesa.
Strangely, to me at least, there is a push by some lawmakers to create legislation that would require external audits for any YooHanHoeSa that exceeds a certain size, however, this does not seem to be a likely development any time soon.
With the many perks that make YooHanHoeSas an attractive business structure, a lot of big multinational companies in Korea like HP, MS, Google, Apple, Coca Cola, Chanel and recently IKEA Korea have established as a YooHanHoeSa. There is also the option to to transition the company from a YooHanHoeSa to JooShikHoeSa should you wish to do so in the future, particularly in the case of an IPO or vice versa.
When an expat establishes an FDI Company (more than W100million paid-in-capital which is transferred from overseas), you can apply for D-8 VISA immediately.
If you need more details or have any questions in this articles, please contact me Jz@joezoh.com or visit my website.
Happy New Year for 2016!
*Ref.: InvestKorea )