Introduction
In order to get my startup visa in Korea, I had to establish a company. Establishing a company in any country can be associated with a lot of headaches and unfamiliar terms. Luckily for me, I didn't have to go through this process alone. I had a friend who had been through this process and explained to me exactly what I needed to do to start my company! Today, I want to be that friend for you and give you an overview of the whole process.
Business Structures in Korea
Today, I will discuss the two most common business structures in Korea.
주식회사 (Jusik Hoesa) and 개인사업 (Gaein Sa-eob) are two different types of business entities in Korea.
A Jusik Hoesa is a “Corporation”, while a Gaein Sa-eob is an “Individual Business”.
In the subsequent sections, the terms "Corporation" will be used instead of "주식회사 (Jusik Hoesa)" and "Individual Business" will be used instead of "개인사업 (Gaein Sa-eob)" for ease of understanding.
Individual Business
Establishing an Individual Business in Korea involves a different set of steps compared to incorporating a corporation. Here, we provide a detailed breakdown of the process to help you navigate it more easily.
The first step in establishing an Individual Business is to determine the type of business you want to engage in. Unlike a corporation, an Individual Business is owned and operated by a single individual.
Once you've decided on the type of business, the next step is to prepare the required documents for registration. Here's a checklist of what you need:
- A bank statement in your name, with a balance sufficient for starting your business
- A completed Business Registration Form
- A residence card certificate
- A stamp and stamp certificate
- A copy of your passport and residence card
With all documents ready, you can then proceed to register your business at the local tax office. The registration process involves submitting your application and paying a registration tax. Once your application has been approved, you will receive a business registration certificate.
It's important to note that as the owner of an Individual Business, you are personally liable for all the business's debts. Therefore, it's crucial to have a clear understanding of your potential liabilities and have a plan in place to manage them effectively.
An important factor to consider when choosing between a Corporation and an Individual Business is the complexity of the accounting. In general, the accounting structure for an Individual Business tends to be simpler than that of a Corporation.
As a sole proprietor, you only need to keep track of your income and expenses. The accounting process is relatively straightforward, and you may be able to handle it yourself without the need for an accountant.
Thus, if you prefer a simpler accounting system and less administrative complexity, establishing an Individual Business might be the better choice for you.
Taxes for Individual Business
Taxable Income (Won) | Tax Rate (%) |
Up to 12 million | 6 |
12 million to 46 million | 15 |
46 million to 88 million | 24 |
88 million to 150 million | 35 |
Over 150 million | 42 |
If you're just getting started and don't anticipate earning more than 46 million won in taxable income per year, opening an Individual Business could be a beneficial strategy. You can always transition to a corporation later as your business expands and your income increases.
Corporation
The most common type for foreign entrepreneurs is a Corporation.
Once you've decided on the structure, the next step is to prepare the required documents. Here's a checklist of what you need:
- A bank statement in your name, with a balance greater than 1 million Won
- A completed Company Registration Form
- A residence card certificate
- A stamp and stamp certificate
- A copy of your passport and residence card
- Appoint a director (Korean), you will need their stamp, stamp certificate, and resident registration certificate
One crucial requirement is that you must assign a Korean National as a Board Director for your company. This person will essentially vouch for your company. This rule is in place to ensure that there is someone who can be held accountable to Korean laws and regulations.
With all your documents in order, you can then proceed to register your company.
Incorporation is usually done by a lawyer and costs around 405,000 Won Company Registration Fee, plus additional lawyer fees, which can vary. The whole process, when done right, will take around one week.
In addition to the steps mentioned, it's also crucial to hire an accountant. They will ensure all your financial records are correctly maintained, and all necessary filings are made, which is essential for your business's legal and financial health.
Taxes for Corporation
Taxable Income (Won) | Tax Rate (%) |
Up to 200 million | 10 |
Over 200 million | 20 |
Over 20 billion | 22 |
Over 300 billion | 25 |
Conclusion
The best option for business incorporation in Korea largely depends on your specific situation and goals.
A Corporation might be a better choice if you plan to have multiple shareholders or investors, as the liability of shareholders is limited to their investment in the corporation. This type of business entity might also be more advantageous if you anticipate a high taxable income, as corporations can benefit from various deductions, exemptions, and credits under Korean tax law.
On the other hand, an Individual Business could be a more suitable option if you plan to solely own and operate the business. Even though the owner has unlimited liability for the business's debts, this type of business entity might be the right choice if you anticipate a lower taxable income and wish to take advantage of personal tax deductions and credits.
Based on my personal experience, I chose to establish a corporation when I relocated my freelance Cloud Engineering work from Germany to Korea. I anticipated that my earnings would exceed 46 million Won, and therefore, by establishing a corporation, I could ease my taxation burden. Despite being a single-person corporation at the moment, this structure will facilitate receiving investments and managing shareholders in the later stages of my business growth.
Whenever you're ready, there are ways I can help you:
Want to Get Weekly Guides Like This in Korea?
Join over 750 weekly Readers in my newsletter to stay updated on the latest information about Life in Korea 🇰🇷
Need Help with Your Questions About Living in Korea?
Are you planning to move to Korea or already living here but still have some unanswered questions? Don't worry! I'm here to help you every step of the way. Whether you need advice on cultural nuances, navigating the immigration, or just want to know the best places to eat and visit, I've got you covered.
How Can I Help You?
- Personalized Advice: Get tailored advice specific to your situation, whether you're a student, a professional, or a tourist.
- Cultural Insights: Learn about Korean customs, etiquette, and how to make the most of your time here.
- Practical Tips: From finding accommodation to understanding public transport, I'll provide you with practical tips to make your life easier.
- Networking Opportunities: Connect with other expats and locals to build your network in Korea.
- Exclusive Resources: Gain access to exclusive guides and resources that can help you navigate life in Korea.
Book a Meeting with Kim
If you still have open questions, why not book a one-on-one meeting with me? I can provide you with personalized support and answer all your queries in detail.
- Schedule a Meeting: Visit my Booking Page to select a convenient time.
- Prepare Your Questions: Make a list of your questions so we can cover everything you need during our meeting.
- Get Expert Advice: During the meeting, I'll provide you with expert advice and actionable steps to help you succeed in Korea.
Don't miss out on this opportunity to get all your questions answered and make your experience in Korea as smooth as possible. Book your meeting today and let's get started!
About the Author
Kim Ninja (Huy-Kim Nguyen)
Cloud Engineer / WebApp Developer 💻
Content Creator Bridging Korea 🇰🇷 to the World 🌎
Startup Founder based in Seoul, South Korea 🚀
The blog published by Kim Ninja (Huy-Kim Nguyen) is available for informational purposes only and is not considered legal advice on any subject matter.
