Setting Up a Startup in South Korea

South Korea has become an ideal destination for aspiring entrepreneurs, thanks to its robust economy, infrastructural superiority, and favorable government policies. 

Whether you are a domestic entrepreneur or a foreign investor, understanding the startup registration in the nation is the crucial first step. That’s what we have covered in this very handbook of incorporating a startup in South Korea. Let’s explore it. 

Why Choose South Korea to Establish a Startup?

• Strong Economy & Technologically Advanced Market: 

South Korea has a stable and highly developed market. The nation leads the world in terms of technological innovation, with a highly connected population that is fast to adopt new technology. This provides a perfect ground for testing tech startups.

• Government Support & Incentives: 

The South Korean government is extremely committed to fostering a pro-business environment. The Foreign Investment Promotion Act (FIPA) provides an array of tax benefits, administrative support, and ease of procedures to foreign investors. Special programs like the Overall Assistance for Startup Immigration System (OASIS) adopt a points-based system to obtaining a startup visa (D-8-4), making it simple to obtain.

• Highly Trained and Educated Talent: 

The highly trained and educated talent pool in South Korea is particularly strong in Science, Technology, Engineering, and Mathematics.

• Strategic Location: 

Its geographical positioning in the Asian center is a gateway to key markets like China, Japan, and Southeast Asia with huge prospective expansion into global markets.

Choosing Your Business Structure

First of all, you need to choose the right business structure for your startup in South Korea. Here are some of them. 

For South Korean budding companies, the decision of which structure to use is determined by the target growth and the intended method of financing. 

For the ambitious startups and foreign individuals, the Joint Stock Company (jusik hoesa) provides limited liability and is the most comprehensive form of business structure. 

On the other hand, the Yuhan Hoesa (Limited Company) business structure is simple, private, and more lenient with limited liability compared to the regulations and compliance.

A Gaein Saeobjja (Sole Proprietorship) is the simplest for a local or resident to set up, however it involves unlimited personal liability which makes it unfit for foreign entrepreneurs seeking investor visa, as well as for most other individuals.

South Korea Startup Registration Procedure: Step by Step Guide

1. Foreign Direct Investment (FDI) Notification

The first and primary step for any foreign entrepreneur is to his foreign direct investment and notify the relevant authorities. There is the Foreign Investment Promotion Act and is one of the first steps to starting any business in South Korea. The designated foreign exchange bank , or organizations such as Invest KOREA, are usually the places to where such notifications are sent.

2. Remittance of Capital and Deposit

Once the FDI notification is done, you will be required to remit the amount of investment into a provisional corporate Korean Bank account. For a foreign-invested company to be eligible to enjoy benefits from FIPA, the initial minimum amount is usually required to be KRW 100 million (approximately $70,000 in the USD). This is not a general requirement for all incorporations—smaller-scale entities can still be established in Korea without FDI status. A payment certificate of deposit in shares is required in the following process.

3. The Registration of the Company at the Court

This is the registration stage. You will be asked to provide and submit a series of documents to the local registry. The following are some examples of these:

Articles of Incorporation: This document highlights the purpose of the business, its form, volume of shares, internal norms, and rules. It has to be certified by a Public Notary. 

Application for Registration: This is a formal business registration form. 

Proof of Capital Deposit: This is the certificate, received from the bank, which recognizes the payment of the capital. 

Shareholders and Directors: This is the photocopy of the passport, or any other form of identification, of shareholders, and directors, along with any foreign documents which may be subject to notary, and apostille. 

Registered Office Lease Agreement: This is the evidence of the registered office address for the business in Korea. 

After the court has accepted the application, you are entitled to receive a document called a Corporate Registration which is necessary for other actions to be taken.

4. Business Registration with the National Tax Service (NTS)

Having the company already registered at the court, you now have to register the company at the National Tax Service (NTS) to obtain a Business Registration Certificate and Tax Identification Number. This will allow the company to operate legally and be up to date with their taxation. You will be obliged to register for Value Added Tax (VAT).

5. Procuring a Corporate Seal and Seal Certificate

The corporate seal (or ingam) is an imprint of a company’s signature in South Korea. To secure a Corporate Seal Certificate, you are first required to physically create a seal and register the seal with a court. This certificate is crucial in verifying the legalities of contracts, legal documents, and agreements in finance. 

Opening a Corporate Bank Account 

Once registered with the NTS, you are able to open a permanent corporate bank account. This is a fundamental requirement needed for all financial activities including the depositing of the share capital, managing the company’s payroll, and remitting taxes. For this specific operation, a Business Registration Certificate, Corporate Registration certificate, and Corporate Seal Certificate are required. 

D-8 visa special considerations for foreign entrepreneurs 

The D-8 (Corporate Investor visa) is the most relevant for foreign entrepreneurs who want to live in South Korea. To get the visa, there is a points system in place and applicants must qualify for this system based of their IP, educational background, government support for startups, and the investment they secure.

OASIS (Overall Assistance for Startup Immigration System) is beneficial for aspiring D-8-4 visa holders, as it helps them learn about startups and assists them in fulfilling visa requirements. 

The D-8 visa(Corporate Investor visa) category is most relevant for foreign entrepreneurs establishing a business in Korea.

• The D-8-1 Corporate Investor Visa requires a minimum investment of KRW 100 million in a Korean corporation.

• The D-8-4 Startup Visa, on the other hand, operates on a points-based system (under the OASIS program) and is designed for innovative startups in fields such as technology and R&D

Conclusion 

Setting up a startup in South Korea can be a lucrative venture. However, it requires you to understand the South Korea startup registration process to fulfill all requirements. If you are looking for any type of assistance with business registration, reach out us at J&J Korea. We will guide you over all steps involved in the startup registration process.