Notes when setting up a company in Korea

South Korea, one of Asia’s economic tigers, is becoming an attractive destination for global businesses looking to expand their markets. So what makes the land of kimchi stand out? South Korea is one of the countries with the strongest export-oriented economy in the world. With an extensive network of free trade agreements, businesses in Korea can easily access major markets such as the US, EU, China and ASEAN. South Korea owns a huge consumer market with high purchasing power and diverse demand. Korean consumers are well-known trendsetters, always looking for new, high-quality products and services. This creates a great opportunity for businesses that want to showcase their products and services in this market. However, there are some notes when establishing a company here, Viet An Law would like to provide some information through the article below.

Notes on preparing a business plan when setting up a company in Korea

A detailed business plan should ensure the following contents:

• Nature of your business: Detailed description of your business: This is an overview of your business that includes the following information: Type of business: (Example: Limited liability company, Joint stock company, Individual business household,…), Business scope: (Example: Fashion Retail, Marketing Consulting Services, Organic Food Production,…), Products/Services Offered: A  detailed description of the product or service that your business offers, including features, benefits and differences from competitors, Core Values and Mission:  What value does your business bring to customers and society? What is the mission of the business?, Organizational structure: Organizational chart, main departments and functions.
• Market Analysis:
  • Target market research: You need to have a good understanding of the market that your business is or will be entering. This includes: Market size, Market trends, Market segments, etc.
  • Target customers
• Financial Forecast:
  • Detailed financial plan: This is an important part of assessing the financial feasibility of the project.
  • Costs: Projected operating costs, fixed costs (e.g., rent, employee salaries), variable costs (e.g., raw materials, marketing costs).
  • Profit: Expected gross profit, net profit, break-even point.

Notes on charter capital when setting up a company in Korea

When setting up a company in Korea, the charter capital regulations have a number of important points to note, especially for foreign investors.

Under current law, there is no requirement for a mandatory minimum charter capital. However, the absence of a minimum requirement does not mean that you can completely ignore the issue of capital.

Determining an appropriate level of charter capital is an important and necessary step. This level of capital is not only the financial foundation for the initial business but also an important indicator of the company’s financial capacity and seriousness towards potential partners, customers and investors. A reasonable level of capital will help ensure stability in business operations, especially in the early stages when the company may not be generating stable revenue.

For foreign investors

• FIPL Minimum Investment: Under South Korea’s Foreign Investment Promotion Act (FIPL), a local company owned by a foreigner will be considered a foreign investor and, therefore, need to comply with the minimum investment regulations. Specifically, this law requires a minimum investment of 100 million won. This means, if you are a foreign investor and want to set up a company in South Korea, you need to make sure that your initial investment capital meets or exceeds the 100 million won level. However, it should be noted that this is the minimum requirement under the FIPL, and the actual charter capital of the company may need to be higher depending on the line of business, the size of the operation, and other factors.
• Suitable charter capital:
  • While there is no absolute minimum requirement, it is necessary to allocate sufficient capital (minimum $5,000) to suit your industry. This helps ensure the financial stability of the company in the early stages and demonstrates your commitment to the business.
  • The time limit for members and shareholders who are foreign investors to contribute the full amount of charter capital is within 90 days after the company is granted an enterprise registration certificate.

Notes on the address of the head office when setting up a company in Korea

When registering a company in Korea, the registered address is important. The registered address needs to meet the following criteria:

• Authenticity:
  • The registered address must be a physical, verifiable address.
  • This is the address used for all official communications, including receiving letters from government agencies.
  • You can choose a physical office address, a home address (if permitted by law), or a virtual office service address.
• Using Virtual Office Services:
  • Many companies, especially start-ups or foreign companies, prioritize using virtual office services.
  • Virtual offices provide registered addresses and other support services, such as receiving correspondence and answering phones, which help save operating costs.
  • However, it is important to choose a reputable virtual office service provider, ensuring compliance with current legal regulations.