Types of partnerships
There are two types of partnerships in Korea. One is a general partnership (Hapmyung Hoesa in Korean). The other is a limited partnership (Hapja Hoesa in Korean). That said, the formation of a partnership is not common.
Share capital
There is no minimum share capital to establish a company, but registration of a foreigner-invested enterprise under FIPA requires at least KRW 100 million capital contribution.
Types of companies
The Commercial Act recognises the following three types of companies in Korea.
· Joint-stock company (Jusik Hoesa in Korean)
· Limited company (Yuhan Hoesa in Korean)
· Limited liability company (Yuhan Chaekim Hoesa in Korean)
Most foreign investors tend to form a Jusik Hoesa or Yuhan Hoesa. In this regard, only Jusik Hoesa can issue shares or bonds to the public.
A foreign investor can also establish a branch or liaison office rather than a company. The difference between the branch and the liaison office is whether the entity is capable of performing income-producing activities. In this regard, a liaison office is not permitted to perform any income-producing activities, and it cannot issue tax invoices to customers in Korea. On that basis, the functions of the liaison office must be restricted to only preliminary or auxiliary activities.
As mentioned earlier, a branch is entitled to undertake income-producing activities and can issue a tax invoice to a customer. As such, like a company, a branch is required to file a corporate income tax return and a VAT return. Also, although a branch cannot declare dividends, it can remit its annual profit to the head office in accordance with the relevant laws and regulations.
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