1. Introduction

Hello, I am Kyusung Lee, a partner attorney at Weon Law.

Recently, I have received many inquiries regarding the methods and procedures for foreigners to enter the Korean market.

It is understandable that starting a business in a foreign country is never simple, especially with legal complexities involved. Many aspects require professional assistance. Today, I will provide a guide on this topic.

Kyusung Lee – Legal Consultation

Email: kslee@weonlaw.co.kr
Phone: +82-2-6264-7604
All consultations can be conducted in English.

2. Methods for Foreigners to Enter the Korean Market

Foreigners can establish a business in Korea through:

A Foreign-Invested Enterprise is a Korean domestic corporation established under the Commercial Act, which can take the form of a general partnership, limited partnership, limited liability company (LLC), limited company, or joint-stock company. Among these, LLCs and joint-stock companies are the most common forms for foreign investors.

You might wonder, Why are these classifications necessary when foreigners are doing business in Korea?

Simply put, if a foreigner invests at least KRW 100 million and acquires at least 10% of voting shares (new or existing), it is classified as a Foreign-Invested Enterprise under the Foreign Investment Promotion Act. Such enterprises are considered domestic corporations under the Commercial Act.

On the other hand, branches and liaison offices, regulated by the Foreign Exchange Transactions Act, are distinguished based on whether they can conduct business activities:

3. Foreign-Invested Enterprises (FIEs)

Establishment Process

FIEs are the only entities that can be recognized as foreign direct investment (FDI) under the Foreign Investment Promotion Act. They have no restrictions on naming or business scope, maintain legal independence, and the legal liabilities are solely attributed to the domestic corporation.

Additionally, FIEs can obtain financing based on their creditworthiness. They must comply with Korean GAAP for bookkeeping, and if they meet certain criteria, they are subject to external audits.

FIEs are liable for corporate tax on all domestic and international income. However, under the Tax Reduction and Exemption Control Act, FIEs and SMEs may qualify for tax incentives, making it crucial to seek professional advice to maximize benefits.

4. Branches

Establishment Process

Branches are foreign corporations under the Foreign Exchange Transactions Act, meaning they are not recognized as foreign direct investment. They must operate under the same name as their parent company and can only conduct business activities within their authorized scope.

One advantage is that, unlike FIEs, there is no minimum investment requirement. While branches must maintain bookkeeping under Korean GAAP, they are not subject to external audit obligations.

For taxation, only domestic-source income of the branch is subject to corporate tax. Some countries also impose branch taxes in addition to corporate tax.

5. Liaison Offices

Establishment Process

Liaison offices, also regulated by the Foreign Exchange Transactions Act, are more restricted than branches. They cannot generate revenue and are limited to liaison activities such as market research and business communication.

A key difference is that liaison offices have no bookkeeping or tax obligations, as they are not subject to corporate tax.

Compared to FIEs and branches, liaison offices offer more operational flexibility, though their scope is significantly limited.

6. Conclusion

Today, we explored three ways foreigners can enter the Korean market: Foreign-Invested Enterprises, Branches, and Liaison Offices, and compared their key characteristics.

While FIEs, as a form of domestic corporation, are subject to strict regulations under the Foreign Investment Promotion Act, branches and liaison offices under the Foreign Exchange Transactions Act also involve complex procedures.

However, the success of your business venture in Korea depends greatly on the quality of professional assistance you receive.

7. About Attorney Kyusung Lee

Attorney Kyusung Lee has extensive international experience, having graduated with honors from The Hotchkiss School in the U.S. and Brown University (Ivy League) with a degree in Economics.

He is a Certified Startup Law Specialist recognized by the Korean Bar Association and holds a Certified Anti-Money Laundering Specialist (CAMS) qualification. His areas of expertise include:

- Foreign-Invested Enterprises
- English Contract Drafting & Review
- Corporate Law Advisory

All consultations can be conducted in English without an interpreter, and with years of legal expertise and accumulated experience, I can provide tailored solutions to help you establish and operate a successful business in Korea.

Thank you.