COMPANY FORMATION IN KOREA REPUBLIC

The Republic of Korea is located between China and Japan. Its geopolitical position has enabled Korea to act as a bridge for cultural exchanges and trade between its neighbours. Korea has rapidly emerged as one of the world’s leading Information & Communication Technology powerhouses. Korea’s excellent telecommunications infrastructure makes Internet use and maintenance easily affordable. Korea is the world’s 8th largest investor in research and development.

Korea is the world’s 8th largest investor in research and development.

Intensive growth transformed Korea into the 12th largest economy and trading partner in the world in 2006.

Korea’s industrial structure was drastically reshaped. Major industries were diversified to include automobiles, petrochemicals, electronics, shipbuilding, textiles and steel products.

The GDP growth driven by brisk export and sizeable investment in plant and facilities, Korea emerged as the world’s 11th largest economy in terms of GDP

Korea has entered into DTAAs with various countries

Foreign residents can choose to pay a flat tax at 16.5% instead of the progressive tax as described above

VAT is levied on the supply of most goods and services in Korea and on the importation of goods at a rate of 10%

Joint Stock Company: Joint Stock Company is the only corporate entity that is allowed, at present, to publicly issue shares. The vast majority of incorporators in Korea chose the Joint Stock Company corporate form. It is also the most common corporate form for foreign companies establishing subsidiaries in Korea and this will not change with the April 2012 revisions.

Private Company: Private Company is a closely held company that is prohibited from having more than 50 shareholders. In recent years, a few foreign companies (including some international hedge funds) have chosen Private Company. A few companies, recently, have chosen this form because of possible U.S. and E.U. tax benefits (pass-through benefits). Additionally, there are few requirements in regard to directors, publication of balance sheet and accounting. However, the KCC prohibits securitizing shares and issuing corporate bonds.

Limited Partnership: With a Limited Partnership one or more partners must maintain unlimited liability and one or more partners may maintain limited liability. The entity is responsible to pay Korean corporate taxes and thus may not be treated as a pass-through entity.

Partnership: In a Partnership two or more partners form the partnership. The partners must maintain unlimited liability. The entity is responsible for corporate taxes and thus is not a pass-through entity.

Limited Liability Partnership: Limited Liability Partnership is similar to Limited Partnership. With a Limited Liability Partnership one or more partners may have unlimited liability and one or more partners may maintain limited liability. Limited Liability Partnership is not a separate legal entity. The tax treatment issues are not yet resolved; however, we doubt that it will be subject to double taxation, thus, we assume that it will be treated as a pass-through entity.

Limited Liability Company: Limited Liability Company is very similar to a U.S. LLC. The liability is limited, shares are freely transferrable between members, bonds may be issued, no capitalization requirements are imposed, no director or auditor requirements are imposed and the entity has easy exit requirements. The tax treatment issues are not yet resolved, but, however, we doubt that it will be subject to double taxation, thus, we assume that it will be treated for tax purposes.

It usually takes 7 days to set up a business in Korea Republic.