Types of Companies and Legal Entities in Korea
Hyun-min Chang Managing Partner
Request a consultation1. Types of Legal Entities According to Each Law
The Republic of Korea defines types of companies or legal entities through ① Commercial Act(Law), ② Civil Act(Law), and ③ Other Special Laws.
In Korea, most legal entities are established as Stock companies under the Commercial Act(Law) (over 90%). Which is also the case when foreigners establish a legal entity in Korea.
In the past, limited companies were strategically chosen by foreign large corporations when entering Korea due to fewer or no external audit and disclosure obligations compared to Stock companies. However, with the revision of Korea's External Audit Act, the benefits for foreign entities choosing limited liability companies have significantly decreased.
2. Legal Entities under Commercial Act
Korea's Commercial Act defines five types of legal entities: ① Stock Company, ② Limited Company, ③ Limited Liability Company, ④ Limited Partnership Company, and ⑤ Unlimited Partnership Company.
① Stock Company
A Stock company is a legal entity based on Korean Commercial Act, where capital is divided into stocks, and shareholders contribute and have limited liability according to their stocks. Ownership (shareholders) and management can be separated, and ownership of the legal entity can be transferred relatively easily through the sale of stocks.
② Limited Company
A limited liability company has no stocks but contributions to units. Members have indirect and limited liability only to the extent of their contributed amount, and members have shares according to the number of contribution units. Transfer of limited company shares requires consent from a majority of members.
③ Limited Liability Company
The Korean Limited Liability Company is a new form of company introduced through the 2011 Commercial Act revision, similar to the LLC in the United States. Transfer of equity interest requires consent from all members. No member can contribute personal services or credibility as the subject matter for their investments.
④ Limited Partnership Company
A limited partnership company consists of limited liability partners who are jointly liable with the company up to their contribution amount, and unlimited liability partners who manage the company. Due to the heavy responsibility of partners, this type of legal entity is rarely used in Korea today.
⑤ (Unlimited) Partnership Company
A company composed only of unlimited liability partners who bear unlimited joint liability for the company's debts. Like limited partnership companies, this type of legal entity is rarely used in Korea today due to the heavy responsibility of partners.
※ For foreign investment corporations, it's a recognition that foreigners have invested in a general corporation, not a separate type of legal entity called "foreign investment corporation".
※ Stock companies and limited companies above a certain size must undergo external audits by certified public accountants and disclose this information according to Korea's External Audit Act.
Korean External Audit Subject Corporation Disclosure Site
① Korean
② English
Criteria for Korean External Audit Subject Corporations (Korean)
Criteria for Korean External Audit Subject Corporations (English)
3. Other Legal Entities in Korea Based on Various Laws
① Incorporated Association: Based on Civil Act
② Incorporated Foundation: Based on Civil Act
③ Medical Firm: Based on Medical Act
④ Accounting Firm: Based on Certified Public Accountant Act
⑤ Law Firm : Based on Attorney-at-Law Act
⑥ Educational Foundation: Based on Private School Act
⑦ Social Welfare Corporation: Based on Social Welfare Services Act
Other types such as cooperatives also exist.
4. Reasons Why you should choose Tax & Accounting Office Haeon for Establishing a Korean Legal Entity
① One-Stop Expert Service
Haeon is a legal group with Korean lawyers and accountants, capable of handling everything from establishing a Korean legal entity to tax filing and accounting after establishment.
② Direct Communication with Korean Experts Without International Brokers
In Korea, legal representation for establishing a legal entity is only possible by lawyers or Beommusa Lawyer, and tax representation and accounting audits are specialized tasks only possible by those with government-certified qualifications like CPA.
Brokers without these professional qualifications often subcontract to Korean experts after receiving clients.
By choosing Haeon, clients can directly work with Korean experts without excessive fees due to unqualified brokers.
③ Easy Communication in English
Haeon includes an accountant who served as an English interpreter for the Korean Army, interpreting between U.S. and Korean forces. This allows easy communication in English, even if you don't speak Korean, to receive assistance with Korean legal entity matters.
If you are looking for professional consultation regarding establishing a legal entity in Korea, please request a consultation appointment through the link below.
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