Starting a Business in Korea: A Practical Incorporation Guide for Foreign Founders

What small startups should know about capital, required documents and foreign investment registration before transferring money to Korea.

Imagine that you are preparing to launch a business in Korea.

You have a product, a small founding team and perhaps your first potential customer. You may also have Korean won in a local bank account. At this point, incorporating a Korean company may appear straightforward: choose a company name, deposit the capital and file the registration documents.

However, foreign founders need to answer one important question before transferring or depositing any money:

Do you simply want to establish a Korean company, or do you want the company to be officially registered as a foreign-invested company?

These are not always the same thing.

A foreign national can become a shareholder of a Korean company without the company necessarily qualifying as a foreign-invested company under Korean law. The source of the capital, the method of remittance and the documents issued by the foreign exchange bank can be just as important as the identity of the shareholder.

This guide explains the basic process for a foreign individual or overseas company establishing a new Korean corporation through a cash investment.

1. A Foreign Shareholder Does Not Automatically Create an FDI Company

A Korean company established by a foreign founder is still a Korean domestic corporation. Its incorporation and corporate governance are primarily governed by the Korean Commercial Act.

If the investment satisfies the requirements of the Foreign Investment Promotion Act, the company may also be registered as a foreign-invested company.

For a typical investment involving the acquisition of shares, the usual requirements include:

• An investment of at least KRW 100 million; and
• Ownership of at least 10% of the company’s voting shares.

There are other ways to satisfy the management-participation requirement, but the structure above is the most common for a foreign founder establishing a new Korean company.

A company can still be incorporated with less than KRW 100 million. However, it will generally not qualify as a foreign-invested company solely on the basis of that investment.

This distinction can affect the company’s foreign investment registration, immigration planning, future remittance of dividends or sale proceeds, and access to certain investment-related procedures.

2. The Source and Route of the Capital Matter

Consider two founders.

Founder A transfers foreign currency from an overseas account through a Korean foreign exchange bank after filing the appropriate foreign investment notification. The foreign currency is converted into Korean won, and the bank issues the documents showing the remittance and purchase of foreign currency.

Founder B has KRW 100 million in a personal Korean bank account and deposits that money directly as the company’s capital.

Both founders may be able to establish a Korean company and receive shares. However, the two companies may not receive the same treatment under the foreign investment registration system.

For a standard cash-funded incorporation, the investment should be processed through a Korean foreign exchange bank so that there is a clear documentary trail showing:

• The identity of the foreign investor;
• The overseas source and remittance of the investment funds;
• The purpose of the transfer;
• The conversion of foreign currency into Korean won; and
• The use of those funds as the company’s paid-in capital.

In practice, the foreign currency purchase certificate issued by the bank is an important document for completing the business registration and foreign-invested company registration process.

Simply depositing Korean won already held in Korea may allow the founder to subscribe for shares, but it generally does not create the same evidence of foreign investment. Without the required banking documents, the company may be unable to complete registration as a foreign-invested company.

For this reason, foreign founders should obtain legal and banking guidance before remitting or depositing the capital.

3. What Should Be Decided Before Incorporation?

Before preparing documents, the founders should agree on the basic structure of the Korean company.

The main decisions usually include:

• Company name;
• Registered office address;
• Business purposes;
• Amount of paid-in capital;
• Identity of each shareholder;
• Number of shares and ownership percentages;
• Directors and representative director;
• Fiscal year; and
• Whether the intended business requires a licence or government approval.

For small startups, a stock company, or jusik hoesa (주식회사), is often the most familiar structure. It provides a clear shareholding structure and is generally suitable for companies that may raise outside investment in the future.

That does not mean it is always the best choice. A limited company may be suitable for some closely held subsidiaries. The appropriate structure depends on the number of investors, governance arrangements, fundraising plans and tax considerations.

The business purposes also require careful attention. They will appear in the company’s articles of incorporation and corporate registry. If the company plans to operate in a regulated industry—such as financial services, recruitment, travel, food, healthcare or certain online services—it may need a licence or registration in addition to the corporate incorporation.

4. What Documents Does a Foreign Founder Need?

The exact document list depends on whether the investor is an individual or an overseas company, as well as the investor’s country and the requirements of the relevant court registry and bank.

If the investor is a foreign individual

The documents typically include:

• Passport copy;
• Evidence of nationality;
• Evidence of the investor’s overseas address;
• Power of attorney, if a Korean representative handles the filing;
• Signature certificate or equivalent document, where required;
• Apostille or consular legalisation, where required; and
• Korean translations of the relevant documents.

If the investor is an overseas company

The documents typically include:

• Certificate of incorporation or corporate registry extract;
• Business licence or equivalent document;
• Articles of incorporation or bylaws, where required;
• Corporate resolution approving the investment in Korea;
• Evidence of the authority of the company’s representative or authorised signatory;
• Power of attorney;
• Information on shareholders and ultimate beneficial owners for bank verification;
• Apostille or consular legalisation, where required; and
• Korean translations.

Overseas documents often cause the greatest delay. Apostille, notarisation and consular legalisation requirements vary by country, and banks may request additional documents as part of their know-your-customer review.

The document list should therefore be confirmed before the founders begin collecting signatures.

5. The Basic Incorporation Process

A standard foreign-invested company incorporation generally follows these steps.

Step 1: Structure the investment

Confirm the investor, capital amount, shareholding percentage, company type and whether the investment is intended to qualify as foreign direct investment.

Step 2: File the foreign investment notification

The foreign investor generally files the notification with KOTRA or a Korean foreign exchange bank before transferring the investment funds.

Step 3: Transfer and convert the investment funds

The investment funds are remitted through the foreign exchange bank handling the investment. The remitter, notified investor and shareholder should be consistent.

The transfer purpose should also clearly identify the payment as investment capital. After conversion, the relevant banking certificates—including the foreign currency purchase certificate—should be obtained and retained.

Step 4: Register the Korean company

The incorporation documents are prepared and submitted to the competent court registry. These may include the articles of incorporation, share subscription documents, director appointment documents, corporate resolutions and evidence of payment of capital.

Step 5: Complete tax and business registration

After incorporation, the company must complete its corporate and business registration with the Korean tax authorities. Additional licences or permits may be necessary depending on the business.

Step 6: Open the corporate bank account

The temporary investment funds are transferred to the company’s corporate account. The bank will normally conduct its own review of the company, representative, shareholders and ultimate beneficial owners.

Step 7: Register the foreign-invested company

The final foreign-invested company registration is completed with the institution that accepted the original investment notification. Under the standard procedure, this registration should be completed within 60 days after payment of the investment.

6. Common Mistakes That Delay the Process

Foreign founders frequently encounter delays because they begin with the money transfer rather than the investment structure.

Common mistakes include:

• Transferring the capital before filing the foreign investment notification;
• Using a remitter whose name is different from the notified investor;
• Sending money without clearly identifying it as investment capital;
• Depositing Korean won already held in Korea and assuming that it will automatically qualify as FDI;
• Failing to obtain a foreign currency purchase certificate;
• Preparing overseas documents without the necessary apostille or legalisation;
• Choosing business purposes without checking licence requirements;
• Signing an office lease that cannot be used for business registration;
• Underestimating the bank’s shareholder and beneficial-owner review; and
• Assuming that the process ends when the corporate registration is completed.

A straightforward incorporation may proceed relatively quickly once all documents are ready. In practice, however, apostille procedures, bank compliance reviews and business licences can significantly extend the timeline.

7. A Practical Checklist for Foreign Founders

Before transferring capital to Korea, confirm the following:

• Who will be the legal investor?
• Will the investor be an individual or an overseas company?
• How much will be invested?
• What percentage of the Korean company will the investor own?
• Is foreign-invested company status required?
• Where are the investment funds currently held?
• Through which foreign exchange bank will the funds be transferred?
• What banking certificates will be issued?
• Which overseas documents require an apostille or legalisation?
• Does the proposed business require a licence?
• Is the office address suitable for business registration?
• Who will serve as the representative director?

For a foreign startup, the order of these decisions matters. Correcting the investment structure after the capital has already been transferred can be slower and more expensive than planning it properly from the beginning.

Conclusion

Establishing a company in Korea is generally possible for both foreign individuals and overseas companies. The more difficult issue is ensuring that the investment, banking documents, corporate registration and post-incorporation procedures all follow the same structure.

The most important practical lesson is simple:

Do not transfer or deposit the capital before confirming the investment route.

A foreign founder may be able to establish a Korean company using locally held Korean won, but this does not necessarily allow the company to register as a foreign-invested company. For a standard cash investment, the foreign exchange bank and its supporting documents are an essential part of the incorporation process.

Nam & Kim Law Office assists foreign founders and overseas companies with investment structuring, foreign investment notifications, incorporation documents, corporate registration coordination and post-incorporation compliance in Korea.

This article provides general information only and does not constitute legal advice. Required documents and procedures may vary depending on the investor, country of origin, investment structure, bank and type of business.

Official References

• Invest KOREA – How Foreigners Can Start Business in Korea
• Invest KOREA – Incorporation Procedure
• Korean Foreign Investment Promotion Act