Types of Entities for Foreign Direct Investment (‘FDI’) in Korea
Foreign Investment Promotion Act is the basic law for foreign investment in Korea, which is designed to facilitate foreign investment and provide various benefits for foreign investors.
Generally, a foreign investor has a wide range of business structures to choose from when establishing an entity in Korea. The type of entity an investor chooses will depend on what best suits the particular needs of the investor (including optimal financial and tax considerations) and is essentially set out below:
- Representative office or Branch office of parent company (governed by Foreign Exchange Transaction Act)
- Limited Partnership
- Limited Liability Company
- Limited Company (“Yuhan hoesa” in Korean)
- Joint Stock Company (“chusik hoesa” in Korean)
A representative office (liaison office) and a branch office are not a local corporation and governed by Foreign Exchange Transaction Act, whilst all other forms of an entity listed above are types of a corporation organized and recognized by Commercial Act which may also be subject to Foreign Investment Promotion Act.
Most common types are Limited Company and Joint Stock Company, and please let us review a key difference between these two most common types in our next article.