Chusik Hoesa (주식회사) is the most widely used corporate form in South Korea for both domestic and foreign businesses. It closely resembles a standard corporation with share capital and shareholders and is often considered the default structure for serious commercial operations, including subsidiaries of foreign companies.
Minimum Capital
There is no statutory minimum capital requirement for establishing a domestic Chusik Hoesa—technically, even KRW 100 is acceptable. However, if a foreign investor wishes to register the company as a Foreign Direct Investment (FDI) under the Foreign Investment Promotion Act (FIPA) and access related incentives (such as tax benefits or investor visas), an investment of at least KRW 100 million (approximately USD 80,000) per foreign investor is required. It’s important to note that filing as FDI is not mandatory—foreign investors may choose to establish a company without FDI registration, although this may limit access to certain benefits.
For purely domestic companies, there is effectively no capital floor. In practice, though, banks and stakeholders often recommend starting with a modest capital base, such as ₩5–10 million or more, to establish financial credibility.
Company Name Format
In Korea, the official company name must be registered in the Korean language, even for foreign-owned entities. In many cases, the Korean name will be a phonetic transliteration or romanization of the English name of the foreign company. This ensures that the name complies with Korean registration rules while maintaining brand recognition.
For companies incorporated as Chusik Hoesa (주식회사), the entity designation is included in the name and can appear either before or after the company name. For example, a business may be registered as (주)코리아테크 or 코리아테크(주), both meaning “KoreaTech Co., Ltd.” The symbol (주) is a standard abbreviation for 주식회사 and is commonly used in official documents, contracts, and branding materials.
Share Structure and Ownership
A Chusik Hoesa must issue shares, which represent ownership. The company may issue different classes of stock, including common, preferred, non-voting, and redeemable shares, offering flexibility in ownership and fundraising. It is the only Korean corporate form eligible to list on stock exchanges or issue corporate bonds, making it particularly suitable for larger ventures or companies with plans for future public offerings.
The company can be established with just one shareholder, with no upper limit on the number. There are no restrictions on nationality or residency—foreigners can own 100% of the company, except in restricted industries such as media, telecom, or agriculture. Shareholders’ liability is limited to the amount of their capital contribution.
Management and Legal Representation
Chusik Hoesa requires a board of directors composed of at least three directors. However, if the company’s capital is less than ₩1 billion, a single director may suffice. One director is appointed as the representative director, who serves as the legal face of the company. There are no requirements for directors or the representative director to be Korean nationals or residents. A foreigner can serve in this role, although in practice, having a local address or a designated local agent for legal service is highly advisable. If the foreign director will physically work in Korea, a relevant visa is necessary.
If capital is ₩1 billion or more, the company must also appoint a statutory auditor. For companies with capital below that threshold, the appointment of an auditor remains optional.
Taxation
Chusik Hoesa is taxed as a resident company on its worldwide income. As of 2023, corporate income tax is levied at progressive rates: 9% on the first ₩200 million of income, 19% on amounts up to ₩20 billion, 21% up to ₩300 billion, and 24% above that. An additional local surtax of around 10% of the corporate tax also applies.
Dividends paid to foreign shareholders are generally subject to a 20% withholding tax (15.4% with local surtax included), but this may be reduced under applicable tax treaties. The company must also register for VAT if it conducts taxable business in Korea—the standard rate is 10%. Withholding taxes also apply to salaries and to domestic interest or dividends paid to individuals. Different rates may apply for non-residents depending on treaty provisions.
Reporting and Compliance Requirements
Chusik Hoesa must prepare annual financial statements and business reports. If the company exceeds certain thresholds (e.g., assets over ₩12 billion, liabilities over ₩7 billion, or revenue over ₩10 billion), or if it is listed or has capital over ₩10 billion, an external audit is required under the Act on External Audit. Even if these thresholds are not met, an audit may still be necessary depending on other regulatory factors.
Tax filings include annual corporate tax returns (due within three months of fiscal year-end), quarterly VAT filings, and withholding obligations. The company is also required to hold an annual general meeting of shareholders to approve financial statements and comply with governance rules.
Ease of Incorporation
Incorporating a Chusik Hoesa involves registering the company with the court and tax office. Foreign investors also need to file an FDI report with KOTRA or a designated foreign exchange bank if they wish to be recognized under the FIPA framework. The entire process typically takes two to four weeks. While the entity type involves more formalities than simpler structures—such as forming a board of directors if capital is high—incorporation is relatively straightforward with proper guidance. Notarization of articles of incorporation is not required if documents are in Korean.
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Use Cases and Suitability
Chusik Hoesa is best suited for medium to large enterprises, especially those that plan to raise capital, issue shares, or go public in Korea. It offers a formal structure, clear governance, and flexibility in ownership, making it ideal for subsidiaries of global companies or investors planning long-term operations.
Foreign Ownership Restrictions
There are generally no restrictions on foreign ownership except in specific regulated sectors such as broadcasting, telecommunications, energy, or agriculture, where limits may apply or prior government approval may be needed. Outside those sectors, foreigners can own 100% of a Chusik Hoesa. Foreign investors who invest ₩100 million or more per person typically file as FDI to gain transparency and benefits, but this is optional.
Liability
As a separate legal entity, the Chusik Hoesa is liable for its own debts and obligations. Shareholders’ liability is strictly limited to their capital contributions, protecting personal assets.
Summary
Chusik Hoesa (주식회사) is the go-to corporate structure for foreign and domestic companies aiming for serious commercial presence in Korea. It provides limited liability, robust governance, flexibility in raising capital, and the possibility of public listing. While it involves more administrative responsibilities than simpler forms, it is widely recognized, familiar to international investors, and often recommended for companies planning long-term growth and local financing.
