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| Foreign individuals and representatives of overseas companies who have completed business registration in Korea. Their business activities play an important role in connecting the Korean market with the global market. |
Everything You Must Know About Business Registration Before Starting a Business in Korea
This practical guide provides foreign individuals and overseas companies with a clear and accurate overview of business registration in Korea. It covers the concept, registration procedures, taxation types, required documents, risks of nominee registration, and suspension or closure reporting—essential knowledge for legally and successfully operating a business in Korea.
Introduction: Why Business Registration in Korea Matters
Hello, readers.
The number of foreign nationals engaging in economic activities in Korea continues to grow steadily.
However, before starting any business in Korea, the very first and most essential step is business registration. That is precisely what this article aims to explain.
Korea is widely regarded as one of Asia’s most institutionally stable countries, with a well-established legal and regulatory framework. As a result, it has become an attractive destination for foreign investors and overseas companies. Nevertheless, simply renting an office and commencing operations is not sufficient to conduct business legally in Korea.
Under Korean tax law, business registration is the foundation of all commercial activity. Without a proper understanding of this system, businesses may face unexpected tax liabilities, administrative penalties, restrictions on financial transactions, and other serious risks.
This article serves as a practical guide for foreign sole proprietors, startup founders, and representatives of overseas corporations considering business operations in Korea. While minimizing complex legal terminology, it focuses on delivering precise and actionable information necessary for real-world business operations.
1. The Basic Concept of Business Registration and Legal Obligations
In Korea, any individual or entity that independently supplies goods or services must register as a business. This requirement applies regardless of nationality, meaning that foreign individuals and foreign corporations are subject to the same obligation.
The core principles of business registration in Korea are as follows:
1.Business registration must be completed for each place of business.
2.Registration must be filed with the competent tax office within 20 days from the commencement of business.
3.Lending or borrowing a business name without actual business activity is strictly prohibited.
In particular, when a foreign entrepreneur operates a business using a Korean national’s name, all tax and legal liabilities are legally imposed on the person whose name is registered. This practice often results in serious legal consequences.
2. Severe Legal and Financial Risks of Nominee (Name-Lending) Registration
Under Korean tax law, nominee registration is treated as a serious form of tax evasion. While it may appear convenient or customary in some cases, the consequences can be extremely severe.
A person who lends their name may face the following penalties:
1.All taxes related to the business are assessed against the registered name holder
2.Seizure and public auction of assets in the event of tax delinquency
3.Loan restrictions and suspension of credit cards due to notifications to financial institutions
4.Increased national pension and health insurance contributions
5.Restrictions on overseas travel and passport issuance
6.Possible criminal charges as a tax evader or delinquent taxpayer
Even if the actual business operator is later identified, the registered name holder is not exempt from responsibility. Moreover, the record remains in the National Tax Service system, potentially causing disadvantages when the individual later starts a legitimate business.
3. Overview of the Business Registration Application Process
While the business registration process in Korea is relatively straightforward, errors frequently occur due to incomplete documentation or improper filing methods.
The basic process is as follows:
1.Identify the tax office with jurisdiction over the business location
2.Complete the business registration application form with a handwritten signature
3.Prepare all required supporting documents
4.Submit the application either in person or online
5.Receive the business registration certificate
If the applicant is registered with the Korean National Tax Service’s online system, Hometax, and possesses a joint authentication certificate, the entire process—including document submission—can be completed online without visiting the tax office.
4. Differences Between Simplified Taxpayers and General Taxpayers
Sole proprietors in Korea are classified as either simplified taxpayers or general taxpayers based on their annual revenue. This classification directly affects tax calculations and reporting obligations.
Simplified Taxpayer
Applicable to sole proprietors whose expected annual revenue is less than KRW 104 million.
Tax calculation is simplified, and the overall tax burden is generally lower.
General Taxpayer
Value-added tax (VAT) is calculated based on both sales and purchases, with stricter filing and reporting requirements.
However, the following industries are excluded from simplified taxation regardless of revenue:
*Certain manufacturing and mining industries
*Wholesale and real estate trading businesses
*Professional service providers
*Taxable entertainment establishments
*Industries designated by the National Tax Service as excluded
Foreign business operators should carefully evaluate their industry type and projected revenue structure before selecting a taxation category.
5. Understanding the Unified Business Unit Taxation System
When a single business operator runs multiple business locations, they may opt for the unified business unit taxation system if certain requirements are met. This system allows all tax filings and payments for multiple locations to be consolidated at the head office, significantly reducing administrative burdens.
New businesses must apply within 20 days from the start of operations, while existing businesses must apply at least 20 days before the beginning of a new tax period. Foreign corporations may also qualify for this system.
6. Required Documents for Foreign Individuals and Foreign Corporations
Foreign individuals and overseas corporations are required to submit additional documents compared to Korean nationals. Commonly required documents include:
1.Business registration application form
2.Copy of alien registration card or passport
3.Copy of lease agreement
4.Corporate establishment documents
5.Notification of domestic place of business
6.Articles of incorporation and head office documentation
7.Statement of fund sources (for certain industries)
If the business operator does not reside in Korea for an extended period, appointing a tax agent through a formal notification is mandatory.
7. Importance of Business Suspension and Closure Reporting
Even when a business is temporarily suspended or permanently closed, a formal report must be filed. Failure to do so may result in continuous tax assessments despite the absence of actual business activity.
Suspension or closure can be reported either by visiting the tax office or through the Hometax system. Certain licensed businesses may use an integrated closure reporting process to handle all procedures simultaneously.
If the exact closure date is unclear, the date of report submission becomes the official κΈ°μ€ date. Therefore, aligning the actual business termination date with the reporting date is critically important.
Conclusion: Key Takeaways for a Successful Business Start in Korea
Business registration in Korea is not merely an administrative formality—it is the starting point for taxation, legal compliance, and financial transactions. For foreign individuals and overseas companies in particular, a lack of understanding can lead to unnecessary and avoidable risks.
The following three principles should always be kept in mind:
1.Register the business under the name of the actual operator
2.Review taxation types and industry restrictions in advance
3.Consider the entire business lifecycle, including suspension and closure
By adhering to these fundamental principles, Korea can be a predictable and stable market even for foreign business operators. A proper understanding of business registration is, ultimately, the first and most crucial step toward business success in Korea.
If you are planning to do business in Korea, we hope this guide proves helpful.
Thank you for reading. We look forward to sharing more valuable content with you in the future.
