Writer 관리자 Date 2011-07-27
 Title CHOICE OF LEGAL FORM
 Content 2. CHOICE OF LEGAL FORM
The types of business enterprise provided for by the Commercial Code - unlimited partnership, limited partnership, joint stock company, and limited company - are all available as vehicles for foreign investment. The types are classified according to: (1) whether members’ liability with respect to the entity’s liability is limited or unlimited; and (2) whether such liability falls directly upon the members’ own assets or only indirectly upon the company’s property. A joint stock company (“chusik hoesa”) is the most commonly selected form of corporate vehicle, as it offers members limited liability and shares are freely transferable.

2.1 Joint Stock Company (“Chusik Hoesa”)
Shareholders of the company holding a given capital divided into shares are only liable to contribute up to an amount equal to their share subscription and do not bear any liability with respect to their company’s liability. The joint stock company system is appropriate for a large business requiring large amounts of fixed capital and the continued procurement of funds. A joint stock company requires at least three promoters and becomes effectively incorporated after preparation of the articles of incorporation, election of directors and auditors, determination of
shareholders, fulfillment of contribution and, lastly, completion of registration of incorporated status.

2.2 Limited Company (“Yuhan Hoesa”)
As in the case of a joint stock company, the liability of all members is limited to the amount of their contribution to the company. The individual character of each member is taken more into account, transfer of equity is limited, and the company is not open to the public (unlike a joint stock company). Therefore, this type of company is appropriate for the operation of a small or mediumsized business owned by a small number of persons. Promoters are not separately required, but
all members prepare the articles of incorporation and act as promoters at the time of incorporation.
There is no system for scrutiny of the incorporation process, at least two members of the company jointly prepare the articles of incorporation, and all members put their names and affix their seals thereto. Directors and auditors are elected, capital contribution is made, and the incorporation of the company is effected upon registration of the incorporation.

2.3 Unlimited Partnership (“Hapmyung Hoesa”)
The business consists of members bearing direct, joint and unlimited liability with respect to the business’s creditors. In principle, all members bear rights and obligations with respect to implementation of the partnership affairs and the representation of the partnership. This type of business is appropriate for an enterprise jointly owned by a small number of persons whose personal relationship is very close. Each member bears unlimited liability and thus need not pay in
capital prior to formation of the partnership. Contribution of credit or labor is possible, and there is no inspection procedure by a court. Also, all the members execute partnership affairs and thus need not form an executive organ prior to formation of the partnership. At least two members jointly prepare the establishment document, all members put their names and affix their seals or signature, and the partnership is formed upon registration.

2.4 Limited Partnership (“Hapja Hoesa”)
This type of business entity consists of both members bearing direct and unlimited liability and members bearing limited liability. Members bearing limited liability participate in the business only through their capital contribution and have no right to undertake partnership affairs or represent the partnership. This type of business is substantially similar to an unlimited partnership even though a capital contribution is added to the type of unlimited partnership. A limited partnership is formed after at least one member bearing unlimited liability and at least one member bearing
limited liability, respectively, prepare the establishment document and registration is effectuated.

2.5 Domestic Branch of a Foreign Company
If a non-resident foreign corporation desires to establish and operate a branch or office in Korea, this should be reported to a designated foreign exchange bank or the Minister of Finance and Economy.
A domestic branch falls into one of two categories: a “regular” branch conducting profit-generating activities in Korea, and a “liaison office” which does not carry on profit-generating activities but merely undertakes non-profit-making functions such as liaison of business affairs, market research, and research and development.


Prepared by: Mr. Doo-Yeol Lee
Woori Accounting Corporation
Amended: November 2010
For further information on the services available from the DFK International Member firm in South Korea please contact:
Mr. Doo-Yeol Lee
Woori Accounting Corporation
Tel: +82 2 565 7083
Email: LDY1613@unitel.co.kr
Web: www.ventureplaza.co.kr/english