Choosing the Right Business Structure in Korea: Jushik Hoesa vs. Yuhan Hoesa
Are you considering setting up a “주식회사 (Jushik Hoesa)” in Korea? While popular, this corporate structure involves extending directorship and possibly the auditor's term every three years. For a simpler, more flexible alternative, consider a “유한회사 (Yuhan Hoesa)”, a limited liability company, which requires only a director and no registered auditor for a SME investors.
In a one-man company structure like Jushik Hoesa, you're wholly liable for corporate taxes if owning over 50% of shares. To reduce this liability, shares are often distributed among friends.
However, this liability aspect is similar in Yuhan Hoesa. Major companies prefer Yuhan ChagIm Hoesa(유한책임회사: Limited Liability Company) for its privacy in financial statements and External Financial Audit Law may not be applicable, so a lot of foreign companies were restructured to this type of company.
Foreign investors often default to Jushik Hoesa, yet Yuhan Hoesa offers greater flexibility and simplicity, especially in corporate secretarial matters. Without needing a D-8 visa or FDI certificate, Yuhan Hoesa allows for company establishment at residential addresses(ex. Online sales, IT service, Consulting, and etc.) with minimal capital, given the business scope is not restricted.
A case in point involves a Singaporean investor I assisted, who faced challenges with her landlord upon registering her apartment as a business address. A lot of landlords concerns their rent income exposure to the tax office since Company may claim those rent expenses to their deductible expenses. This highlights the need for careful planning and understanding of local norms in Korea.
At JZ Associates, we guide expatriates and foreign investors through these complexities, ensuring focus on core strengths while we manage accounting, taxes, HR, and legal aspects in line with Korean business practices.
If you would like a free consultation with an English-speaking Accountant in Korea, please schedule a call at: Schedule a Call with Jz
FAQs:
What is the main difference among Jushik Hoesa, Yuhan Hoesa and Yuhan Chagim Hoesa?
Jushik Hoesa requires renewing directorship and possibly auditors every three years, while Yuhan Hoesa is simpler, no need to renew the directorship terms, and requiring only a director and no auditor. Even Yuhan Chagim Hoesa is not requiring a Financial Audit according to the External Financial Audit Law.
How does shareholding affect liability in Korean companies?
In all entities, owning over 50% of shares means full liability for corporate taxes. Yuhan Hoesa also has similar liability structures.
Can foreign investors establish a company at their residence in Korea?
Yes, especially with Yuhan Hoesa, you can establish a company at a residential address, subject to certain business scope restrictions.
What are the visa implications for different company structures in Korea?
Both of theses company structure, you can apply for the D-8 VISA if your FDI amount is more than 100mil.won.
Why should expats and foreign investors choose JZ Associates for business setup in Korea?
JZ Associates provides comprehensive support in navigating Korean business structures, accounting, legal, and tax complexities, allowing clients to focus on their core business including getting VISA.
