Limited Liability Company (YH)
์ ํํ์ฌ (Yuhan Hoesa)
Company formation in South Korea
The YH is best suited for: Foreign companies establishing a wholly owned subsidiary in Korea, Small to mid-size businesses that do not need to raise public capital, Joint ventures between foreign and Korean partners, Companies prioritizing operational flexibility over public listing potential. A Yuhan Hoesa is taxed as a corporation under Korean tax law. The corporate income tax rates are progressive: 9% on the first KRW 200 million, 19% on income from KRW 200 million to KRW 20 billion, 21% on income from KRW 20 billion to KRW 300 billion, and 24% on income exceeding KRW 300 billion. Local income tax of 10% of the national tax liability is added. Dividends paid to non-resident shareholders are subject to 20% withholding tax (or a reduced rate under an applicable double tax treaty). VAT is charged at 10% on most goods and services.
- Foreign companies establishing a wholly owned subsidiary in Korea
- Small to mid-size businesses that do not need to raise public capital
- Joint ventures between foreign and Korean partners
- Companies prioritizing operational flexibility over public listing potential
Key Facts
Step-by-Step Formation Process
Report foreign investment to KOTRA or a foreign exchange bank
Foreign investors must file a Foreign Investment Notification with the Korea Trade-Investment Promotion Agency (KOTRA) or a designated foreign exchange bank before incorporation. This notification confirms the type and amount of investment and is required for all foreign direct investment exceeding KRW 100 million.
Deposit capital into a foreign exchange bank
Transfer the investment capital to a designated Korean foreign exchange bank. The bank issues a certificate of capital arrival, which is required for the incorporation filing. The minimum foreign direct investment amount recognized under the Foreign Investment Promotion Act is KRW 100 million.
Prepare incorporation documents
Draft the Articles of Incorporation in Korean, specifying the company name, business purposes, registered office, capital structure, and member details. Gather KYC documents for all members and directors, including apostilled or consularized identification documents for foreign nationals.
Register with the Court Registry
Submit the incorporation application to the competent District Court Registry Office along with the articles of incorporation, proof of capital deposit, director appointment documents, and the registration tax (approximately 0.48% of capital plus local education tax). The court issues a certificate of incorporation upon approval.
Post-registration filings
Register with the National Tax Service for corporate tax and VAT, register for the four major social insurance programs (national pension, health insurance, employment insurance, industrial accident insurance), and notify the relevant local government office. Open a corporate bank account using the certificate of registration.
Required Documents
- Articles of Incorporation in Korean
- Foreign Investment Notification certificate
- Certificate of capital arrival from a Korean foreign exchange bank
- Apostilled passport copies and proof of address for all members and directors
- Director appointment and consent documents
- Registered office lease agreement or proof of address in Korea
- Business registration application form
Cost Overview
Tax Treatment
A Yuhan Hoesa is taxed as a corporation under Korean tax law. The corporate income tax rates are progressive: 9% on the first KRW 200 million, 19% on income from KRW 200 million to KRW 20 billion, 21% on income from KRW 20 billion to KRW 300 billion, and 24% on income exceeding KRW 300 billion. Local income tax of 10% of the national tax liability is added. Dividends paid to non-resident shareholders are subject to 20% withholding tax (or a reduced rate under an applicable double tax treaty). VAT is charged at 10% on most goods and services.
Pros & Cons
- No statutory minimum capital requirement โ more accessible for smaller foreign businesses
- Simpler governance structure than a Chusik Hoesa โ no board of directors or auditor required
- Flexible internal management governed by the articles of incorporation and member agreement
- Same limited liability protection as a Chusik Hoesa
- Lower ongoing compliance costs due to fewer mandatory reporting requirements
- Suitable for wholly owned subsidiaries where public trading of shares is not needed
- Cannot offer shares to the public or list on the Korea Exchange (KRX)
- Maximum of 50 members โ not suitable for companies with a large number of investors
- Less recognized internationally than a Chusik Hoesa โ some Korean business partners may perceive it as less established
- Transfer of membership interests may be restricted and typically requires consent of other members
- Limited ability to raise external equity capital compared to a corporation
Other Structures in South Korea
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Get StartedThis content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.