Incentives, hurdles for foreign entrepreneurs

Deciding on what form of business to choose and how to secure foreign direct investment incentives were among the topics discussed at a recent two-part seminar for foreigners planning to start a business in Korea.

Young Ham, managing partner and head of the Global Services Division at Hanmi Accounting Corp. in Seoul, presented “The Nuts and Bolts of Setting up and Running a Company” to a crowd of some 90 budding entrepreneurs at Seoul Global Business Support Center.

Over the course of an hour, Ham explained the differences between a liaison office, branch and subsidiary, the three types of business entity entrepreneurs with businesses outside Korea already can set up.

A liaison office performs preliminary or auxiliary activities for its head office such as advertising or market research and is not subject to corporate income tax. A branch of a foreign company is subject to tax only on its earnings in Korea, whereas a subsidiary is subject to tax on income generated within Korea and outside the country.

Ham said that one advantage of a subsidiary is that it demonstrates a greater commitment to the Korean market to customers in the country. A foreign branch of a business, however, has the advantage of having no minimum capitalization requirements.

Ham also spoke about the two forms of business open to entrepreneurs who don’t already have a business outside of Korea, a sole proprietor and a corporation. 

Ham recommended that a corporation is the preferable option for a business likely to turn over more than $50,000 profit in a year as it appears more solid to potential customers.

“If you present a card saying I’m the CEO of a company it’s different from just being a salesman,” he said.

For smaller operations, he said, being the sole proprietor is preferable because it is easier to set up.

Ham also devoted part of the seminar to tax matters, noting, in an echo of Benjamin Franklin’s famous phrase, “tax is something you cannot avoid in your life, like death.”