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Also see Business Set Up

If you are working in Korea and on an E2, F2or E1 visa, (for example), you may have an idea about starting and running your own business here, e.g, a hagwon. The following assumes you have done the math and the business venture is a viable proposition, and more so, you have plans in hand as to what to do with the business should you leave Korea. If you wish to start a business in Korea, please contact Korean Business Recruiters (KBR) (Korea) who can help you establish your business and support you and act as your legal partner while you do the work inside of your existing visa.

General Observations

  1. Some beginning observations. If you are here on an E1 or E2 visa, you cannot work work a second job per se. However, some ventures are Internet related, and this raises complex legal issues of just where the business is being run from. To date we have not received a satisfactory answer from any Korean authority as the legitimacy of running an Internet business. This relates to the complex issues of the isp being in another country, where the Internet work is 'actually' taking place, and the role of accepting income in Korea for your foreign registered Internet business. Clearly the laws have not kept pace with the complexities of technology. We will pursue answers and post them as and when they are received, however, as noted under Immigration, it appears that most offices will grant permission to run this type of business. Of course, if it generates income, you may have to declare this income pursuant to Korean Taxation Laws, or in your home country, depending upon applicable tax laws.

  2. Occasionally a foreigner comes into Korea on a tourist visa, and whilst here gains employment, and neither the Employer nor the Employee follow up with the legal requirements of the Korean Immigration Act. These foreigners stay here on a 90 day tourist visa, leave the country for brief trip to Japan, etc, then come back on a further 90 day Tourist visa and continue working. This is breaking numerous Korean Laws, and if caught, the foreigner is liable to a substantial fine and or imprisonment before deportation. We can only stress the importance of complying with Korean laws, for working illegally is inviting problems.

  3. Foreigners can establish and run a business in Korea. The easiest way to establish a business is to register your own (native home) business here. However there are limitations as to what you can do. The more expensive alternative is to establish a company in Korea. Law firms have pro-forma documents which are easily completed and lodged with the appropriate government departments. Incorporating a company is both permitted now and relatively easy. Though the law requires a 50,000,000 ($U.S. 43,000.00) deposit guarantee, viable ventures will find companies similar to bail bondsmen who will post that money for you. If you wish to contact Korean Business Recruiters with your idea, KBR can often bring your business plan into reality via unique legal partnership system

  4. In Korea there are 4 kinds of Companies pursuant to the Commercial Code. They are; Partnership Companies ("hapmyong-hoesa"), Limited Partnership Companies ("hapcha-hoesa"), Stock Companies ("chusik-hoesa"), and Limited Companies ("yuhan-hoesa"). N.B. Many teachers have asked about establishing a Non Profit company. In Korea this takes a lot of time, a lot of paper work, a lot of money ($6,000) and will probably not be accepted.

E. Owning and Establishing Your Own School.

It is possible for a foreign national to operate a language school in Korea. To start it, you have to get a license from a Local Education agency

Hagwon Types:

Sole Owner:
Registered in one person's name. A Korean national. He is the owner/director/boss. He can be declared bankrupt, yet the school carry on work the next day under the name of a family member. You may have no-one to 'chase' in this case. There are thousands of these legal entities in Korea.

Two or more Koreans.

Incorporated company:
Articles of Incorporation are prepared, which, inter alia, list the Directors, shares issued and value, rules for meetings. Similar in nature to western concepts.

There are some well known franchises in Korea. They are Ewha A.L.S, YBM Education Inc ECC Division, ECY, etc.

See Setting up a foreign owned school

Hagwon Owner's Ancillary Obligations:

Owners must process the business registration papers as in any jurisdiction and lodge certain documents with various government departments. All schools are obliged under the law to Register their school with their Local Board of Education Office. Each POE District Office has a Register maintained that records; the school's name, address, staff members names working there, and the fees charged by the school to its students. School fees have a maximum limit that may be charged. There are 5 categories of hogwons, the fifth category relating to owner/teacher and confined to music/sport/ dancing instruction. In this category, the owner is the sole teacher. Of the other four categories, the category depends upon the size of the hagwon, ranging from 1000 square meters or above, (b) 500-1000 (c) 300-500 (d) 100-300. The owner lodges with the District Office of Education various documents, ranging from his business registration certificate, a copy of the building lease if leased, etc. Depending upon which category the business falls under, the owner must pay certain fees. (view the doc) After a hogwon owner lodges the documents with the appropriate District Education Office, an Inspector from that Office will inspect the hagwon and then issue a Certificate to the owner.

Another obligation of the owner, if his school employs 5 or more staff, is to pay contributions to Korean Labor Welfare Organization, pursuant to Article 2 of the Enforcement Decree of Employment Insurance Act. Payments can either be a lump sum yearly, or paid quarterly. The categories of payment are:- Unemployment Benefit, 0.6% shared equally by employer/employee, Employment Security, 0.3% paid by the Employer only, and Vocational Ability Development calculated at 0.1% premium paid by the employer only.

A copy of the license shall accompany the application for tax registration certification to be submitted to the district tax office, in addition to a photocopy of your passport or residence card, a lease agreement for the language school and a report of the tax agent in charge of your tax liabilities. The tax office may ask for some more documents such as copy of your investment certificate.

An investment certificate is issued by a foreign exchange bank when foreign currency equivalent to 50 million won or more is physically remitted into Korea.

Visa status shall also be converted from your current E-2, working visa, to D-8. For this conversion, you are expected to personally visit and submit to the immigration office an application form, a copy of tax registration certificate, foreigner's investment certificate and other documents, which may be requested by the immigration officer.

You may ask a law firm or an accounting firm to establish the business on your behalf. Otherwise, you may do it yourself with help from a Korean interpreter, if available.

The income tax rate on businesses is progressive, from 9.9 percent through 39.6 percent, including the local resident tax

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