1. What is a family corporation?
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A family corporation is a general corporation that is run by family members as shareholders or officers.
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Its primary purpose is to
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Reduce taxes
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Organized wealth management
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Long-term wealth growth and succession
2. Choosing an entity form: corporation vs. limited liability company
Classification | Corporation | Limited Company |
Structure | Can issue shares | Equity contribution, no stock |
Management | Board of directors, shareholders' meetings | General meeting of employees, fast decision-making |
Outside investment | Advantageous | Difficulty |
Choose a limited company if you have no plans for family-oriented operations and outside investment, or a corporation if you expect to expand and attract investment in the long term.
3. 3-step process to incorporate
Step 1: Preliminary Decisions
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Participating members: shareholders, CEO, directors, etc.
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Business Purpose: Real estate sales, leasing, development, etc.
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Business name: Check for duplication(www.iros.go.kr)
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Capital: At least KRW 1 million, consider license tax for registration in overcrowding control areas
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Headquarters location: Check residential availability, consider non-crowded areas for tax savings
Step 2: Document Preparation and Payment Procedures
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Prepare Articles of Incorporation: Notarization can be waived for small entities
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Pay capital: Deposit funds in the name of the CEO and obtain a balance certificate
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Appoint officers: Designate a president, CEO, and director
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Designate an investigative reporter: stockless audit is available (reduces notary fees)
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Documents required: seal stamp, seal certificate, resident registration card, and legal representative consent form for minors
Step 3: Incorporation and business registration
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Filing at the registry office: Submit articles of incorporation, shareholder list, minutes, investigation report, etc.
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Payment of registration tax: calculated based on capitalization
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Business registration: Apply at the tax office or from home within 20 days of completing the registration
4. Required actions after incorporation
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Open a corporate bank account and issue a corporate card
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Obtain 4 types of insurance: required to pay employees' salaries
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Select an accounting/tax agent: Monthly accounting, tax filing, and bookkeeping
5. Key Considerations
Equity structure design
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Beware of gift taxes when distributing shares in children's names
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Absolute no-no: Nominee trusts - risk of tax and ownership disputes
Income withdrawal methods
Classification | Salary | Dividends |
Payable to | Working family | Shared family |
Tax implications | Can be treated as a corporate expense | Double taxation after paying corporate tax |
Cautions | Proof of actual work required | Dividend income tax 15.4% (KRW 20 million or less can be taxed separately) |
Caution for branch payroll
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Treatment of recognized interest and representative bonuses for personal use of corporate funds
Real estate-related tax differences
Item | Individual | Corporate |
Home Acquisition Tax | 1 to 3 percent | 12 to 13.4 |
Death tax | With deduction | No deduction + flat rate |
Retail-Office | Same (approx. 4.6%) | Same |
Conclusion: Corporations are better suited to invest in non-residential real estate, such as commercial and office buildings, than homes.
6. Checklist for Ongoing Corporation Operations
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Keeping books and obtaining proof
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Tax filings: Meet deadlines for VAT, withholding tax, corporate tax, etc.
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Registering changes: change of address or officers within two weeks
7. Closing Advice
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Incorporation is a useful tax and wealth strategy tool, but it must be operated transparently.
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Professional help is recommended, such as a tax accountant or attorney
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Good communication and clear division of roles among family members: a transparent management culture is key to long-term success