Business Structures - DukHee Park

Maria Lisak's email to DukHee Park.
Dear Mr Park:
What would be the Korean equivalent of American:
sole proprietorship
partnerships
corporations
limited liability companies

Specifically, I want the students to inform themselves of Korean business structures - the strengths and weaknesses (the opportunities and pitfalls).

My students have several different backgrounds - English to Chemistry to, of course, Business. So I am looking for materials (English - awesome) or Korean (not too dense - general info with some specific guidelines/legal aspects).

Do you have any suggestions?

Thanks again for your time. I am always happy should you need my help in return.

Maria

DukHee Park's Response.
I happen to be reading American corporate taxation textbook in which I could get to know minute differences among corporate forms, mainly in the context of taxation.

There are many factors of consideration in selecting a business form.

Among them are types of ownership, limited liability, control of management, incorporation, easiness of capitalization and exit, etc.

There are sole proprietorship(sole ownership) and collective enterprises(collective ownership) in Korea.

Sole proprietorship is a form which is owned and controlled by one person. So it is not regulated by the law for that matter. It is governed by various laws and regulations.

As for collective enterprises, we have partnerships and corporations. There are 2 kinds of partnerships-general and limited, and two kinds of corporations-stock corporation and limited liability company.

Be careful that even though Korean and American laws use same names for companies, they are not always the same in contents.

All four forms are incorporated ones according to Korean Commercial Act.

In the U.S., partnerships are not incorporated, which means they are not treated as separate legal entities from the equity holders.

From the perspective of limited liability, general partnership is composed of partners with full responsibility and limited partnership is composed of partners with full and limited liability.
Only general partners are given the management power.

Stock corporation is owned by the form of shares. It is the most frequently used form in Korea. It is adequate to collect huge capital in the market. Shareholders have a say only in the shareholders’ general meeting. Management is trusted with the board of directors and executive officers.

Limited liability company can be called a small-sized form of stock corporation. But it has many different characteristics from the stock corporation. It is intended for family company with small number of equity holders. It is not used so often in Korea. Note that American limited liability company is more like a limited partnership with limited partners who have the management control.

Definitely more than 90% of companies are stock corporations in Korea.

Stock corporation is most democratic because it is based on democratic principles. Shareholders can exert their control through voting rights which are proportionate to the number of shares. The corporation can accumulate huge capital through sale of shares in the open market. It is easy to get out of the corporation by selling the shares that he or she has been holding.
There are many variations in the U.S. such as LLP and LLLP. In fact, Limited liability company in the U.S. is one of variations.

That’s all today. If you have more questions, feel free to ask.

Duckhee Park.