Legal Issues for Korean Parent Companies Expanding to the U.S. (Entity Setup, Visas, and Compliance Pitfalls)
As more Korean companies look to expand into the U.S. market, understanding the legal and operational framework for establishing a subsidiary or branch office is essential. The U.S. offers vast opportunity—but its regulatory landscape is complex and decentralized, with separate federal, state, and even local compliance layers.
This article highlights key considerations for Korean parent companies establishing a presence in the U.S., including corporate structure, immigration options, and ongoing compliance obligations.
1. Choosing the Right U.S. Entity
The first major decision is selecting the right type of entity for your American operations. Most Korean companies choose between:
Limited Liability Company (LLC): Flexible management and pass-through taxation. Often preferred for smaller or joint-venture operations.
Corporation (Inc.): Better suited for larger subsidiaries or when planning to raise outside capital. Offers clear shareholder structure and continuity.
Wholly-Owned Subsidiary vs. Branch Office:
A subsidiary is a separate legal entity that limits the parent’s liability. A branch office, by contrast, exposes the Korean parent to direct U.S. liabilities. In nearly all cases, forming a subsidiary—typically a Delaware or New York corporation or LLC—is recommended.
2. Ownership, Capital, and Governance
Foreign-owned U.S. companies must comply with both corporate law and federal disclosure requirements.
Key steps:
Draft Articles of Incorporation (or Organization) and register with the Secretary of State.
Obtain an Employer Identification Number (EIN) from the IRS, even if the Korean parent has no U.S. tax ID.
Prepare bylaws or an operating agreement governing management and ownership.
Appoint at least one U.S. registered agent for service of process.
Banking & Capital Contribution:
Most banks require in-person verification by a U.S. representative and certified company documents. Be prepared for a detailed compliance review due to anti-money-laundering (AML) laws.
3. Visa and Immigration Considerations
Sending key personnel from Korea to the U.S. requires appropriate visas. Common options include:
L-1 Intracompany Transfer Visa: For executives, managers, or specialized employees transferring from a Korean entity to a U.S. subsidiary or affiliate.
E-2 Investor Visa: For substantial investment in a U.S. enterprise by Korean nationals (under the Korea-U.S. treaty).
H-1B Specialty Occupation Visa: For professionals working in qualified specialty roles, typically requiring a bachelor’s degree or higher.
Each visa type has specific eligibility requirements, timelines, and compliance obligations—especially regarding salary and job duties.
4. Employment and HR Compliance
U.S. labor laws differ significantly from Korea’s.
Korean employers must adjust to decentralized employment regulation across federal and state levels.
Important points:
At-will employment: Most U.S. employees can be terminated for any lawful reason, absent a written contract.
Wage and hour laws: Each state sets its own minimum wage and overtime rules.
Employee classification: Misclassifying employees as independent contractors can trigger penalties.
Anti-discrimination laws: Employers must comply with federal and state laws prohibiting discrimination based on race, gender, age, disability, and more.
Many Korean executives find U.S. employment practices surprisingly litigation-sensitive—so preventive compliance is crucial.
5. Common Compliance Pitfalls
Even well-established Korean corporations can face unexpected challenges when entering the U.S. market:
Inter-company transactions: Transfer pricing between parent and subsidiary must follow arm’s-length principles.
Tax filings: Both federal and state tax filings are mandatory even if the business operates at a loss.
Annual reports and franchise taxes: Each state imposes periodic filings and fees.
Intellectual property: Trademarks and patents must be registered separately in the U.S. system.
Import/export controls: Certain industries (electronics, defense, dual-use technology) require federal clearance.
6. How Good Pine Can Help
Good Pine advises Korean parent companies and U.S. subsidiaries on all aspects of cross-border business setup and compliance, including:
U.S. entity formation and governance
Drafting bylaws, operating agreements, and shareholder structures
Coordination with immigration counsel for L-1, E-2, and H-1B visas
Employment policies and compliance training
Risk management and ongoing legal support in New York and New Jersey
Expanding to the U.S. market is a strategic milestone—one that benefits from thoughtful planning and experienced local counsel.
Disclaimer
This article is for general informational purposes only and does not constitute legal advice. Reading it does not create an attorney–client relationship with Good Pine P.C. For tailored guidance, please contact Good Pine P.C. directly.
