2024 Korea Business Setup Guide: Launch Your Restaurant Successfully

Considering the initiation of a restaurant in Korea signifies the beginning of an exciting culinary enterprise in a country renowned for its extensive and diverse food culture. South Korea offers a dynamic dining atmosphere with a growing fascination for both traditional Korean cuisine and international flavors. This guide will explore the essential phases and valuable insights to assist you in the prosperous launch of a restaurant in this vibrant culinary landscape. From understanding local preferences to handling necessary permits, our goal is to provide you with crucial information to guarantee the success of your business set up in the Korean restaurant industry.

1. Choosing Business Formation:

In the dynamic business environment of South Korea, restaurants commonly decide between a Limited Liability Company (LLC) or a Joint Stock Company (JSC) when embarking on their business set up.

The Limited Liability Company (LLC), known as Yuhan Hoesa, provides a simple and adaptable legal framework, safeguarding owners from personal liability concerning the company's debts. This structure is favored by small to medium-sized businesses for its straightforwardness, eliminating the requirement for a board of directors or statutory auditor. However, initiating an LLC necessitates at least one investor.

On the other hand, a Joint Stock Company (JSC), referred to as Chusik Hoesa, is typically embraced by larger enterprises. It mandates a minimum of three investors and involves a more complex management structure, including the obligatory appointment of a board of directors and statutory auditor. The JSC allows for easier share transferability, making it suitable for businesses intending to attract external investments or be listed on the stock exchange in the future.

When deciding between an LLC and JSC for your restaurant venture in Korea, take into account factors such as long-term goals, operational scale, funding requirements, and the level of corporate governance complexity you are willing to manage.

While alternative business structures like sole proprietorship or partnerships exist, these may not be optimal for foreign investors due to factors such as unlimited personal liability or restrictions on foreign ownership.

Regardless of the chosen structure for your restaurant business set up in Korea with Foreign Direct Investment (FDI), strict adherence to all relevant regulations is crucial, particularly those specific to the food service industry. This involves obtaining the necessary licenses and permits related to food safety standards.

2. Acquiring Company Name:

Embarking on the procedure to secure a company name in South Korea represents a crucial initial phase in the business set-up process. This entails submitting an application to the Korean Intellectual Property Office (KIPO).

The selection of a distinctive name is paramount, adhering to specific guidelines. The company name should be crafted using Korean characters and must avoid close resemblance or duplication of existing business names. Additionally, it should steer clear of incorporating any prohibited or inappropriate terms.

Once a suitable name is chosen, an application is submitted to KIPO for approval. This action secures the selected name exclusively for your business, preventing any other entity from using it throughout your incorporation proceedings.

Approaching this process with careful consideration and planning is essential, recognizing that your business name significantly shapes its identity and brand image. It is advisable to choose a name that reflects your business's nature, aligns with your brand strategy, and resonates with your target audience, as it plays a pivotal role in defining your business in the marketplace.

3. Notification of Foreign Investment:

The notification of foreign investment can be carried out either by the foreign investor or their representative, requiring a power-of-attorney if a representative is employed. The notification can be submitted to KOTRA, KOTRA's overseas investment KBCs, designated head offices or branches of domestic banks, and domestic branches of foreign banks. For foreign investment through the acquisition of stocks (or contribution), two copies of the notification form are essential.

Individual investors must furnish documentation verifying their nationality, such as a copy of their passport, while corporate investors need to provide a certificate of incorporation issued by a foreign administrative agency, such as the Commerce Department. Additionally, a power-of-attorney is obligatory when the notification is lodged through a representative.

This step is a crucial component of the business set-up process, and careful attention to the required documentation and procedures is imperative for a smooth foreign investment notification.

4. Capital Transfer for Business Establishment

Facilitating the movement of investment capital stands as a crucial element in initiating your business in South Korea. This can be achieved by either transferring funds to domestic banks from abroad or physically transporting the capital across borders. In the latter scenario, a declaration at the customs office is mandatory, and acquiring a certificate for declaring foreign currency becomes necessary.

For fund transfers, consider either opening a non-resident account in foreign currency or utilizing a temporary account number provided by a designated foreign exchange bank. Once the investment capital is transferred, it must be converted into Korean currency and moved to an account specifically designated for receiving payments related to stocks (securities subscription deposit account). Subsequently, the bank will issue a securities subscription deposit certificate, a vital document during the registration and incorporation phase.

Banks may request notarized copies of documents such as articles of incorporation, minutes from inaugural and board of directors meetings, and certificates of stock receipt. Therefore, it is crucial to thoroughly review the list of required documents in advance to ensure a seamless capital transfer for your business set-up.

5. Incorporation and Business Registration Process

The registration of incorporation marks a crucial milestone in initiating your restaurant business in South Korea. This involves the submission of essential documents, such as articles of incorporation, minutes from the inaugural and board of directors meetings, and certificates of stock receipt. These documents can be submitted either to the local court registry office or online through the i-one system. Subsequent to this, the bank will issue a securities subscription deposit certificate, a mandatory document for the incorporation registration process.

After the incorporation registration, within 20 days of establishment, you are required to register your restaurant with the local tax office. This step, known as business registration, necessitates the submission of additional documents and information about your restaurant, including its location, size, expected income, and other relevant details.

It is important to highlight that banks may request notarized copies of documents, including articles of incorporation, minutes from inaugural and board of directors meetings, and certificates of stock receipt. It is crucial to thoroughly review the checklist of required documents well in advance.

Be sure to adhere carefully to all requirements and deadlines associated with both incorporation and business registrations to ensure full compliance with South Korean laws and regulations in the establishment of your restaurant business.

6. Foreign-Invested Company Registration Process

Initiating the registration of your foreign-invested restaurant business in South Korea is a crucial procedure that should commence at the same location where the initial foreign investment notification was submitted. This process needs to be completed within 30 days from the date when the investment capital has been fully paid.

Upon obtaining the certificate of business registration from the relevant tax office, you can proceed to submit an application for the registration of a foreign-invested company.

Typically, the necessary documents for this phase include:

• Application form for the registration of a foreign-invested enterprise
• Certified copy of corporate registration (original copy)
• Copy of the certificate of purchase/deposit of foreign currency
• Shareholder ledger

After submitting these documents, a certificate for the registration of a foreign-invested company will be issued. This document holds significance in various scenarios, such as:

• Remitting investment returns or profits overseas: The process has been streamlined, requiring only a copy of your foreign-invested company registration certificate, a resolution from the board of directors (including details on dividend payouts), and a financial statement audited by a certified public accountant.
• Applying for a D-8 (business investment) visa: You can apply at the Investment Consulting Center of KOTRA, jurisdictional immigration offices, or Korean consulate generals abroad (excluding Chinese nationals). The necessary documents include copies of the completed foreign investment notification, your new foreign-invested company registration certificate, corporate or business registry certification, dispatch order or employment certification, passport, and visa application form.

7. Setting Up a Business Bank Account

Following the official registration of your restaurant business in South Korea, the subsequent step involves the establishment of a bank account. This account is crucial for overseeing all financial transactions related to your restaurant, including customer payments, supplier and employee payments, and operational expenses.

To open a bank account in South Korea, you generally require:

• Business registration certificate
• Certificate of seal impression
• Proof of personal identity (e.g., passport)

Some banks may ask for additional documentation or details about your business, so it is recommended to directly contact the bank or check their website for specific requirements.

Upon submission of the necessary documents and completion of any required application forms, the bank will review your application. Once approved, you can commence using your newly established business bank account.

It's important to note that different banks offer various types of accounts with distinct features and benefits. Therefore, it is crucial to thoroughly compare options from multiple banks before deciding where to open an account for your restaurant business.

8. Registering with the Korea Tax Authority

Following the establishment of your bank account, the next crucial task is to register your restaurant business with the Korea Tax Authority. This step is essential to ensure compliance with South Korean tax laws and regulations, covering aspects such as income tax, corporate tax, value-added tax (VAT), and other relevant taxes.

To initiate registration with the Korea Tax Authority, you typically need to provide:

• Business registration certificate
• Certificate of seal impression
• Proof of personal identity (e.g., passport)
• Comprehensive details about your restaurant, including its location, size, expected income, and other pertinent information.

Upon submission and approval of these documents by the Korea Tax Authority, you will be issued a business taxpayer identification number (TIN). This TIN will be a requirement for all future interactions with the tax authority.

It's crucial to recognize that various businesses may be subject to distinct taxes or have different filing requirements. Therefore, a thorough understanding of the taxes specifically applicable to restaurant businesses in South Korea is essential for successful business set-up.

9. Initiating Business Operations

The commencement of business operations marks the concluding phase in the process of launching your restaurant in South Korea. It's the moment when you can officially welcome customers through your doors! Maintaining a commitment to delivering high-quality food and exceptional customer service is paramount at this stage, laying the foundation for a positive reputation among local patrons.

Subsequently, post-commencement, continuous monitoring of customer feedback and business performance is vital. This ongoing evaluation allows for necessary adjustments and improvements over time, ensuring the sustained success of your restaurant venture.

Conclusion

Embarking on the venture of establishing a restaurant in South Korea entails a series of crucial steps, spanning from choosing the appropriate business structure and securing your company name to fulfilling legal obligations such as foreign investment notifications, capital remittance, incorporation registration, and tax enrollment. Despite the intricacies of these processes, the dynamic food culture and flourishing dining scene in South Korea present significant opportunities for entrepreneurs. By understanding local preferences and regulations, recruiting well-trained staff, sourcing quality ingredients, and implementing effective marketing strategies, you can successfully initiate your restaurant business set-up in this thriving market.

Pearson & Partners offers comprehensive support and guidance throughout the entire journey of establishing a restaurant. Our team, consisting of experienced professionals, is committed to smoothing your path to business set-up in South Korea. We provide expert insights into legal obligations, regulatory compliance, and strategic decision-making, all customized to enhance your chances of success in this vibrant market. With the support of Pearson & Partners, you can confidently navigate the complexities of business establishment and set the stage for a prosperous venture in South Korea.