How to open a Restaurant in South Korea

Considering the establishment of a restaurant in Korea signifies the beginning of an exciting culinary venture in a country renowned for its diverse food culture. South Korea offers a vibrant dining scene, with growing interest in both traditional Korean cuisine and global flavors. In this guide, we will explore the essential steps and key insights to assist you in successfully launching a restaurant in this dynamic culinary landscape. From understanding local preferences to navigating regulatory requirements, our aim is to provide you with essential information to ensure the success of your restaurant venture in Korea.

1. Choosing the Business Structure:

In South Korea's dynamic business environment, restaurants typically opt for either a Limited Liability Company (LLC) or a Joint Stock Company (JSC).

The Limited Liability Company (LLC), known as Yuhan Hoesa, provides a simple and flexible legal framework, protecting owners from personal liability for company debts. This structure is favored by small to medium-sized businesses due to its simplicity, eliminating the need for a board of directors or statutory auditor. However, establishing an LLC requires at least one investor.

On the other hand, a Joint Stock Company (JSC), referred to as Chusik Hoesa, is commonly chosen by larger enterprises. It requires a minimum of three investors and involves a more complex management structure, including the mandatory appointment of a board of directors and statutory auditor. The JSC allows for easier transferability of shares, making it suitable for businesses seeking external investments or future listing on the stock exchange.

When deciding between an LLC and JSC for your restaurant venture in Korea, consider factors such as long-term goals, operational scale, funding needs, and your willingness to handle corporate governance complexity.

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

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

2. Reserving a Company Name:

Initiating the process of reserving a company name in South Korea is a crucial initial step in establishing your business. This involves submitting an application to the Korean Intellectual Property Office (KIPO).

Selecting a distinctive name is vital, following specific guidelines. The company name must be in Korean characters and should not closely resemble or duplicate existing business names. Additionally, it should avoid incorporating any restricted or inappropriate terms.

Once you have chosen a suitable name, you submit an application to KIPO for approval. This reserves the chosen name exclusively for your business, preventing any other entity from using it during your incorporation process.

Approach this process with careful consideration and planning, recognizing that your business name significantly influences its identity and brand image. Therefore, it is advisable to select a name that reflects your business's nature, aligns with your brand strategy, and resonates with your target audience.

3. Foreign Investment Notification:

Notification of foreign investment can be made by the foreign investor or their proxy, with a required power-of-attorney if a proxy is used. KOTRA, KOTRA's overseas investment KBCs, designated head offices or branches of domestic banks, and domestic branches of foreign banks can be notified. Two copies of the notification form for foreign investment through the acquisition of stocks (or contribution) are required. Private investors must provide a document verifying their nationality (copy of passport), while corporate investors need a certificate of incorporation (issued by a foreign administrative agency such as the Commerce Department). A power-of-attorney is also mandatory when the notification is filed by a proxy.

4. Facilitating Foreign Investment Capital Transfer:

Enabling the transfer of investment capital is a crucial step in establishing your business in South Korea. This can be achieved by transferring funds to domestic banks from abroad or physically carrying the capital through customs. In the latter scenario, a customs declaration is required, along with obtaining a certificate for declaring foreign currency.

For fund transfers, consider 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 deposited into an account designated for stock payments (securities subscription deposit account). Subsequently, the bank will issue a securities subscription deposit certificate, an essential document for the registration and incorporation process.

Banks may request notarized copies of documents such as articles of incorporation, inaugural meeting minutes, board of directors meeting minutes, and certificates of stock receipt. Therefore, it's essential to carefully review the list of required documents beforehand.

5. Incorporation and Business Registration:

Incorporation registration is a crucial step in establishing your restaurant business in South Korea. This involves submitting essential documents, including articles of incorporation, inaugural meeting minutes, board of directors meeting minutes, and certificates of stock receipt, either to the local court registry office or online through the i-one system. Upon completion, the bank will issue a securities subscription deposit certificate, necessary for the incorporation registration process.

Following incorporation registration, within 20 days of establishment, you must register your restaurant with the local tax office. This business registration process requires additional documents and information about your restaurant, such as its location, size, expected income, and other relevant details.

Banks may require notarized copies of documents, including articles of incorporation, inaugural meeting minutes, board of directors meeting minutes, and certificates of stock receipt. It's essential to carefully review the checklist of required documents in advance.

Ensure compliance with all requirements and deadlines associated with both incorporation and business registrations to adhere fully to South Korean laws and regulations for your restaurant.

6. Foreign-Invested Company Registration:

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

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

Typically, the required 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 and applying for a D-8 (business investment) visa.

7. Setting Up a Bank Account:

After officially registering your restaurant business in South Korea, the next step is to establish a bank account. This account is essential for managing 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 typically need:

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

Some banks may require additional documentation or details about your business, so it's advisable to contact the bank directly or check their website for specific requirements.

Once you submit the necessary documents and complete any required application forms, the bank will review your application. Upon approval, you can start using your newly established business bank account.

Different banks offer various types of accounts with different features and benefits, so it's important to compare options from multiple banks before selecting where to open an account for your restaurant business.

8. Registering with the Korea Tax Authority:

After setting up your bank account, the next crucial step is to enroll your restaurant business with the Korea Tax Authority. This is essential to ensure compliance with South Korean tax laws and regulations, including 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 relevant information.

Upon submission and approval of these documents by the Korea Tax Authority, you will receive a business taxpayer identification number (TIN), which is required for all future interactions with the tax authority.

It's important to understand that different businesses may be subject to different taxes or have different filing requirements, so a thorough understanding of the taxes applicable to restaurant businesses in South Korea is crucial.

9. Launching Business Operations:

Launching business operations marks the final phase in opening your restaurant in South Korea. It's the moment when you can officially welcome customers! Maintaining a commitment to delivering high-quality food and exceptional customer service is crucial at this stage, as it lays the foundation for a positive reputation among local patrons.

Following the launch, continuous monitoring of customer feedback and business performance is essential. This ongoing evaluation allows for necessary adjustments and improvements over time, ensuring the sustained success of your restaurant venture.

Conclusion:

Embarking on the journey of opening a restaurant in South Korea involves several critical steps, from selecting the right business structure to fulfilling legal obligations such as foreign investment notifications, capital remittance, incorporation registration, and tax enrollment. Despite the complexities, South Korea's dynamic food culture and burgeoning dining scene offer significant opportunities for restaurateurs. By understanding local preferences and regulations, recruiting well-trained staff, sourcing quality ingredients, and implementing effective marketing strategies, you can successfully launch your restaurant business in this thriving market.

Pearson & Partners provides comprehensive support and guidance throughout the entire process of establishing a restaurant. Our team of seasoned experts is dedicated to smoothing your path to business setup in South Korea, offering professional insights into legal obligations, regulatory compliance, and strategic decision-making tailored to increase your chances of success in this vibrant market. With Pearson & Partners' backing, you can confidently navigate the complexities of business establishment and set the stage for a prosperous venture in South Korea.