How to Start a Restaurant in South Korea: A Complete Guide to Company Formation

Embarking on the journey to establish a restaurant in South Korea marks the beginning of an exciting culinary venture in a country renowned for its diverse and vibrant food culture. South Korea offers a dynamic dining scene with growing interest in both traditional Korean cuisine and international flavors. This guide will walk you through the essential steps and valuable insights needed to successfully launch a restaurant in this lively market. From understanding local preferences to navigating necessary permits, our goal is to provide you with crucial information to ensure the success of your restaurant venture in Korea.

1. Choosing the Business Structure

In South Korea's bustling business environment, restaurants typically select either a Limited Liability Company (LLC) or a Joint Stock Company (JJC).

• Limited Liability Company (LLC): Known as Yuhan Hoesa, this structure offers a simple and flexible legal framework, protecting owners from personal liability for company debts. Ideal for small to medium-sized enterprises, it does not require a board of directors or a statutory auditor. However, at least one investor is needed to set up an LLC.
• Joint Stock Company (JSC): Referred to as Chusik Hoesa, this structure is commonly chosen by larger businesses. It requires a minimum of three investors and involves a more complex management system, including a board of directors and a statutory auditor. The JSC allows easier transfer of shares, making it suitable for businesses seeking external investment or planning to list on the stock exchange.

When deciding between an LLC and JSC for your restaurant, consider long-term goals, business scale, funding needs, and the level of corporate governance you are prepared to manage.

Although sole proprietorships and partnerships are alternatives, they might not be ideal for foreign investors due to factors like unlimited personal liability or restrictions on foreign ownership.

Adhering to all relevant regulations, especially those related to the food service industry, is crucial for your restaurant's success in Korea. This includes obtaining necessary licenses and permits related to food safety standards.

2. Securing Your Company Name

Reserving a company name in South Korea is a key first step in setting up your business. This involves applying to the Korean Intellectual Property Office (KIPO).

Choosing a unique name is essential and must comply with specific guidelines. The name should be in Korean characters and avoid closely resembling existing business names or including restricted terms.

Once you select a name, submit an application to KIPO for approval. This reserves the name exclusively for your business, preventing others from using it during your incorporation process.

Careful planning is needed as your business name significantly impacts your identity and brand. Select a name that reflects your business's nature, aligns with your branding strategy, and appeals to your target audience.

3. Foreign Investment Notification

Foreign investment can be notified by the investor or their proxy, with a power-of-attorney if a proxy is used. Notifications can be made through KOTRA, KOTRA’s overseas investment KBCs, domestic banks, or foreign banks with domestic branches. Two copies of the notification form are required, along with proof of nationality for private investors (passport copy) or a certificate of incorporation for corporate investors. A power-of-attorney is required if a proxy is used.

4. Transferring Foreign Investment Capital

Transferring investment capital is a crucial step in establishing your business in South Korea. This can be done by remitting funds to domestic banks or physically bringing the capital through customs. In the latter case, customs declaration and a certificate for declaring foreign currency are necessary.

For remittance, consider opening a non-resident foreign currency account or using a temporary account number from a designated foreign exchange bank. Once the capital is transferred, it must be converted to Korean won and deposited into a securities subscription deposit account. The bank will then issue a securities subscription deposit certificate, essential for registration and incorporation.

Ensure you have notarized copies of required documents such as articles of incorporation and meeting minutes, as banks may request these.

5. Registration of Incorporation and Business

Incorporation registration is a critical milestone in setting up your restaurant in South Korea. This involves submitting documents like articles of incorporation, inaugural meeting minutes, and stock certificates to the local court registry office or online through the i-one system. Once completed, the bank will issue a securities subscription deposit certificate, necessary for the incorporation process.

After incorporation, you must register your restaurant with the local tax office within 20 days. This involves providing additional details about your restaurant, such as its location, size, and expected income.

Be aware that notarized copies of documents may be required, so review the checklist of required documents carefully.

6. Registering a Foreign-Invested Company

Registering your foreign-invested restaurant should be done at the same location where you notified foreign investment. This must be completed within 30 days of fully paying the investment capital.

After receiving the business registration certificate from the tax office, apply for registration as a foreign-invested company. Required documents typically include:

• Application form for foreign-invested company registration
• Certified copy of corporate registration
• Copy of the foreign currency purchase/deposit certificate
• Shareholder ledger

Once these documents are submitted, you will receive a foreign-invested company registration certificate, necessary for remitting investment returns or applying for a D-8 (business investment) visa.

7. Opening a Bank Account

After registering your restaurant, the next step is to open a bank account for managing financial transactions, including customer payments, supplier and employee payments, and operational expenses.

To open an account, you'll need:

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

Banks may request additional documentation, so check their requirements in advance. Once approved, you can begin using your new business bank account.

Different banks offer various types of accounts, so compare options carefully before choosing where to open your account.

8. Registering with the Korea Tax Authority

With your bank account open, the next step is to enroll your restaurant with the Korea Tax Authority. This is essential for compliance with South Korean tax laws, including income tax, corporate tax, VAT, and other relevant taxes.

To register, you'll need to provide:

• Business registration certificate
• Certificate of seal impression
• Proof of personal identity (e.g., passport)
• Details about your restaurant, such as location and size

After approval, you'll receive a business taxpayer identification number (TIN), required for future interactions with the tax authority.

Understanding specific taxes applicable to restaurant businesses is crucial for compliance.

9. Launching Business Operations

The final step is to officially start your restaurant operations. This involves welcoming customers and committing to high-quality food and exceptional service to build a positive reputation.

Ongoing monitoring of customer feedback and business performance is essential for making necessary adjustments and ensuring continued success.

Conclusion

Opening a restaurant in South Korea involves several important steps, from choosing the right business structure and securing a company name to fulfilling legal requirements like foreign investment notifications, capital transfer, and tax registration. Despite the complexity, South Korea's dynamic food culture and growing dining scene offer significant opportunities. By understanding local preferences, recruiting skilled staff, sourcing quality ingredients, and implementing effective marketing strategies, you can successfully launch and thrive in this vibrant market.

Pearson & Partners is here to support you throughout the process of establishing your restaurant. Our team of experts provides comprehensive assistance with legal obligations, regulatory compliance, and strategic planning to help ensure your success in South Korea. With Pearson & Partners, you can confidently navigate the complexities of business setup and lay the foundation for a prosperous venture in Korea.