Korea Cuisine Opening: Complete Handbook for Starting a Restaurant

Venturing into the realm of restaurant ownership in Korea marks the initiation of an exhilarating gastronomic endeavor in a nation renowned for its diverse and expansive food culture. South Korea boasts a vibrant dining scene, with a growing appetite for both traditional Korean cuisine and international flavors. In this guide, we will explore the essential steps and valuable insights to navigate the successful launch of a restaurant in this dynamic culinary landscape. From understanding local palates to obtaining necessary permits, our aim is to provide you with indispensable knowledge to ensure the prosperity of your restaurant venture in Korea.

1. Choosing the Right Business Structure:

In South Korea's bustling business landscape, 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, offers a straightforward and flexible legal framework, shielding owners from personal liability for the company's debts. This structure is favored by small to medium-sized businesses due to its simplicity, omitting the need for a board of directors or statutory auditor. However, establishing an LLC requires at least one investor.

Conversely, 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 facilitates easier share transferability, making it suitable for businesses planning to attract external investments or list on the stock exchange in the future.

When deciding between an LLC and JSC for your restaurant venture in Korea, consider factors such as long-term objectives, operational scale, funding requirements, and your comfort level with corporate governance complexity.

While other business structures like sole proprietorships or partnerships exist, 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 essential, particularly those specific to the food service industry. This includes obtaining the necessary licenses and permits related to food safety standards.

2. Securing Your Company Name:

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).

Choosing a distinctive name is paramount, adhering to specific guidelines. The company name must be composed of Korean characters and should not closely resemble or duplicate existing business names. Additionally, it should avoid incorporating any restricted or inappropriate terms.

Upon selecting 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, select a name that reflects your business's nature, aligns with your brand strategy, and resonates with your target audience.

3. Notifying Foreign Investment:

Foreign investment notification can be initiated by the foreign investor or their proxy, with a required power of attorney if a proxy is utilized. KOTRA, KOTRA's overseas investment KBCs, designated head offices or branches of domestic banks, and domestic branches of foreign banks can receive notifications. 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

Ensuring a seamless transfer of investment capital is a critical component of launching your business in South Korea. This can be achieved through either remitting funds to domestic banks from abroad or physically transporting the capital across borders. In the latter scenario, a customs declaration is required, along with obtaining a certificate for declaring foreign currency.

For fund remittance, consider options like opening a non-resident account in foreign currency or utilizing a temporary account number issued by a designated foreign exchange bank. Upon remitting the investment capital, it must be converted into Korean currency and transferred to a designated account for stock payments (securities subscription deposit account). Subsequently, the bank will issue a securities subscription deposit certificate, essential 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. Hence, it's imperative to meticulously review the list of required documents beforehand.

5. Incorporation and Business Registration

Incorporation registration represents a pivotal milestone in establishing your restaurant business in South Korea. This entails submitting essential documents, such as articles of incorporation and meeting minutes, to the local court registry office or via the i-one system online. Subsequently, the bank will issue a securities subscription deposit certificate, a prerequisite during the incorporation registration process.

Following incorporation registration, within 20 days, you must register your restaurant with the local tax office, a process known as business registration. This involves providing additional documents and information about your restaurant's location, size, expected income, and other pertinent details.

Banks may require notarized copies of documents, including articles of incorporation, meeting minutes, and certificates of stock receipt. Thoroughly review the checklist of required documents in advance.

Adhering to all requirements and deadlines associated with incorporation and business registrations is crucial to ensure full compliance with South Korean laws and regulations for your restaurant.

6. Foreign-Invested Company Registration

Registering your foreign-invested restaurant business in South Korea is a crucial step, initiated 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.

Required documents typically include the application form, certified copy of corporate registration, certificate of purchase/deposit of foreign currency, and shareholder ledger. Upon submission, a certificate for the registration of a foreign-invested company will be issued, holding significance for various purposes, including remitting investment returns or profits overseas and applying for a business investment visa.

7. Establishing a Bank Account

Following the official registration of your restaurant business in South Korea, the next step is to open a bank account. This account serves as a crucial tool for managing financial transactions related to your restaurant, including customer payments, supplier and employee payments, and operational expenses.

To open a bank account, you generally need documents such as a business registration certificate, certificate of seal impression, and proof of personal identity. Additional documentation or details about your business may be required by some banks, so it's advisable to check specific requirements.

After submitting the necessary documents and completing application forms, the bank will review your application. Upon approval, you can commence using your newly established business bank account, bearing in mind that different banks offer various types of accounts with distinct features and benefits. Therefore, thorough comparison of options is recommended before finalizing your choice.

8. Registering with the Korea Tax Authority

After setting up your bank account, the next crucial step is to register your restaurant business with the Korea Tax Authority. This is essential for ensuring compliance with South Korean tax laws, covering areas such as income tax, corporate tax, value-added tax (VAT), and other applicable taxes.

To initiate registration, you'll typically need to provide:

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

Upon submission and approval of these documents, the Korea Tax Authority will issue a business taxpayer identification number (TIN), which will be necessary for all future dealings with the tax authority.

It's important to understand that different businesses may be subject to different taxes or have varying filing requirements. Therefore, a comprehensive understanding of the specific tax obligations applicable to restaurant businesses in South Korea is essential.

9. Launching Business Operations

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

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

Conclusion

Embarking on the journey of opening a restaurant in South Korea involves a series of critical steps, from selecting the right 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 complexities involved, South Korea's dynamic food culture and thriving dining scene offer significant opportunities for restaurateurs. By understanding local preferences and regulations, recruiting skilled staff, sourcing quality ingredients, and implementing effective marketing strategies, you can successfully launch your restaurant business in this vibrant market.

Pearson & Partners offers 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. We provide professional insights into legal obligations, regulatory compliance, and strategic decision-making, tailored to maximize your chances of success in this dynamic market. With Pearson & Partners by your side, you can confidently navigate the intricacies of business establishment and pave the way for a prosperous venture in South Korea.