Opening a Restaurant in South Korea: Essential Steps and Insights

Starting a restaurant in South Korea represents the beginning of an exciting culinary journey in a country renowned for its rich and diverse food culture. South Korea offers a vibrant dining scene with a growing interest in both traditional Korean cuisine and international flavors. In this guide, we will explore the essential steps and valuable insights needed for the successful establishment of a restaurant in this dynamic culinary environment. From understanding local food preferences to managing necessary permits, our goal is to provide you with the crucial information required to ensure the success of your restaurant venture in South Korea.

1. Choosing the Right Business Structure

In South Korea’s dynamic business environment, restaurant owners typically choose between forming a Limited Liability Company (LLC) or a Joint Stock Company (JSC).

An LLC (Yuhan Hoesa) offers a simple and flexible legal framework, protecting owners from personal liability for the company’s debts. This structure is ideal for small to medium-sized restaurants due to its ease of setup and management, requiring neither a board of directors nor a statutory auditor. However, at least one investor is required to establish an LLC.

On the other hand, a JSC (Chusik Hoesa) is suited for larger enterprises. It requires a minimum of three investors and involves a more complex management structure, including a board of directors and a statutory auditor. This structure facilitates the transfer of shares and is beneficial for businesses that plan to attract future investments or go public.

When choosing between an LLC and JSC for your restaurant in South Korea, consider your long-term goals, business scale, funding needs, and your readiness for corporate governance.

Alternative business structures like sole proprietorships or partnerships are generally less suitable for foreign investors due to unlimited personal liability or restrictions on foreign ownership.

Regardless of the chosen structure, it is vital to comply with all relevant regulations, especially those related to the food service industry, including obtaining necessary licenses and adhering to food safety standards.

2. Reserving Your Company Name

Securing a company name in South Korea is a crucial first step in establishing your restaurant. This process involves submitting an application to the Korean Intellectual Property Office (KIPO).

Your chosen name must be unique, written in Korean characters, and free from similarities with existing business names or restricted terms. Once a name is selected, submit an application to KIPO to reserve it for your business, ensuring no other entity can use it during your registration process.

Choosing the right name is important as it affects your restaurant’s identity and brand image. Select a name that reflects your business’s nature, supports your branding strategy, and appeals to your target audience.

3. Notifying Foreign Investment

Foreign investment notification must be submitted by the investor or their authorized proxy. KOTRA, KOTRA’s overseas investment KBCs, designated domestic bank branches, and domestic branches of foreign banks can receive the notification. Submit two copies of the investment notification form along with the required documents, such as a passport copy for private investors 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 key step in setting up your restaurant in South Korea. This can be done either by remitting funds to a domestic bank account or physically bringing the capital through customs. If you choose to bring capital physically, declare it at customs and obtain a certificate for foreign currency declaration.

For fund transfers, open a foreign currency non-resident account or use a temporary account number from a foreign exchange bank. After remitting the capital, convert it to Korean won and deposit it into a securities subscription deposit account. The bank will then issue a securities subscription deposit certificate, which is needed for registration and incorporation.

Ensure you check the specific document requirements with the bank in advance, as notarized copies of documents such as articles of incorporation and board meeting minutes may be needed.

5. Incorporation and Business Registration

Incorporation is a significant milestone for your restaurant in South Korea. Submit documents like the articles of incorporation, inaugural meeting minutes, and stock certificates to the local court registry office or online via the i-one system. After incorporation, you must register your business with the local tax office within 20 days. This involves providing additional details about your restaurant, such as location and expected income.

Be prepared for banks to request notarized documents and to meet deadlines for both incorporation and business registration to comply with South Korean laws.

6. Registering as a Foreign-Invested Company

Registering your foreign-invested restaurant must be done at the same location where you submitted the foreign investment notification. This step must be completed within 30 days after the full payment of the investment capital.

Submit documents such as the foreign-invested enterprise registration application, a certified copy of corporate registration, and proof of foreign currency purchase. This will result in the issuance of a foreign-invested company registration certificate, which is required for remitting profits and applying for a D-8 visa.

7. Opening a Business Bank Account

After registering your restaurant, the next step is to open a business bank account for handling all financial transactions. Required documents usually include the business registration certificate, a certificate of seal impression, and proof of identity. Check with various banks to find the best account options for your restaurant business.

8. Registering with the Korea Tax Authority

Following the opening of your bank account, you need to enroll with the Korea Tax Authority. This registration is crucial for tax compliance, covering income tax, corporate tax, and VAT. Provide documents including the business registration certificate, certificate of seal impression, and proof of identity. After approval, you will receive a business taxpayer identification number (TIN).

9. Starting Your Restaurant Operations

The final step is to launch your restaurant. Focus on providing high-quality food and excellent customer service to build a positive reputation. Regularly review customer feedback and business performance to make necessary improvements for long-term success.

Conclusion

Starting a restaurant in South Korea involves several important steps, from choosing the right business structure to registering with the tax authority and managing foreign investment. Although the process can be complex, South Korea’s vibrant food culture offers significant opportunities for restaurateurs. By understanding local preferences, meeting regulatory requirements, and employing effective strategies, you can successfully establish and grow your restaurant business in this exciting market.

Pearson & Partners offers expert guidance and support throughout the process of setting up your restaurant in South Korea. Our team of professionals is dedicated to helping you navigate legal requirements, regulatory compliance, and strategic decisions to ensure your venture’s success. Contact us for personalized assistance tailored to your business goals in South Korea.