Starting a Business in Korea- A General Guideline
Though teaching remains the predominant field of work for most expats in Korea, an increasing number of individuals are seizing the opportunities that lay in the Land of the Morning Calm by starting their own business. From bars and restaurants to dance studios and shops, the number of businesses with expats at the helm continues to climb in numbers as they make the bold attempts to crack the finicky Korean market. But being emboldened with an entrepreneur spirit and a strong business idea isn’t quite enough to get a business up and running as there are, like any country, strict rules and regulations that must be followed and adhered to. While we strongly recommend you consult with experts (governmental, legal, or otherwise) for the official details, here is a breakup of some of the general steps for expats looking to be his or her own boss in Korea.
To begin with, you must first have the proper visa to run and operate a business in Korea. Those who possess a residential visa (such as one of the F-2, F-4, F-5, F-6 visas) will have the most freedom to launch a business with similar benefits and relaxed limitations that a Korean national would receive. Most E-series visas, such as the E-1 and E-2 visas, do not qualify to run a business and any attempt to do so illegally is likely to be met with harsh repercussions. Without an F-series visa, a safe bet is a visa for foreign entrepreneurs (D-8 or D-10). Many business owners, however, have expressed frustration and ire about the sometimes unclear process for these visas including rules and regulations that seem to change overnight.
The good news is that in recent years, the Korean government has begun easing general start up rules to help encourage foreigners to start businesses in Korea. Just last year, a Korean-American entrepreneur was the recipient of Korea’s first “start up visa”– an indication that the Korean government is opening avenues to more foreign start ups. Nevertheless, the high investment requirements to obtain a D-series visa for foreigners attempting to start a business from scratch, as well as tales of running into frequent bureaucratic issues later on seem to indicate that procuring a Korean national- whether as an investor, partner, or helper in the business background- is heavily encouraged. Depending on your nationality, situation, current visa type, and other factors, the process can vary so those who are interested in finding out more about the best visa option should contact the appropriate legal and governmental entities for proper advisement.
After obtaining the proper visa and a location for your business, you’ll need to determine its classification so you can register your business. The most common types of business classifications include:
- Private Business (사업자 or “sa-eob-ja”)
- Partnership Companies (합명회사 or “hab-myeong hwe-sa”)
- Limited Partnership Companies (합자회사 or “hab-cha hw-esa”)
- Stock Companies (주식회사 or “joo-shik hwe-sa”)
- Limited Companies (유한회사 or “yu-han hwe-sa”)
Of these, the private business and partnership classifications are most common for foreigners which are what most “mom and pop” shops such as restaurants, stores, bars, and other small businesses fall under. Many factors hinges on the appropriate classification of your business including the legal documents required, subsequent taxing, liability, etc, but do note that your business can apply to change its legal classification and structure later on if needed.
Before you register your business you will have to head to your closest government office such as your provincial government office (도청 or “do-cheong”), city hall office (시청 or “si-cheong”), or borough office (구청 or “gu-cheong”) where, depending on your business type, you will need to obtain approval, make a registration, or make a declaration of your business. This is a complicated process where the steps you need to take and the associated documents you are required to provide differs based on the purpose of your business. You may also need either, or both, an official company seal and your personal seal. If so, head to your closest seal maker (these shops are often referred in Korean as a 도장방 or “do-jang-bang”) where you can obtain a customized business seal (for stamping official contracts) for roughly 30,000 Korean Won. Call your closest government office beforehand to find out exactly what steps you will need to take and what you will need to provide. Once you have submitted your application, the required documents, and paid any related fees your application will be reviewed for approval, which can take a few days.
If you are approved you will need to register your business at your closest tax office (세무서 or “se-moo-seo” in Korean). Again, depending on your business, the documents and official notaries you must provide will differ but in general your passport, visa, bank account, real estate contract of your business, foreigner investment declaration (which you can obtain from a visit to your local bank or KOTRA), your business confirmation document from your closest government office, are just some of the things you will need to provide with your registration application.
Your business will then have to deal with tax issues. Taxing rules will differ depending on your business type and purpose so you will want to consult with your business’ tax agent or accountant- who you will have to likely officially list- beforehand to know exactly what you’ll need to do and what fees must be paid. This person should be a registered Korean accountant or tax agent.
Later on in the process, you will run into other important steps such as registering for important insurances related to your business (such as the National Pension Fund, Public Health Insurance Program, Employment Insurance, etc). Even after successfully completing all these steps, you may have to file additional paperwork and register with other Korean governmental organizations- depending on your organization’s type and business- before you can operate so it’s advisable you give yourself plenty of time and be patient and prepared for possible unforeseen fees and official work.
To tackle the complicated and strict process, in addition to a number of legal experts one can contact, potential non-Korean entrepreneurs in Seoul can receive advice and support from the Seoul global business center. Created by the Seoul government to aid foreigners looking to either establish a business (or who are already conducting a business in the capital), the center provides a number of services and consultation free of charge. One can even partake in programs such as business coaching and business incubating after registering with the center.
For many non-Koreans who have found success as business owners here a lot of patience, thorough research of the process, and hours of talks with potential partners, legal experts, and friends are just some of the things that are heavily encouraged for budding entrepreneurs in Korea. The overall process isn’t easy and as many Korean and non-Koreans alike can attest to, establishing a business doesn’t always guarantee success in the competitive and trend-centered Korean consumer landscape. But as intimidating and frustrating it is to navigate the official procedures and potential governmental red tape, many agree that there is no satisfaction of knowing until one goes and gives it their all. After all, as Randy Pausch once said, the brick walls aren’t there to keep us out but rather to give us a chance to show how badly we want it!