Establish a Company in Japan


~The reason of establish in Japan~

The Japanese economy has grown rapidly by Abenomics . It endured a low- growth era that was said "the 20 years lost" .

Japanese company owns a lot of intellectual properties , which is guaranteed by the quality of "made in japan" . It says that the intellectual property is just lifeline for Japanese companies. With this order business in Japan , imitation and , such as copyright infringement , as compared to the country of the neighboring countries , it will be freed from many of the worries .

We Tokyo Consulting Group have the experience and expertise to provide the services required for incorporation in Japan. We support your startup processes by dispatching our staff for accounting, labor, and tax-related tasks.

Business Setup

Starting A Business In Japan

Businesses are no longer exclusive to domestic markets in the era of globalization. One aspect of development in a contemporary company is the establishment of overseas branches and subsidiaries.

Asia has become one of the world's most dynamic and competitive markets, prompting many companies to establish branches on the continent. Situated in the heart of Asia, Japan plays a key role in the continent's economic development since the late 20th Century. Securing a business base in Japan can prove to be an excellent entry point into the Asian market.

We Tokyo Consulting Group have the experience and expertise to provide the services required for incorporation in Japan. We support your startup processes by dispatching our staff for accounting, labor, and tax-related tasks.

Table of Contents

Overview

Before starting a business in Japan, the company has to be registered as a legal entity. The business will be recognized as such after the complete registration of its branch office or subsidiary company.

Registration is necessary for daily operations in the country. For instance, when opening a bank account, a newly established business in Japan will be required to show a certificate of registration as a legal entity.

Accounting rules and processes differ between entities. It is essential that the method of incorporation matches your strategy, and this is also an area we can offer support.

Incorporation Strategies

There are several possible strategies for setting up a company in Japan. Due to the enactment of Japanese Corporate Law in 2006, some restrictions on business startup were lifted. Since then, business incorporation has become simpler for foreign companies, allowing easier access into the Japanese market.

Below are the most common methods of business incorporation in Japan: Subsidiary Company(Kabushiki-Kaisha or Godo-Kaisha), Branch, Representative Office, and Representative Service.

Subsidiary Company (Kabushiki-Kaisha and Godo-Kaisha)

The Kabushiki-Kaisha (KK) is similar to joint stock corporation in the United States, and is the predominant method for starting up a business in Japan. Large scale corporations always choose KK, because a variety of methods are available to gather funds (e.g: stock options and convertible bonds).

The Godo-Kaisha(GK) is similar to the limited liability company, and is especially effective for smaller businesses. The fee for establishment is less than that of KK, and they have greater freedom of self-governance. Moreover, the GK does not require annual approval and publishing of their financial statements.

When starting up a business in Japan as a KK or GK, the main factors to take into consideration are:

For other details, refer to the table below:

                   
Kabushiki-Kaisha Godo-Kaisha
Transfer of equity participation share Freely transferred; may require approval of Board of Directors if stipulated in articles of incorporation Approval of all equity participants required
Number of Executives At least one director; to form a board of directors, at least three directors and one auditor are necessary.
One or more of the directors should be representative directors, and at least one representative director should be a resident of Japan
At least one director; all members are executive officers but a representative may be appointed
Regular Shareholder Meetings Held annually Not required
Distribution of profits/losses Allocation by equity participation May be at different rates if stated otherwise in the article of incorporation

Advantages for KK is easily recognized or trusted when working with big Japanese companies. Possible to appoint directors who don't hold shares. Disadvantages for KK is expensive setting up costs, around 400,000 yen. (GK is around 250,000 yen)

Advantages for GK is useful when you have partners who can contribute by providing their knowledge, skills or network without making large financial contribution. Disadvantages is less credible when compared with KK.

Regarding governance, KK is divided between investors / shareholders (owners) and company management (Directors). (a shareholder can also become director at the same time)It is necessary to issue financial statements, and directors have a term of office. The term of office is 1 to 10 years with possibility of re-election (registration is necessary)

On the other hand, KG is owned and managed by partner. We need to invest (irrespective of amount) to manage the company.

Issuance of financial statements is unnecessary, and the term of office of the directors does not have a fixed period.

For both KK and GK, the parent company bears responsibility to the liabilities for equity participants of the subsidiary. It is possible for a GK to reorganize into a KK, and vice versa.The cost of conversion is nearly the same as the difference in setting cost between KK and GK (about 100,000 yen).

Other methods of subsidiary startup include Gomei-Kaisha(Unlimited Partnership) and Goshi-Kaisha(Limited Partnership), but these options are rarely considered in practice since their equity participants bear unlimited liability. Equity participation and joint ventures with local enterprises are also possible measures for starting business in Japan.

Branch Office

The easiest way for a foreign company to establish the foundation of business operation in Japan is to open a branch office. The branch office can start business operations as soon as the location of the office is secured, the branch representative decides, and the necessary information is registered.Unlike a subsidiary company, starting up a branch does not require new articles of incorporation. Instead, an affidavit is required from the embassy of the parent company's country. If the embassy located in Japan does not provide notary services, certification by a public notary from the parent company's country is also acceptable. The registration process is relatively simple. Expenses start at approximately JPY 90,000; name seal expenses and services fees paid to professionals, however, still apply. There are no significant differences between the regulations that apply to the business activities of companies and those that apply to branches.

It is necessary to have a corporation or a Japanese bank account formally registered in Japan to deal with Japanese clients, but in Japan you do not want another capital. At that time the branch office is suitable.


Basic knowledge of branch office is below,

Representative Office

Establishing a representative office is a very effective method of startup in Japan when the company is still at advertising or market research stage of its incorporation. Although a representative office cannot perform actual business activities, it generally does not have to be registered unless it is representing a finance institution (Banking Law, Securities Exchange Law). Registration costs do not apply and tax notices do not need to be submitted. A representative office is required to register as a subsidiary or branch when the need to engage in business activities arises. In this case, if there will be no sales in Japan and do not wish to pay taxes in Japan, or if you don't know how the business will grow in the Japanese market so simply wish to do a market research so far, representative office is suitable.


Basic knowledge of representative office is below,

Representative Service

Representative Service is a type of outsourced business startup in Japan, in which the representatives of the parent company work with agents to process accounting or taxation work. A need for extra staff and specialists during the peak periods, or sudden shortage of human resources is usually when a company may consult a representative service.

Incorporation Processes

Kabushiki-Kaisha

It takes about 2 months for the company to be registered as a KK after the determination of profile. See below for the list of required processes for a KK:

  1. Determination of Profile of KK
  2. Examination of identical corporate names at Legal Affairs Bureau
  3. Preparation of Articles of Incorporation
  4. Acquisition of documents required for registration
  5. Notarization of Articles of Incorporation
  6. Remittance of Capital
  7. Appointment of Officers
  8. Examination of establishment procedures
  9. Application of Registration at Legal Affairs Bureau
  10. Acquisition of Registration Certificate
  11. Opening of Corporate bank account
  12. Notification of stock acquisition to the Bank of Japan

Godo-Kaisha

It takes about a month for the company to be registered as a GK after the determination of profile. See below for the list of required processes for a GK:

  1. Determination of Profile of GK
  2. Examination of identical corporate names at Legal Affairs Bureau
  3. Preparation of Certification regarding equity participants in parent company's country
  4. Preparation of Certification regarding equity participants in Japan
  5. Preparation of Articles of Incorporation
  6. Payment of investment by members
  7. Application of Registration at Legal Affairs Bureau
  8. acquisition of Registration Certificate
  9. Opening of Corporate bank account
  10. Notification of stock acquisition to the Bank of Japan

Branch Office

It takes about a month for the branch office to be registered. See below for the list of required processes for a branch office:

  1. Notification of Establishment to the Bank of Japan
  2. Determination of Profile of branch office
  3. Examination of identical corporate names at Legal Affairs Bureau
  4. Establishment of branch office
  5. Preparation of affidavit on establishment
  6. Certification of affidavit by embassy in Japan
  7. Application of Registration at Legal Affairs Bureau
  8. Acquisition of Registration Certificate
  9. Opening of branch office bank account

Examination of identical corporate names at Legal Affairs Bureau

The company name can be entered in alphabet, number, kanji, hiragana, katakana (or a mixture of these). If another company with the same name is not registered in the same address, you can choose any name. Even though, it would be wise to check in advance if there are any other companies with the same name elsewhere or whether the trademark is registered.

Preparation of Articles of Incorporation

Articles of incorporation of a company list "absolute matters" and "relative matters." Absolute matters are matters that must be stated for the articles of incorporation to be valid, and relative matters are matters that do not have legal effect unless stated in the articles of incorporation.


Details to be decided in the Articles of Incorporation
Absolute matters of KK

Absolute matters of GK

Documents required for registration

Required documents for a foreign individual

  1. Seal certificate (inkan shomeisho) of each investor and director. (issued within 3 months)
  2. Determination of Profile of branch office
  3. two certified copies (If an investor also becomes a director)
  4. Company seal that needs to be registered at the registry office

Required documents for a foreign company

  1. Registry certificate of the parent company issued within 3 months
  2. Notarized Signature attestation of the parent company's representative.

Application of Registration at Legal Affairs Bureau

Becoming a Sole Proprietor in Japan

When launching a new business in Japan, it may be the best way for you to start as a sole proprietor, at least to see how it develops at the beginning. Because it is not complicated and you don't have to pay so much tax, until the business reaches a certain amount profits.

Sole proprietor is a business owned and operated by one individual and you can use a commercial name. Owner and business can not be separated, and all profits / losses, and business assets / liabilities will be owned.

However, the sole proprietor option is available only in the following cases:

One of them has a stable contract with Japanese companies, one of them intends to provide necessary documents for acquisition or renewal "engineer / specialist in humanities" visa or "skilled labor" visa (freelance translator, IT engineer, freelance sports instructor etc.)

Holders of working visa who already has freelance work as side job on top of the full-time job If you wish to get a work visa through your own business which you start in Japan, in most cases it is necessary to set up a company.

Also it may be advantageous to establish a company, even if the sole ownership is the option for you. For example, when trading regularly with Japanese companies, it is easy to obtain reliability in order to do business as a company.

Because of the company's limited liability, the responsibility to amount of the capital invest is limited. After generating certain profits, if the company could be likely to use different tax rates, eventually you can reduce tax to pay.

If you want to start a business with several partners, it is easier to manage the financial aspects for establish a company.


How to start business as a sole proprietor in Japan

There is no registration procedure required to become a sole proprietor, so you can easily start once you are ready. Just submit a specific notice to the tax office within two months after the start of business activities, and file a tax declaration once a year, for the income of the previous year between February and March.

All tax-related procedures are done in Japanese. You can also hire an accountant who can speak English. It is possible to hire employees (full time or part time) as a sole procedures.

A sole proprietor can join the National Health Insurance and Pension Scheme as for the Social security. If your activities are required business license, it is necessary to obtain business license or permission from Japanese authorities.

What Tokyo Consulting Group has to Offer

Today, as Japan faces rapid economic changes across all industries, foreign companies face potential crises. Considering the complexity of Japan's tax system and legislation, it can be difficult for foreign companies to establish themselves in the country without the assistance of a highly knowledgeable, professional business consulting firm.

Established in 20 countries across Asia, Tokyo Consulting Group is at an advantageous position in the globalizing market. With our expertise, experience, and resources, we are able to give full support at every step on the way of business incorporation in Japan.

When starting up a business, the incorporation process has to be planned and considered thoroughly. Some of them are crucial like laws and regulations; others include customs and other social norms which may affect business in the long-term.

We Tokyo Consulting Group are highly experienced in setting up subsidiaries of foreign companies in Japan. Since 1998, we have continually enhanced and updated our knowledge base through our professional experience and market research.

We are capable of providing support with all the aspects required to start up in Japan. Our Japanese CPAs, USCPAs, tax accountants, and social insurance specialists provide the necessary services you may need. We also support with the publishing of financial statements under Japanese GAAP, US GAAP, or IFRS. A team of specialists with different areas of expertise will assist you throughout your incorporation processes.

We guarantee to provide services with the highest level of professionalism at reasonable prices, in the most efficient and effective methods that would meet your expectations. Our staff speak English and Japanese among other languages such as French, Chinese, Spanish, Portuguese, Mongolian, and Khmer, and are capable to serve companies worldwide, regardless of scale. We readily provide our services to fulfill your requirements fully and promptly.

To learn more about our incorporation assistance and a range of other services, send us a message or call us at +81-3-5369-2930.