How to Set Up a Company in Japan
Wednesday, September 18, 2019
Although you can conduct a business with proper licenses and visa as a sole proprietorship (an unincorporated business) in Japan, there may be advantages to incorporating a company.
Why set up a company in Japan?
The main reasons for setting up a company are:
Limited liability. Incorporating a company is a way to protect your personal assets in the case that your business goes bankrupt or is sued or otherwise is held liable for damages. By incorporating your business, you and your investors will only ever lose the amount invested in the company (assuming that the incorporation is found to be bona fide).
Tax advantage. Start-up businesses frequently lose money in the first few years and if your business is incorporated, you can deduct expenses of the company against revenue and avoid taxes on the revenue. However, if the revenue is less than 10 million yen, it might be better to remain unincorporated.
Investment. Having a company allows for equity from investors and makes it easy for investors to understand their rights.
Creditability. As described below, some clients especially in Japan feel more comfortable dealing with companies rather than individuals.
Visa. As Japan does not have investment visa, if you have money, forming a company and becoming an officer of the company might be a way to qualify for a visa to stay in Japan (Business Manager Visa).
The most common company forms in Japan are kabushiki-kaisha 株式会社(stock company; “KK”) and godo-kaisha 合同会社(limited liability company; “GK”).
Both GK and KK can achieve the benefits of incorporation listed above for a small business. Generally, Japanese people feel more comfortable dealing with a KK as it is the most common form of company in Japan and previously required a large amount of initial capital. However, recently, GK has become more common and many successful companies are GK, so the difference in credibility has lessened. As a GK can be incorporated for much less than a KK, GK is usually the best for start-ups.
Differences between KK and GK
*The government office where registration documents are filed.
** A notary (kosho nin) certifies that the articles of incorporation are properly prepared in accordance with laws.
The articles of incorporation outline the governance of a company. In Japan, the articles of incorporation for a KK will contain the following information:
Location of head office
Matters concerning shares or other equity
General meeting of shareholders
Matters concerning board of directors, board of auditors, directors and auditors
Matters concerning accounting such as the start and end of the fiscal year.
You will have to decide on a corporate name, business purposes (also called “objectives”) and the location of head office (location must be in Japan). If you hire a legal professional, she will provide you with templates for the articles of incorporation. In Japan, the practice is to have a very detailed list of business purposes for a KK.
The registered seal requirement involves creating a seal and registering it with a municipal office and a signature certificate is prepared by the competent authority in your home country or other country (e.g., embassy).
If you live outside of Japan and have no bank account in Japan, setting up a KK might be hard. Under the KK formation rules, when you set up a KK, you need to transfer the capital to your Japanese personal bank account first. If you don’t have a personal bank account in Japan, you are allowed to let someone who has a Japanese bank account join as an Initial Director and set up the KK with his/her bank account. A Japanese bank account is not necessary for a GK.
The capital amount depends on whether you tend to apply for a visa using your newly incorporated company. If you have such intention, the capital should be more than 5,000,000 yen as that is one of requirements to apply for the Business Manager Visa. If not, more than one yen of capital is acceptable. However, without a Japanese working visa, you cannot receive a salary from your company in Japan.
Regarding your company registration, you should hire a shiho shoshi lawyer who will take care of the entire company formation. If you need a Business Manager Visa and any business license, you should hire a gyosei shoshi lawyer.
The above is general information and the actual process might differ depending your circumstances.
** Please read “The Who’s Who of the Japanese Legal World.” For a KK, Japanese attorney or a shiho shoshi (judicial scrivener) is required although you can register a KK by yourself with the notarization of the AOI by a notary (kosho nin). A gyosei shoshi (administrative scrivener) may prepare the paperwork for a GK or KK, but may only register a GK.
About the Author
Lawyer in Tokyo