Setting up a Company in Japan
Foreign companies establishing a business entity in Japan can choose from four basic types of operations: 1) subsidiary company (“kabushiki kaisha”), 2) branch (of foreign office) and 3) representative office.
As the procedures for setting up a company or a branch in Japan are complicated and must be conducted in Japanese, most people enlist the services of a professional, such as an attorney-at-law, judicial scrivener, or administrative scrivener to handle establishment procedures which typically take three months to complete.
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,
Branch office is commercial activities
Registration is required
No capital is required
Setting up costs is around260,000yen
Should be a representative in Japan (resident)
Accounting is aggregated to the parent company’s accounting (tax declaration required in Japan)
Employing staff is possible
Social security is mandatory
Obtaining visa is possible
Company name must be Same as the parent company
Opening corporate bank account is possible
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 office is not commercial activities.
Registration is not required.
No capital is required
Employing staff is Possible
Social security may be mandatory depending on case
Obtaining visa is Possible
You can decide the company name free
Opening corporate bank account is impossible
It takes about 2 months for the company to be registered as a KK after the determ
ination 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
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:
13. Determination of Profile of GK
14. Examination of identical corporate names at Legal Affairs Bureau
15. Preparation of Certification regarding equity participants in parent company’s c
16. Preparation of Certification regarding equity participants in Japan
17. Preparation of Articles of Incorporation
18. Payment of investment by members
19. Application of Registration at Legal Affairs Bureau
20. acquisition of Registration Certificate
21. Opening of Corporate bank account
22. Notification of stock acquisition to the Bank of Japan
It takes about a month for the branch office to be registered. See below for the list of required processes for a branch office:
23. Notification of Establishment to the Bank of Japan
24. Determination of Profile of branch office
25. Examination of identical corporate names at Legal Affairs Bureau
26. Establishment of branch office
27. Preparation of affidavit on establishment
28. Certification of affidavit by embassy in Japan
29. Application of Registration at Legal Affairs Bureau
30. Acquisition of Registration Certificate
31. 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
- trade name
- place of principal office
- value or minimum amount of assets contributed at time of incorporation
- name and address of each promoter
- Absolute matters of GK
- trade name
- place of principal office
- names and addresses of members
- statement that all members are limited liability members
- purpose and value of members’ contributions
- 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.two certified copies (If an investor also becomes a director)
3.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.
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:
Spouse of Japanese National Visa, Long Term Resident Visa, Permanent Resident Visa, or Spouse of Permanent Resident Visa holders.
Holders of working holiday visa (no limit until visa expires)
Holders of Dependent Visa, Student Visa, or Cultural Activities Visa who received permission from Immigration office (up to 28 hours per week)
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.