Forming a Company in Japan |
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Although Japan has a reputation for being a hard place for entrepreneurs to get their foot in the door, forming a company in Japan can be a rewarding and enriching experience. The Japan External Trade Organisation (JETRO) recently stated that more than 83% of 614 foreign-investors who had decided on forming a company in Japan reported 'fair to booming' business. More than 50% are expanding, and approximately 10% reported lower operational costs than a year ago. There are many different corporate structures allowed under the Company Law of Japan, which include: |
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| Kabushiki Kaisha (KK) Joint Stock Company | |||||||||||||||||
A Kabushiki Kaisha (KK) is a separate legal entity with liability limited to the amount contributed. This is projected to be the preferred corporate structure for foreign investors forming a company in Japan. It is now considered the most flexible structure because it can suit different companies’ needs. A KK can be closed, with only one director, which is ideal for start-ups, or it can be 'public' with more than three directors and a statutory auditor, though not necessarily listed, which can be preferred by sizeable entities. |
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Under the New Company Law, there is no paid up capital requirement. However, the company must raise Yen10 million in capital within five years to stay registered as a KK. Any key decision must be made by the Director or Board of Directors because of the strong statutory requirements for corporate governance. International entrepreneurs should budget for Japan KK set up fees of approximately US$18,000, depending on corporate structure and range of professional services required. |
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| Godo Kaisha (GK) Limited Liability Company | |||||||||||||||||
For those investors undertaking the process of forming a company in Japan the creation of a Godo Kaisha (GK) is similar to a Limited Liability Company. Each partner is only liable for the amount they have invested, and creditors will only receive the amount of capital paid into the company. This structure allows a person to keep their business operation simple and do little reporting and compliance work. The minimum capital requirement for a Godo Kaisha is 1 Yen upon incorporation, but the company is required to raise at least Yen 3 million within the first 5 years. A GK is taxed at corporate tax rates, unlike an Anglo-American Limited Liability Company, on top of the income tax on the income tax the owners pay. This change causes some to see a KK as superior, but a GK still has many advantages for those investors undertaking the process of forming a company in Japan. International entrepreneurs should budget for Japan GK set up fees of approximately US$12,000, depending on corporate structure and range of professional services required. |
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Branch Office |
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For those investors forming a company in Japan for trading purposes a branch office is the right choice. In this case, a branch office needs i) to be registered with the Japanese Ministry of Justice ii) to have a resident representative and iii) to have a registered office. A branch office can do most things a domestic company does, including having a bank account and leasing equipment. However, since a branch office is not a separate legal entity from the head office, the head office can be sued for the branch’s debts. Any losses can be 'rolled-up' and carried to the next year to offset against profit for tax reasons for a maximum of five years in a branch office. However, because a branch office cannot be directly converted to a company, the tax benefit from rolled-up losses will be lost if they aren't yet offset. International entrepreneurs should budget for Japan branch office set up fees of approximately US$13,000, depending on corporate structure and range of professional services required. |
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Representative Office |
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A representative office can be a useful and easy way to establish a presence in Japan. However, a representative office is restricted in its activities and may not serve the purpose of forming a company in Japan for some investors. It can be valuable in i) purchase of assets ii) storage of assets and iii) auxiliary assets such as advertising, information gathering and market research. A representative office in Japan is restricted from making sales, but it can supply information and prices to customers. There is no limit on the number of employees allowed. International entrepreneurs should budget for Japan representative office set up fees of approximately US$11,000, depending on corporate structure and range of professional services required. |
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| Other Information | |||||||||||||||||
| Refer to the following links to read more information on Japan Company set up: | |||||||||||||||||
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| Contact Us | |||||||||||||||||
| For more information on any of our Japan Corporate services, please email email@healyconsultants.com or telephone us in Tokyo at +81 345 801 776. | |||||||||||||||||
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