Steps of business setup in Japan is quite different from most of other English nations. The language and culture made the process even trickier. But the big picture is that, Japan is a stronghold for various business opportunity. Investors who managed to set their foreign venture here always recommend Japan for foreign investments.
Before an investor plunge into business setup here it should be noted that there are four types of businesses one can choose from when in Japan. These business types are:
- Corporation (Kabushiki Gaisha)
- LLC (Goudou Gaisha)
- General Partnership (Goumei Gaisha)
- Limited Partnership (Goushi Gaisha)
Foreign investors often choose LLC (Goudou Gaisha) before other due to the ease of conduct and various facilities and flexibilities this type of business gets in field of taxation, liabilities and more.
However, if you are a foreign investor in Japan ready to obey the steps of business setup in Japan, there are two ways of corporation setup process you must be aware about. You need to choose one of these two policies to run the business in Japan. Two ways of business in Japan are:
- Kabushiki Kaisha (KK)
- Godo Gaisha, also commonly called GK.
KK or GK?
Investors in Japan often gets confused in between KK and GK during business setup here. To There are several aspects one must keep in mind. These aspects often determine whether to choose KK or GK type for business. Below is a simplified list that can facilitate an investor regarding whether to choose GK or KK policy for his/ her business.
- If an investor has strong financial backup and ready to conduct regular business with Japanese corporations than KK is the right choice for his/her company
- If the foreign investment has limited budget and the dealings will mostly be conducted with isolated clients and foreign companies, GK will be the right choice for this type of business.
- If an investor has a future plan to add up other investors or have an intention to redistribute shares or sell shares than we recommend KK policy and income tax return Japan.
- Choosing GK would be the right choice if investor wish to distribute profits with variable percentage which might be different from actual investment rate. This profit rate however, will be equalized through workforce, knowledge sharing, which is other than financial support.
- If you choose to set the easiest form of business, which is the sole proprietorship in Japan, we advise you to go for GK policy to set this type of company.
If you have clear concept about when to choose GK and KK, now you should concentrate about steps of company setup in Japan. From here onward we will describe the procedural steps of foreign investment journey in Japan.
Steps of business setup in Japan
Behold the general steps of business setup in Japan:
Fix your office address
When setting up an office in Japan, a foreign investor must need to consider registering an office address first. This address must be distinct and in a corporate space and must not be virtual office, resident address or temporary office and visa in Japan.
Drafting the Articles of Incorporation also known as Teikan in Japan
This is an important document that an investor needs to draft and submit. This particular document will determine how the proposed company will be managed in Japan.
Notarize Teikan or Articles of Incorporation
Next, the article of Incorporation needs to be notarized from the notary office. In Japan, Notary office is called Koshonin yakuba. This notarization has to be done for Kabushiki Kaisha (KK) and not Godo Gaisha (GK) type business.
Notarization fee: 50000 yen (Only for KK)
Revenue stamps fee: 40000 yen (For KK and GK)
Deposit of the initial capital
At this phase of business registration process a foreign investor cannot open a bank account. However, initial deposition of business capital needs to be done as a part of company incorporation process. To do that, foreign investor has to connect with a local investor in japan who is reliable enough for depositing the initial capital.
Capital deposit amount: At least 5,000,000 yen or at least two native Japanese employees under you or 2,500,000 yen and a single native Japanese employee.
Getting ready with the company registration documents
In this step of business setup in Japan, all documents recommended must be collected and compiled. Documents such as a letter of agreement from the proposed company directors, notification of the company’s seal etc. has to be available.
Filing company registration application
Once all documents are up to the mark, submit company registration application to the registry office or Homukyoku. The authority of this office deals with all the company registration process in this country.
Registration fees: For KK type business- At least 150,000 yen, for GK type company- 60,000 yen.
Obtain registry certificate and company’s seal certificate
The final phase of the company registration process in Japan includes the retrieval of the registry certificate and company seal certificate. This is possible only when registry certificate is issued after successful business registry process in Japan.
Opening a corporate bank account
At this phase foreign expat can finally open his/her company bank account. However, this has to be corporate account and the account need to be under the name of the company registered. Once the bank account is opened, the investor can transfer the initial deposit from local investor to this newly opened company account.
Complete tax and social insurance compliances
This phase varies company to company but proper tax certificate needs to be collected from the authority. Social insurance should also be under consideration when residing in Japan as foreign investor. Although it is not a part of business setup process in Japan, but ensuring these additional compliances are strongly recommended when establishing a corporate venture in Japan
The whole setup process and regulatory procedures take approximately 3 to 4 weeks. However, this time may stretch even more if the investor resides in other country.
In case, if a business or company needs special license, such as medical, pharmaceutical or import- export, liquor etc. the company need to wait for 2 to 3 months for obtaining particular license/s and continue with the commercial functions in Japan.
It is always recommended to seek and take professional advices from an experienced business incorporation agent who works for international investors in Japan. Doing o will minimize the complexities and wastage of time for business setup in Japan.
Digital stamp can save additional costing during notarization of Article of Incorporation. This can save up to 40,000 yen if appropriate digital stamp can be shown during this particular process.