Introduction
Japan has been a popular destination for international companies seeking to establish a local operation. For companies looking to expand globally, setting up a team in Japan requires going through the process of establishing a local company. This Japan company incorporation guide serves as an introduction to the common considerations and steps.
Company Types
Foreign companies setting up a legal entity in Japan typically choose between a branch office, subsidiary, or joint venture. The most common option is a Kabushiki Kaisha (KK) or a Godo Kaisha (GK).
Kabushiki Kaisha (KK): A Kabushiki Kaisha is a joint-stock company and is commonly referred to as a “stock company” in English. It can have an unlimited number of shareholders and directors, and the shareholders’ liability is limited to their investment.
Godo Kaisha (GK): A Godo Kaisha is a limited liability company. It can have up to 50 members and requires at least one representative director. The shareholders’ liability is limited to their investment.
Branch Office: A foreign company can set up a branch office in Japan. However, the branch office is not considered a separate legal entity, and the parent company is liable for all the branch office’s activities.
Joint Venture (JV): A joint venture is a new business entity created through a partnership between foreign and Japanese investors. In a JV, the partners jointly share the profits, losses, management responsibilities, and operational expenses.
Incorporation Requirements
Paid-up Capital: There is no minimum paid-up capital requirement for incorporating a KK or a GK in Japan. However, it is recommended to have sufficient capital to fund the business operations.
Foreign Percentage Ownership: Foreign companies can set up a wholly-owned subsidiary in Japan where 100% foreign ownership is allowed under the Foreign Direct Investment (FDI) policy.
Local Director: A KK or a GK must have at least one director who is a resident of Japan. It is also recommended to appoint a local corporate secretary to assist with the compliance requirements.
Office: A physical office in Japan is mandatory before incorporation. The office address will be used as the registered office of the entity in the incorporation documents.
Complete Legal Paperwork
A legal firm or a corporate service provider can assist with the preparation of company incorporation paperwork, which includes articles of incorporation, constitution, and other legal documents to support the incorporation.
Company Incorporation
Once the legal paperwork has been executed, the service provider will provide a copy of the official certificate of incorporation issued by the Legal Affairs Bureau. In Japan, the incorporation process can take between one to three months.
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File Mandatory Registrations
After incorporation, the company must file for the required registrations with the local authorities, which include:
Registration of the company with the Legal Affairs Bureau
Registration of the company with the Tax Office
Registration of the company with the Social Insurance Office
Registration of the company with the Labour Standards Office
Registration of the company with the Health Insurance and Pension Office
Setup Bank Account
Setup Bank Account
The final step is to establish a bank account with a local bank in Japan. This can include extensive application documents, notarized director documents, KYC documentation, and in-person signatures.
Common local banks in Japan include Mizuho Bank, Sumitomo Mitsui Banking Corporation (SMBC), and Mitsubishi UFJ Financial Group (MUFG).
This article does not constitute legal advice.
