Photo: Kaique Rocha
As Japan is single jurisdiction unlike the United States, Germany and Australia, there is no difference in formalities and requirements for establishing and doing a business anywhere in Japan. However, some local governments such as Fukuoka City offer various incentives and support to foreign individuals or companies who are establishing a business in their regions.
Choice of Medium
For individuals who have chosen Fukuoka (or Japan) to start their new business from scratch, their options will be limited to selecting a form of business whereby they are developing their business. If you want to avoid hassle at an early stage, you can choose a sole trader or partnership which requires few administrative steps to be taken. A sole trader is a self-employed person and is often called “freelance” in everyday language. A partnership is commonly used for a professional firm such as an accounting firm or a law firm.
Type of Company
A company structure may be perceived by your customers and others as a more familiar entity to conduct business with. You can set up a company even if you are the only member. Under the Japanese Companies Code, there are four types of companies:
1. Kabushiki Kaisha (KK)
2. Godo Kaisha (GK)
3. Gomei Kaisha
4. Goshi Kaisha
The last two types of companies are rarely used in practice and can be left out in most cases. KK is the most common type of company and over 90% of existing companies in Japan, from Toyota to Fukuoka SoftBank Hawks, use KK.
GK was created as a new type of business vehicle in 2006, designed to be used by small companies whereby the company can save initial and maintenance costs. In practice, however, it has been used for, among other things, subsidiaries of US companies (e.g. Apple Japan) for it is deemed to be equivalent to LLC [*1] in the US which has some advantages under US tax laws.
Because KK is the most recognized by both consumers and businesses, KK has, in most cases, been recommended when setting up a company. However, you could choose GK as it is less expensive and becoming more recognized [*2].
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Steps for Setting Up a Company
The steps for the incorporation of a KK are as follows:
1. Drafting the articles of incorporation.
2. Notarization of the articles of incorporation by a notary public. The fee for notarization is ¥50,000 [*3].
3. Capital contribution (¥1 or more) by the promoters and other subscribers.
4. Appointment of directors of incorporation.
5. Registration of the incorporation of the KK on the commercial registry maintained by the Ministry of Justice, at the location of its head office. The application for registration can be filed electronically. The fee for registration is ¥150,000 [*4].
In case of GK, the notarization can be omitted and the registration fee is ¥60,000 rather than ¥150,000.
Professional Costs
You can do it yourself. Starting a business has never been easier. In this case, no professional costs are needed. There are many websites (e.g. https://www.freee.co.jp/launch/) which can help you prepare necessary documents to be filed with the relevant authority.
However, since those websites are typically designed for Japanese users, for those who do not understand the Japanese language, it will be better to hire someone. Also, since the notarization process requires the promoter or his/her agent’s physical involvement, those who wish to set up a company from abroad should find someone in Japan to act for them.
If you instruct a professional such as a lawyer to set up a company, it will cost a further ¥100,000 to ¥150,000.
More Available Options for Established Businesses
For businesses who already have a certain presence in their country/region, there are many options available.
In this internet age, you may sell your product/service online from the county/region in which the company exists (i.e., cross-border e-commerce). If you are willing to establish a presence in Japan, you may achieve it either indirectly or directly. If you wish to do this indirectly, you can find a Japanese business partner who will act as your agent, distributor or franchisee to sell your product/service in Japan. For a more direct way, in addition to setting up a company as the company’s subsidiary (the process of which is the same as above), the company may set up a branch or representative office in Japan. A branch or representative office, however, is not a legal entity and therefore their functions are limited. Finally, you may choose to do business together with a Japanese business partner in a way both of which are involved with its management, i.e. joint venture.
Local Government’s Support
Fukuoka City offers various support exclusively for foreign entrepreneurs. For details, please refer to my previous articles. Furthermore, you may visit the Startup Cafe operated by Fukuoka City to collect more information.
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Notes:
[*1] Limited Liability Company
[*2] In most cases you should amend some of the provisions in the model articles of incorporation for GK, as these provisions are usually drafted for organizations.
[*3] Plus ¥40,000 stamp duty in case the applicant uses paper-based articles of incorporation.
[*4] Or 0.7% of the amount of the paid-in-capital in case it is higher than ¥150,000.
Disclaimer: While every effort has been made to ensure that the information on this article is accurate at the time of posting, it is not intended to provide legal advice as individual situations will differ. If you do require advice or wish to find out more about the information provided and related topics, please contact the author.
Text by: Atty. Atsushi Miyake of Miyake Law, Dec. 2018.
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