Establishing a company in Japan

Begin with what the company is for

Companies are formed in Japan for quite different reasons: to hold property, to place an existing trading or brand business on the ground, or to provide the basis for a status of residence. That purpose then governs the form of the entity, the level of capital, the way the objects clause is drafted and the choice of financial year end. It is therefore more natural to settle the purpose before turning to the registration papers. Where an entity is formed simply to have one in existence, the articles, the capital or the year end often have to be amended later, which costs more time than it saved.

Kabushiki kaisha and godo kaisha

Two forms dominate in practice. The kabushiki kaisha is the more widely recognised, which makes it easier to explain to large corporates and to financial institutions; its formation generally requires notarised articles, and its governance carries more prescribed procedure. The godo kaisha is simpler and less costly to form and maintain, and is often sensible where the entity mainly holds assets or runs a small operation, though it presents differently to the outside world and structures its membership interests differently. Either may be wholly owned by shareholders outside Japan. Neither is superior in the abstract. The right form depends on whom the company will face, and on whether outside investment or a transfer of interests is contemplated.

Formation and the weeks that follow

• Settling the name, objects, registered address, capital and financial year end
• Drafting the articles; for a kabushiki kaisha these generally require notarisation
• Paying in the capital and evidencing it, with the remittance route agreed in advance for a non-resident
• Instructing a judicial scrivener to file the incorporation and obtaining the certificate of registered matters
• Filing the opening notifications with the tax office and with prefectural and municipal authorities
• Enrolling in social and labour insurance where employees are engaged
• Opening a bank account, which calls for a concrete account of the business and the source of funds

What begins after incorporation

Once the company exists, the year takes on a steady rhythm: bookkeeping, the annual accounts, corporate and local tax returns, the treatment of consumption tax, and the payroll obligations of social insurance and withholding. Someone must carry this work in Japan continuously, and it is usually entrusted to qualified professionals such as a certified tax accountant and a labour and social security attorney. The step most often underestimated is the bank account. Japanese institutions review new companies practically, looking at the reality of the premises, the specificity of the business, the representative’s connection to Japan, and the origin and movement of funds. Outcomes vary by institution and by case, though preparing the supporting material in advance can help. We do not ourselves carry on any of these regulated activities; we organise the sequence and the documents, and introduce qualified specialists in each field where they are needed.

This note is general information and is not tax, legal, investment or immigration advice. Rules and administrative practice change over time and their application depends on the facts, so any decision should be confirmed with qualified professionals in the relevant field.