Set Up a Company in Japan @ Asia Business Set Up

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Starting a Company in Japan

Starting a company in Japan is an ideal option for entrepreneurs and organisations conducting business in Japan. However, Japan is not a efficient international trading jurisdiction because of high corporate taxes on global income. Although the Japan limited liability company (LLC) is the preferred corporate vehicle for investors starting a company in Japan, other entities are available depending on business type and requirements. The following is an overview of Japanese corporate law and the different corporate structures available in Japan:

Japan company law is outlined in the New Companies Law of Japan 2006 and company incorporation is controlled by the Ministry of Justice (MOJ). Through the MOJ companies are registered and administered, corporate compliance and disclosure requirements are monitored, and statutory audits by public accountants are regulated.

Of the many legal entities permissible in Japan, the majority of entrepreneurs starting a company in Japan do so through an LLC (Godo Kaisha). The government fee to register an LLC is US$5,570.

Through an LLC, an entrepreneur starting a company in Japan can i) open a corporate bank account ii) obtain local residence and employment visas and iii) lease office or factory premises.

In accordance with the New Companies Law of Japan 2003, each company must appoint at least one director, who need not be resident in Japan. Thereafter, an unlimited number of local and international directors may be appointed. Furthermore, when starting a company in Japan at least one shareholder must be appointed. Both local and international, corporate and individual shareholders are allowed.

When setting up a company in Japan, a local, resident company secretary has to be appointed. A company is also required to lease office space in Japan.

After incorporating a company in Japan, it is necessary to submit audited annually with the National Tax Agency (NTA) by 31 March.

Also established via the Legal Affairs Bureau of the MoJ, a Japan Branch Company retains the legal identity of its foreign parent. The branch company must adopt the same name as its parent, and is required to file audited financial statements (relating to its Japan operations) annually with the NTA.

A Representative Office does not need to be registered, and therefore there are no government registration fees.

Due to the restrictions on activities placed on a Japan Representative Office, this entity is the least preferred option by foreign investors starting a company in Japan. A Japan Representative Office is useful for entrepreneurs wishing to conduct preliminary market surveys and feasibility studies before making a long-term investment commitment to Japan. Because it conducts no business in Japan and is not permitted to issue invoices, a representative office generates no profits and is therefore not subject to tax.

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A limited liability partnership (LLP) has a more simple structure than a limited liability company, because the equity participants (who have limited liability) can freely establish internal rules on the operation of the entity. An LLP is not subject to corporation tax. However, taxes are levied on profits allocated to the equity participants. The government fee to register an LLP is US$5,570.

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