Start A Company In Japan

3/6/2023

So, you think you have a great business idea and need to set up your own business in Japan. Setting up a company for the first time may seem like a complicated thing to do, but Japan has a relatively simple process for company registration.

To start a small business, you can establish a sole proprietorship, but if you want to share ownership of a business, either with other partners or investors, you need to register a company.

Establishing Your Own Company In Japan

My first experience with establishing a company, "Kabushiki Gaisha", goes back to 1987, but not much has changed since. Basically, the company registration is the same, as the nature of the business—producing, selling, and buying—only there are more products and the ways of communication have expanded. Three decades ago, we were using telex, telephones, and fax machines, and now the Internet has made it a lot easier, resulting in fiercer competition in the market.

As a foreigner in Japan, you may come up with business ideas that no one else has considered, which makes it easier to differentiate your company and get noticed in the market. While working in Japan can be more challenging for foreigners, it can also be more rewarding.

This article would be helpful for individuals who are already living in Japan and want to establish their own business, as opposed to companies looking to set up a Japanese subsidiary.

Starting a business in Japan is not easy, but it is easier than popular belief suggests. As for language, many foreign businessmen live and work here with no more than a handful of simple phrases, and some of them are really successful. However, if you don’t speak Japanese, you will always be dependent on someone else, and that is a huge disadvantage for an entrepreneur. Basically, for starting a business, a working-level understanding of Japanese is essential.

Choosing Company Type

There are two types of companies you can establish in Japan:

Godo Gaisha or GK "合同会社"
Kabushiki Gaisha or KK "株式会社"

Godo-Gaisha is a bit easier to set up and manage than Kabushiki-Gaisha. The Godo Gaisha may be a more appealing choice for smaller-scale operations due to its simpler structure and lack of requirements for tasks such as annual shareholder meetings.

However, Godo Gaisha is unable to have outside investors, and it also does not give you the same kind of status as a Kabushiki Gaisha. Some Japanese companies prefer to deal with Kabushiki-Gaisha, but if you know that most of your future clients will not be concerned with the type of entity they are doing business with, then Godo-Gaisha is a fine choice as well. In most cases, Kabushiki-Gaisha is the best company structure to adopt, as its status is important if you will be dealing with other Japanese companies.

The Kabushiki-Gaisha needs only a share capital of 1 yen initially. There is no rule as to the right amount of capital, but the capital amount is useful to demonstrate the credibility of a company. Of course, small amounts are fine, as the capital can be increased in the future as the company grows.

Professional fees charged by legal specialists and government registration taxes are the major costs associated with forming a company. The registration fee for a Kabushiki-Gaisha is 150,000 yen, and for a Godo-Gaisha, it is 60,000 yen. The Kabushiki-Gaisha must be notarized, which costs another 50,000 yen. You should budget around 250,000 yen to set up a Kabushiki-Gaisha and about 200,000 yen if you use a legal adviser.

Depending on a number of factors, you can generally expect the whole process to take about one month for a Kabushiki-Gaisha and a little quicker for a Godo-Gaisha. So, which one is the best? Kabushiki-Gaisha or Godo-Gaisha? It really depends on your individual business needs.

What Type Of Visa You Need

In Japan, there are 30 types of Visa. These can be divided into two types: those that allow a foreign national to work in Japan, and those that do not.

The types of status that are generally prohibited from working include "dependent", "temporary visitor" and "college student". However, "dependent" and "college students" might be allowed to work up to 28 hours per week if they apply for permission from the Immigration Bureau.

The types of status that are permitted to work in a specific area of expertise include "engineer", "professor", "specialist in humanities/international services" and "entertainer".

The types of status that can work in any field include a foreign national registered as a permanent resident (eijusha), a long-term resident (teijusha), the spouse or child of a Japanese national (haigusha), and the spouse or child of a permanent resident (eijusha no haigusha tou). Detailed information about these visas can be found on the Ministry of Foreign Affairs "MOFA" Website.

If you are in Japan and want to start a business, the obvious choice would be applying for "investor/business manager" status, unless you have the possibility of obtaining any of the visa statuses listed above that allow you to work in any field. With the "investor/business manager" visa, you are allowed to run any kind of business. The disadvantages of this visa are the conditions attached to it: 5,000,000 yen to invest in your company and to have a permanent office (not a virtual office).

Once you start your work, the most important thing for renewing your visa is that you can prove your company can pay you a salary that is sufficient for you to support yourself. Normally your salary should be around 250,000 yen to 300,000 yen per month.

Once you start your work, the most important thing for renewing your visa is that you can prove your company can pay you a salary that is sufficient for you to support yourself. Normally, your salary should be around 250,000 yen to 300,000 yen per month. The proof you must provide is a receipt from the Tax Office for Income Tax (gensenchoshuhyo - 源泉徴収票) which shows that your company has paid you a salary. Typically, it is sent to employees in December or January. If that is not possible, showing contracts with customers would be your next option.

The paperwork for renewing a business visa or a spouse visa is not complicated. As long as you can provide the required documents, you can do it yourself. With a quick visit to the immigration bureau of your city, you can get a list of the necessary documents that you have to submit.

Your Salary

Presently, according to Japanese law, as a director of a company, you should have a fixed salary for a given year. Japan is one of those countries where, if your company’s expenses exceed its income annually, you can record it as a debt, and later, when the company has enough money, it will pay you back. This is mostly for tax-related issues. For some, this is one of those situations where they need to contemplate how high to set the salary.

If you are assuming that your company is going to have a lot of income and you are thinking of setting your salary high enough to pay fewer taxes, you need to keep in mind that the personal income tax, pension, and health insurance will be calculated based on your salary. So, the higher you set your salary, the more tax you should pay on other things. Here you can see the list of relevant material in English on the National Tax Agency’s website.

Hire A Tax Counselor

If you are going to establish a company for the first time and are not sure what you exactly should do, you’d better find an accountant who can advise you on how to file the paperwork. For filing your company’s formal paperwork with different organizations in the future, you’ll need to find one anyway.

You can file the paperwork to set up a company yourself, but you must be able to speak, read, and write Japanese to deal with the legal affairs office and bank. Nowadays, you can easily find several English-speaking accounting firms with a quick Google search. Just know that, in comparison, their charging fees are a little higher.

In Japan, consultants in the fields of law and taxation are diverse. Below, see their names in English and Japanese and how generally they can assist you.

Tax Counselors (Zeirishi): Specialized in general bookkeeping, taxation matters
Administrative Scriveners (Gyosei-shoshi): Assisting in visa and permit acquisition
Judicial Scriveners (Shiho-shoshi): Assisting in business establishment
Lawyers (Bengoshi): Counseling large businesses in judicial matters
Patent Attorneys (Benrishi): Consulting in matters concerning industrial property rights such as patents and acquisition of necessary permissions

Documents For Company Registration

For company registration, whether you’d like to handle it on your own or ask your account, you should prepare the followings;

Your Company Profile
Your personal seal and the seal registration certificate
Proof of funds (which can be a copy of your "bankbook" or bank statement, demonstrating that you have the necessary start-up capital)

1. Company Profile

The profile should contain the following:

Company Name: You can use Kanji, Katakana or Romaji (roman letters).
Address: You can change the address at any time, but you have to pay a fee for changes.
Capital: After registration is complete the capital will be transferred into the company’s bank account (normally from your personal bank account).
Founder(s): One or more; should be listed.
Field of Business: You can list as many activities within the industry(s) you have chosen. Your company must operate inside these objectives; of course, you can add to the list later on when you need to.
Tax: You can choose to pay company taxes from January ~ December or April ~ March, depending on which might be beneficial to you.

2. Registering Your Personal Seal

There are shops all around Japan that will make Seals "Hanko" for you in the standard size. You can purchase one from a Hanko shop online or from a shop that you would usually find near train stations. A normal Hanko will cost about 7,000 yen, but this can easily go up to 100,000 yen depending on the material you choose.

You need to take the seal to the municipal office, where they will connect it with your identity. People usually use this Hanko for official and important documents. Together with your registered Hanko, they will give you a card similar to an ATM card. You can use the card to make changes to the seal registration whenever necessary. Ask for one copy of the seal registration certificate; you will need it for opening the company bank account.

3. Opening The Company Bank Account

Once your company is registered, you will receive a registry certificate and a company seal certificate. The process of registration normally takes two to four weeks.

For opening a bank account for your company, you’ll need the company registration certificate, the company seal certificate, and both your personal and the company’s seals. The bank will also ask for the katakana version of the company name.

Banks in Japan, especially major banks, wouldn’t easily open an account for you. The best option is to use the local city banks; for example, if you live in Yokohama, use the Yokohama Bank. Comparing them to major banks, they are somehow welcoming because they feel you are helping the economy of the city by bringing your business to them, which is good for them too. It is easier to receive banking facilities from them as well.

Whether you choose a megabank or a local city bank, the process of opening a bank account would be smoother if you were introduced by a company that has an active bank account there.

Another option is the PayPay Bank, previously known as the Japan Net Bank. They are an internet-only bank. The conditions for opening a bank account seem to be simple: individuals who are 15 years of age or older and legally reside in Japan.

National Health Insurance & National Pension

In Japan, companies that employ workers are required by law to enroll in social insurance (health insurance and welfare pension insurance) and labor insurance (unemployment insurance and workers' compensation insurance).

Accordingly, all residents must enroll in the National Pension and National Health Insurance programs. You can choose to register directly as an individual or through your company. Legally, as a company director or owner, you are required to register through the company. You’d better check the details with a lawyer to see if you have a choice and which is more beneficial to you.

Here is a list of some useful websites you may want to refer to when starting a business in Japan. They can help you not only with the information you need but also with obtaining a visa, establishing your company, and even with loans.