Setting Up a Company in Japan

Can a foreigner start a business in Japan? The answer is yes! Japan has a supportive ecosystem and streamlined incorporation process. The government’s commitment to globalization makes it ideal for global entrepreneurs. Read more to get started on setting up a company in Japan.

As a foreigner living in Japan, you might be contemplating, “Should I consider setting up a company in Japan?” Rest assured, your entrepreneurial spirit is steering you in the right direction. Japan provides a fertile ground for businesses, ripe with opportunities and growth potential. Moreover, the process of starting a business in Japan, with its legal requirements, is more accessible to foreigners than you might think.

Learning how to incorporate a company in Japan is straightforward, with plenty of resources available to guide you through the process. Many professionals offer several aids such as user-friendly platforms with in-depth information, step-by-step guides, and even one-on-one assistance centers by local governments to help you understand the company incorporation process. Moreover, the country is very supportive of foreign businesses, offering various tax incentives and, in some cases, subsidies that make it an attractive option for business owners. This article will explain all of these guidelines to make it easier for you to navigate the process and successfully establish your own business in Japan. 

What is the Overall Process of Setting Up a Company in Japan?

As a foreigner in Japan, you’ll find the process of setting up a company in Japan to be quite systematic and well-defined. The journey begins with drafting the Articles of Incorporation (known in Japanese as teikan – 定款), which serves as the primary document that establishes and registers your business in Japan.

This critical step doesn’t demand much from you, apart from having identified company officials and securing a business address – see our Ultimate Guide to Japanese Offices for cheaper alternatives to an office. The process of filing for business registration is usually completed within a period of 2 to 4 weeks.

Once your articles are approved and your business is officially registered, the path is clear for you to establish a bank account in the name of your company. This will then be followed by the registration for licenses relevant to your specific industry. 

Quick Start Guide to Setup a Company in Japan

This quick start guide aims to simplify the journey for aspiring entrepreneurs in Japan by outlining essential steps and considerations. Whether you choose to form a Kabushiki Kaisha (K.K.) or a 株式会社, Godo Kaisha (G.K.) – 合同会社, this guide covers the crucial stages from initial planning to post-registration activities. Please note, that this guide is for informational purposes only and does not constitute legal advice. For specific legal or incorporation advice, use our Launch Lab Service for a hassle-free experience.

Disclaimer: This guide is based on general information and may not reflect the latest legal requirements. Always verify with current legal standards and professional counsel.

Step 1: Decide Basic Information

• Company Type: Choose from Kabushiki Kaisha (K.K.) 株式会社 or a Godo Kaisha (G.K.) – 合同会社, etc.
• Company Name: Ensure it’s unique and complies with regulations.
• Business Purpose: Clearly define the scope of your business activities.
• Head Office Location: Can be a home, office, or virtual address.
• Capital: Determine initial capital; even 1 yen is legally acceptable, but consider credibility.
• Establishment Date: The date you file for registration.
• Fiscal Year: Typically April 1 to March 31.
• Directors and Shareholders: Define roles and share distribution.

Step 2: Create a Company Seal

• Get a registered seal (JItsuin / 実印) from a professional seal maker for official documents.

Step 3: Draft Articles of Incorporation (Teikan / 定款)

• Include essential details like company name, objectives, and director details.
• Print and bind three copies: for the notary, for submission, and for company records.

Step 4: Notarize Articles of Incorporation

• Visit a notary public with the articles, personal seals, and registration certificates.
• Pay the notarization fee and get the articles authenticated.

Step 5: Deposit Capital

• Deposit the capital into the representative director’s personal bank account.
• Keep proof of the deposit (bank book copy).

Step 6: Register the Company

• Prepare and submit necessary documents to the Legal Affairs Bureau, including:
  • Application form
  • Notarized articles of incorporation
  • Directors’ and shareholders’ consent forms
  • Proof of capital deposit
  • Registration fee (usually via revenue stamps)

For more detailed guidance, book a free consultation with Launch Lab to incorporate your company in Japan

What is the Legal Framework For Setting Up a Company in Japan?

Understanding the system of Japanese laws and regulations is crucial for any foreign company and Japanese company in Japan. This system is designed to be comprehensive yet clear, providing a supportive framework for all businesses. The process involves steps such as determining the most appropriate type of corporation and obtaining visa, residence, and tax requirements. While it is a detailed process, the system is designed to facilitate an efficient journey for entrepreneurs looking to enter the Japanese market.

What are the Four Types of Corporations in Japan?

When setting up a company in Japan, choosing the right type of corporation is essential. There are four primary types of corporations: Kabushiki Kaisha (K.K.) – 株式会社, Godo Kaisha (G.K.) – 合同会社, Goshi Kaisha (G.K.) – 合資会社, and Gomei Kaisha (G.M.) – 合名会社. Each of these types carries unique features, legal implications, and tax structures. Making an informed choice based on your business needs is crucial for the success of setting up a company in Japan

What Type of Corporation is Good For You?

The Kabushiki Kaisha (K.K.) is akin to a joint-stock corporation and is widely chosen by foreign entrepreneurs in Japan due to its credibility, limited liability, and easy share transferability among stock company.

The Godo Kaisha (G.K.), similar to an LLC, offers a flexible management structure and simplicity, ideal for small to medium-sized businesses or sole proprietors.

The Goshi Kaisha (G.S.K.) and Gomei Kaisha (G.M.K.) are partnership entities, less common due to unlimited liability for certain partners, but beneficial for actively managed partnerships.

The Yuugen Kaisha (Y.K.), a former business structure in Japan, no longer exists due to legal changes. However, owning a company with YK status is still valued, as it signals longstanding operation and trustworthiness in the Japanese business landscape.

The small Kabushiki Kaisha (K.K.) stands out as an optimal choice for foreigners setting up a company in Japan. With its global recognition, credibility, limited liability, and flexible structure catering to external investment and growth, K.K. aligns well with international business practices. Hence, for foreign entrepreneurs eyeing the Japanese market, a small K.K. often provides a familiar and flexible business structure that bridges the cultural and administrative gap, enabling a successful market entry. The credibility of a K.K. is anchored in its notable initial capital investment and strict adherence to the registration process, signaling to stakeholders that you are more trustworthy and invested.

The Godo Kaisha (G.K.) structure is likewise appealing to foreign corporations due to its operational flexibility, limited liability, and non-resident member allowance. It doesn’t require a board of directors, auditors, or minimum capital, simplifying business control. Also, G.K.’s financial statements aren’t public, providing extra privacy. Companies like Google Japan, Exxon-Mobil, Apple, and Amazon Japan successfully use the G.K. structure, showcasing its viability for foreign businesses seeking to penetrate the Japanese market.

Establishing a Kabushiki Kaisha

The journey to establish a K.K. starts with the creation and notarization of your Articles of Incorporation. This foundational document outlines vital business details, such as your company’s purpose, capital investment, and share distribution. Once notarized, it serves as the official constitution of your company.

Following this, you will register your company’s seal, or hanko, a uniquely Japanese element that functions akin to a legal signature on official documents. With your seal registered, you’ll then submit the incorporation documents to the Legal Affairs Bureau. This step officially recognizes your K.K. and allows you to move forward in the process.

The final stage involves setting up a bank account in your company’s name and registering for taxes and social insurance. This crucial step ensures you comply with Japan’s fiscal regulations and are prepared for future business transactions.

How much does it cost?

The costs associated with this process are reasonably structured. As per this guide to launching a company, the notarization of the Articles of Incorporation costs around 50,000 yen, the company seal registration and creation costs around 25,000 yen, and the fee for incorporation registration is around 150,000 yen. 

How many days will it take for each process?

To gain a clearer understanding of the timeline for each process and associated costs, refer to the detailed list below:

• Business plan: 2 to 4 weeks
  • Choose a company name and verify its availability at this link: https://www.houjin-bangou.nta.go.jp/
  •  Get a Japanese address and phone number 
• Articles of incorporation (electronic), sealing application for certification, certification by notary public: approx. 3 business days
  • Fill out the incorporation application for the correct company type and have it stamped by all founding members
• Corporate seals (seal of representative of: the corporation, bank account, square seal of corporation): approx. 3 business days
• Transferring investment money to a bank account: approx. 1 to 3 business days
• Preparation and sealing documents for registration of incorporation: approx. 1 to 3 business days
  • Submit articles of incorporation to TOSBEC or Legal Affairs Bureau (around ¥60,000 to ¥150,000) depending on GK or KK
• Application for registration of incorporation: 1 business day
• Confirming the completion of registration, receiving registration certificate: approx. 7 days after submission

Establishing a Godo Kaisha

The first step towards establishing a G.K. would also be to draft the articles of incorporation. Unlike a K.K., which requires a minimum capital of one yen and an appointed company director, the G.K. has more flexible requirements. It necessitates at least one member, who can be a non-resident foreign national. This is beneficial for entrepreneurs who want to maintain control of their business without residing in Japan.

Next, the incorporation documents must be submitted to the Legal Affairs Bureau for registration. This includes the articles of incorporation, company seal registration certificates, and proof of capital contributions from all members. Once these are submitted and the registration tax is paid, the Legal Affairs Bureau will issue a registration certificate, marking the official start of your G.K.

It’s important to open a corporate bank account for your G.K. in Japan, even before the company registration process. The bank account will be required to deposit initial capital, pay the registration tax, and manage the company’s financial affairs.

Lastly, your G.K. must be registered with relevant tax offices and social security offices, ensuring compliance with Japanese taxation and social security laws. Registering for a consumption tax is mandatory for companies whose taxable sales exceed 10 million yen in the base period.

How much does it cost?

Setting up a G.K. might cost between 600,000 to 1,000,000 yen. This amount usually covers the legal fee for drafting the articles of incorporation, the registration tax, and the costs of obtaining company seal certificates. A G.K. costs about 190,000 yen less to set up than a K.K. because it has no notarization fee and no stamp duty. It’s also important to account for the initial capital that will be deposited into the company’s bank account. These costs can vary depending on the complexity of your business model, and it’s advisable to consult with a professional to get a more precise estimation.

​​How many days will it take for each process?​​

When planning to establish a G.K. in Japan, it’s important to understand the time frame for each step of the process. Here’s a general timeline:

• Business plan: 2 to 4 weeks
  • Choose a company name and verify its availability at this link: https://www.houjin-bangou.nta.go.jp/
  • Get a Japanese address and phone number 
• Drafting the Articles of Incorporation: 1 to 2 weeks
  • Bring it to TOSBEC or your local notary office for certification (around ¥50,000)
  • Fill out the incorporation application for the correct company type and have it stamped by all founding members
• Bank Account Setup: 1 to 4 weeks
• Submission of Documents to TOSBEC/Legal Affairs Bureau: Less than 1 week
  • Costs around ¥60,000 to ¥150,000
• Waiting for Registration Certificate: 1 to 2 weeks
• Registration with Tax and Social Security Offices: 1 to 2 weeks

You can obtain the necessary documents at this link.

Beau Becker’s article serves as a valuable resource, not only consolidating the requirements but also offering insights into his own application journey.

What are the Visa and Residence Requirements for Setting Up a Company in Japan?

Navigating Japan’s business landscape, particularly understanding visa and residence requirements, can be complex. This section offers a concise guide to help you be confident in setting up a company in Japan.

Acquiring the Investor/Business Manager Visa

Setting up a company in Japan as a foreign national requires a deep comprehension of visa prerequisites. The nature of your existing visa can notably determine the kind of business entity you can operate. If you hold a visa type like the Permanent Resident or the Spouse or Child of a Japanese National, which doesn’t limit your professional activities, you have the liberty to select your business form, be it a sole proprietorship (kojin jigyo) or a corporate structure (K.K. or G.K.).

There may be circumstances where forming a company can boost your business’s legitimacy among various parties like property owners, clients, suppliers, investors, and directors. However, if you are setting up a company in Japan without having a long-term visa, it’s imperative to procure the Investor/Business Manager visa.

This specific visa has its own set of criteria you must adhere to (for a detailed overview, you can refer to this).  A prevalent condition is to incorporate a company with a capital investment of no less than 5 million yen before lodging your visa application.

However, it’s crucial to ascertain your eligibility for the Business Manager visa in the first place. Although it’s legally possible to incorporate a company even without fulfilling the visa conditions, without the appropriate visa, your right to operate the business will be denied.

Navigating the Immigration Bureau can pose significant challenges for new companies. Their visa sponsorship requirements are notably subjective, so to ensure you meet the generally accepted minimum criteria for sponsoring resident visas, consider:

1. Maintaining a minimum of ¥5,000,000 in paid-in-capital. While some suggest this may not be necessary if you hire two full-time local staff, it ultimately rests with the discretion of the immigration officer. To avoid uncertainty, consider investing ¥5,000,000.
2. Securing a dedicated office space with a lock and nameplate. Shared offices or virtual setups are typically not accepted. Even having a private office within a shared space may hinge on the reviewing officer’s decision, so it’s safer to avoid such arrangements. Home offices are unequivocally unacceptable. Instead, lease a small private office or apartment in the company’s name.

If you find yourself ineligible for the Investor/Business Manager visa due to reasons like insufficient investment capital, alternative pathways are available. One option is to seek a Japanese partner or attract additional investors and apply for a different visa category such as “Specialist in Humanities/International Services” or “Engineer.”

Acquiring a Startup Visa

Among the various visa categories available, the “Startup Visa” has emerged as a popular choice for budding entrepreneurs.  It eases the usually complicated process of setting up a company in Japan, making knowledge of its immigration procedures vital for business launch success.

The Startup Visa is a unique program designed to attract innovative foreign entrepreneurs setting up a company in Japan. It provides the recipients with a “Business Manager” status of residence for six months, a period during which they can prepare to launch their business operations. This allows the foreigner in Japan a generous time frame to complete the requirements for the standard Business Manager visa, which includes investing a minimum of 5 million yen and hiring two full-time employees or leasing an office space.

Local governments, rather than national authorities, offer this flexible visa program. To qualify, you need to submit a new business implementation plan demonstrating that your business idea can contribute significantly to Japan’s economy. If the local government approves your plan, you are then eligible to apply for the Startup Visa. Check out this list of startup-friendly cities.

Can I Open a Company in Japan as a Non-resident?

You also don’t have to live in Japan to do business there! If you are not a resident but are looking into setting up a company in Japan as a foreign national, Japan also offers several accommodating initiatives, such as the “4-Month Business Manager Visa,” to ease this process and attract foreign entrepreneurs and investments.

The first step for foreign nationals planning to set up a company in Japan is gaining clarity on the legal prerequisites. Despite popular misconceptions, you don’t need to be a resident of Japan to open a company. However, if you’re the company’s representative director, you will need a physical address in Japan for legal documentation purposes.

One of the popular routes for non-residents is acquiring the “4-Month Business Manager Visa.” This visa is part of the Japanese government’s efforts to encourage foreign investment. It allows non-residents to enter the country and undertake the necessary procedures for setting up a company in Japan. After 4 months, you can extend your stay by changing your visa to an “Investor/Business Manager” visa if your business meets specific requirements.

This visa is given before you enter into Japan, which necessitates the submission of all required documents to the Japanese immigration bureau in advance.

The 4-Month Business Manager Visa is operative for four months. During this timeframe, you are allowed to:

• Acquire a residence card (this requires you to have a residential address)
• Open a bank account
• Register your business

It’s essential to prepare a solid business plan demonstrating your venture’s economic viability, as it serves as a roadmap for your venture, guiding decision-making and demonstrating your business’s economic viability to potential investors or lenders. You’ll also need to confirm your investment capital, which should be at least five million yen for the “Investor/Business Manager” visa, along with details of your office location in Japan.

Different Options for Setting Up a Company in Japan

Alternatively, if you are a non-resident interested in setting up a company in Japan, you have various options to consider. The right choice depends on your specific needs and goals.

Representative Office

A Representative Office, offering an easy establishment process, can conduct market research, information collection, or advertising. However, it’s not permitted for sales or profit-oriented activities.

Branch Office

A Branch Office allows profit-making operations and can lease property and open bank accounts under its name. But it’s not a separate legal entity, with the parent company accountable for its liabilities.

Subsidiary Company

A Subsidiary Company is an independent legal entity, ideal for limiting the parent company’s liability. As mentioned before, there are three types of subsidiaries when setting up a company in Japan: Kabushiki Kaisha (joint-stock corporation), Godo Kaisha (LLC), and Gomei Kaisha (general partnership), each with unique regulations regarding capital, liability, and management.

It is worth noting again that the Godo Kaisha structure, similar to an LLC, has gained popularity among multinational corporations like Google and Apple due to its flexible management and operational provisions. By adopting the G.K. model as these companies have done, businesses can effectively navigate the dynamic business environment in Japan, securing their growth and expansion in this globally significant market.

Exploring Joint Ventures with Japanese Companies

Joint ventures can also offer a practical pathway for foreigners setting up a company in Japan, providing a platform for resource and knowledge sharing and risk dilution.

In a joint venture, parties agree to develop a new entity for a limited time, contributing equity. These partnerships can be a new project or other business activity in a legal structure, such as a partnership, limited liability company, or corporation.

Joint ventures with Japanese companies offer access to local market knowledge, shared resources, and risk reduction. Local insight is invaluable for understanding customer behavior, navigating regulatory frameworks, and identifying growth opportunities.

However, it’s important to note potential risks, such as cultural and operational differences, which can lead to misunderstandings. Hence, choosing the right partner and drafting an explicit agreement is key when setting up a company in Japan.

What are the Tax Requirements?

When setting up a company in Japan, familiarizing yourself with the tax requirements is just as essential as learning about the visa and residence requirements to do business in this country.

Type of Company and Taxation

In Japan, just like many other countries, the type of business you set up directly affects the kind of taxes you’ll be obligated to pay. The selection between different business structures, including sole proprietorships, partnerships, and corporations, brings along specific tax implications that must be factored in during the planning stage.

For instance, corporations in Japan are subject to a series of taxes – corporate tax, inhabitant tax, and enterprise tax. The rates for these taxes hinge on various variables, such as the size and location of your business. 

On the other hand, if you’re operating as a sole proprietorship or a partnership, the tax landscape changes. The taxation for these business structures is more intertwined with personal income tax rather than corporate tax. This distinction underscores the importance of aligning your business plan with the most suitable structure. Potential business owners are recommended to explore our resources on business tax reduction in Japan. 

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Where Can I Get Professional Help When Setting Up a Company in Japan?

Foreign entrepreneurs setting up a company in Japan often face a complex landscape of business rules and cultural nuances. Thankfully, professional assistance, ranging from government-backed initiatives to private service providers, can guide you through this intricate process, ensuring your venture’s seamless setup and success.

Government-Backed Aid: TOSBEC

As part of the Japanese government’s efforts to encourage foreign investment, the Tokyo One-Stop Business Establishment Center (TOSBEC) has been established. TOSBEC, a joint initiative of the Japanese government and the Tokyo Metropolitan Government, caters specifically to foreign companies eager to launch or expand their operations in Tokyo.

At TOSBEC, entrepreneurs can avail themselves of free consultations with seasoned professionals. These experts offer guidance across various business aspects, such as navigating legal procedures, comprehending financial regulations, conducting market research, and understanding cultural expectations. Notably, TOSBEC ensures communication isn’t a barrier in this process, offering interpretation and translation services in multiple languages.

 Back Office Specialist Companies

If you are already an established company and you want to move fast, and you do not want to learn how to do everything yourself, you can use the service of a back office specialist company. They can help you establish a bank account faster than doing it on your own due to their long-term relationships with banks and the company registration process.

These companies can also manage accounts, tax compliance, human resource solutions like payroll, and other operational needs. Their deep understanding of the Japanese business landscape enables them to provide tailored solutions that align with your business goals and the local regulatory framework. Established companies and fast-growing startups use these companies so they can focus their time on their actual business, which is getting more customers and solving their needs.

If you are looking for a company, we can introduce one to you based on your company size and needs from low-tier to high-tier service providers. You can reach out to us using the form below.

Local City Resources

Apart from these nationwide initiatives, local resources can also play a crucial role in setting up a company in Japan. Numerous Japanese cities, including Shibuya, Sapporo, Fukuoka, and Aichi, boast startup centers committed to nurturing new ventures. These centers provide a myriad of resources and services to guide you through the process of setting up a company in Japan. 

For instance, Fukuoka City’s initiative towards nurturing startups offers a wealth of insights and support. For more information, you can listen to our podcast episode: Japanese Startup Cities with Akiko Nakagawa from Fukuoka GSC.

Japanese Startup Cities with Akiko Nakagawa from Fukuoka GSC

What are Some Potential Legal Changes Coming to Setting Up A Company in Japan?

Staying updated on potential legal changes is critical for businesses planning to set up in Japan. Here are some possible legal modifications to keep in mind:

Simplifying the Company Formation Process

In order to attract more foreign investors, the government aims to simplify its process for setting up a company in Japan. Future changes may make the process more integrated and efficient.

Easing the Resident Requirement

Current laws mandate that all companies must have at least one representative resident in Japan. A potential change might relax this requirement, making it easier for non-residents looking into setting up a company in Japan.

Enhancing Transparency in Corporate Governance

Japan is also expected to enforce stricter corporate governance codes in the future aimed at enhancing transparency and accountability in corporate operations. This could result in increased reporting requirements and more robust oversight of director activities. 

Revising Tax Laws 

Possible revisions to Japan’s tax laws could include altered corporate tax rates or more tax incentives for foreign-owned startups. Even though these changes haven’t been formally announced, being aware of them can aid strategic planning.

Are There Any Subsidies For Setting up a Company in Japan?

Japan’s dedication to a diverse business environment has resulted in numerous subsidy programs to attract foreign investment. Let’s explore these financial incentives:

Tokyo’s Special Ward Business Establishment Subsidy Program

The Tokyo Special Ward Business Establishment Subsidy Program provides financial assistance for setting up a company in Japan, specifically, businesses looking to operate in Tokyo’s special wards. It primarily targets SMEs and specific sectors, offering financial support to cover establishment costs.

JETRO’s Investment Promotion Programs

The Japan External Trade Organization (JETRO) is another invaluable source of financial support for foreign companies. ​​JETRO’s Investment Promotion Programs encourage foreign direct investment in Japan. These subsidy programs cover various sectors and stages of a company’s life cycle, providing comprehensive support.

Regional Incentives

Several regional governments in Japan offer their own incentives, including subsidies, tax breaks, and preferential rent agreements for companies investing in priority sectors, reducing initial setup and operational costs.

Final Thoughts

To sum up, setting up a company in Japan as a foreigner is a viable endeavor, made manageable by Japan’s clear laws, business-friendly initiatives, and various forms of support. Despite the procedural complexities, a wealth of resources are available to guide you, from choosing the right type of corporation to navigating the visa and tax requirements and potential legal changes. 

Institutions such as consulting agencies and local startup centers, along with government-sponsored programs and subsidies, provide valuable assistance for foreign entrepreneurs. These resources significantly simplify the process and open up opportunities for fruitful business ventures in the vibrant Japanese market. 

Although the road to setting up a company in Japan may seem daunting, the potential rewards are immense. This journey, while intricate, is made feasible with the proper knowledge and resources. 

For more detailed guidance on setting up a company in Japan, consider referring to The Mipro’s Guide to Starting a Business in Japan and more resources by Scaling Your Company!

If you’re seeking personalized guidance and referrals for setting up a company in Japan, we’re here to assist. Connect with us through our contact form to access expert advice tailored to your unique needs. Your journey towards establishing a successful business in Japan starts with the right support – let us help you every step of the way.