Japan Tax Guide

Starting your business in Japan pt. 1: Selecting your type of operation

Creation date2021/10/28 Last updated2022/07/19


Starting your business in Japan pt. 1: Selecting your type of operation

This blog series aims to give you a general overview of the process of starting your business in Japan. In the first blog entry, we look at the main operation and company types.

Types of operation

A foreign enterprise that wants to start doing business in Japan has three options regarding their type of operation, each with their own characteristics:

1. Representative office
2. Branch office
3. Japanese company

Representative office

An office set up to perform market research and collect information. It can be seen as a preparatory step before setting up a branch office or a Japanese company. No registration at the Legal Affairs Bureau is needed. Additionally, as it does not directly engage in business activities, no corporate taxes need to be paid. Unlike branch offices or Japanese companies, bank accounts or rental agreements cannot be made under the name of the representative office, but must be under the foreign company or a Japanese representative.

Branch office

The branch office is one of the ways that a foreign company can start doing business in Japan. To get started, an appointed representative and location of business must be registered at the Legal Affairs Bureau. In addition, documents such as a notarized affidavit (a document certifying the details of the headquarter and the branch) must be submitted. Legally, the branch office does not constitute a separate entity but is part of the foreign company. As such, any claims and debts are also deemed as that of the foreign company.

Branch establishment flowchart

Required documents

1. Application form for registration
2. Affidavit
3. Seal registration certificate of representative member(s)
4. Seal registration certificate for seal of branch office

Japanese company

Also known as the subsidiary company, establishment procedures are identical to regular Japanese companies. Different to a branch office, this form of business requires paid-in capital and the preparation of articles of incorporation. There are several company types in Japan, and below we will introduce you to the most common two: kabushiki kaisha and gōdō kaisha.

a) Kabushiki kaisha

Also known as kabushiki gaisha, K.K., or stock company, this is the most common company type in Japan. Kabushiki kaisha involves higher registration costs than gōdō kaisha, but has the advantage of being seen as a more stable and reputable business by potential customers. There is a clear distinction between ownership and management, and major business decisions are made in the shareholders meeting. Most companies will opt to have a board of directors, which must contain at least three directors and a statutory auditor.

b) Gōdō kaisha

Also known as gōdō gaisha, G.K., or Japanese LLC, this company type was introduced in 2006 as an option for smaller-scale businesses. Unlike kabushiki kaisha, gōdō kaisha does not require shareholders meetings or board of directors. Investors become “members” of the company and are engaged directly in the operation of the company. Compared to kabushiki kaisha, gōdō kaisha enjoys more flexibility in terms of structure and management, and is popular with subsidiaries of American companies such as Amazon and Apple.

Company establishment flowchart

Required documents (details may vary between K.K. and G.K)

1. Application form for registration
2. Articles of incorporation
3. Determination letter of incorporators
4. Proof of deposit of capital
5. Letter of appointment of directors
6. Seal registration certificate for directors
7. Seal registration certificate for company 

If you have decided to establish a company here in Japan, it will be necessary to deposit initial capital. In the next part of our English blog, we will look at depositing capital and opening a bank account here in Japan.

At TOMA Consultants Group, we provide full consultation and support for establishing your business here in Japan. From helping your company prepare its articles of incorporation and getting its bank account ready, to completing all the necessary tax and social insurance related procedures. Please contact us for more details.             

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