What is company formation in Japan?

The economy of Japan is 3rd largest in the world and world's second
largest developed economy. Japan is a country of technology where
electronic goods and transportation (automobiles) are highly produced. The
industry is more updated with technological impact on day in day out
function of business/trade. It is highly preferred place of many businessmen
across the globe to start or set up the business over there in Japan. The
well-equipped infrastructure, skilled manpower, transparency, good
governance are the key factors of Japanese Government to attract the
investment from foreign investors.

Business Structure & Company Formation Procedure in

Japan
There are several forms of business structure to register and operate. All
are listed below with registration/incorporation process of same:-

1. Sole Proprietorship (kojinjigyo)

It is less complicated and requires less tax until the business reaches a
certain amount of profit. It is a business run and owned by Individual. It can
use a commercial name but does not separate its owner and the business,
meaning thereby all profits/loss and assets/debt of business is sole
responsibility of Individual. There is no legal obligation for mandatory
registration to become sole proprietor hence once decided to start a
business can start trade/business. The one and only requirement to be
fulfilled by proprietor is to submit certain notification to the tax office within 2
months after the beginning of the business activities and file a tax
declaration once a year, between February and March for the income
earned during the previous year. If business requires license/permits then
same has to be obtain from Japanese Government.
2. Company formation Japan

Bank Account in Japan is mandatory for Business Incorporation, if not Bank

Account then people required to find business partner who has bank
account in Japan and willing to receive capital in his/her personal bank
account in Japan. Earlier it required a Representative Director (RD) who is
resident in Japan now after April 2016 when law has changed so not
required to have RD. Though it is advisable to have RD as the many Banks
in Japan does not open the Corporate Bank Account unless there is
resident RD.

In Japan people have two option/type of company to be formed i.e.

Kabushiki Kaisha (KK) and Godo Kaisha (GK).

KK is a form of business on which company has limited liability by share,

widely known and most credible form of company. At least one shareholder
and one RD (can be same person) is most to process ahead for registration
of business. Financial Statements should be published.

GK is a kind of business form which is mostly used by Small & Medium

sized company and functions more like partnership. It is introduced in year
2006. It is owned and managed by partners. At least one partner is
required to register this form of business in Japan. Financial statement is
not required to publish.

3. Foreign Company can have either Representative Office (RO), Branch

Office (BO) and Subsidiary (company established under the Japanese
Laws)

a. Representative Office (RO)

It is a simple fact of having a physical office space located somewhere in

Japan and there isn't any required procedure to register it officially. It is not
allowed to engage in commercial activities or generates profits locally but
the activities like providing information to parent company, advertising &
publicity, market research etc. kind of activities allowed to do being RO by
Japanese Government. It is not subject to paying corporate tax. It is not
possible to open a bank account under the name of the parent company.
Only a personal account under the name of representative can be opened,
but the account holder's name can be followed by the company's name.

b. Subsidiary Company
It is an independent company established under the Japanese law, with a
foreign company holding its shares. A foreign company can be the
shareholder of its Japanese subsidiary, although it is also possible to have
others, shareholders, whether it is a company or an individual, Japanese or
foreign.

c. Branch office (BO)

It is an extended office of parent company located in Japan engage in

commercial activities based on capital of parent company. It needs to
declare and pay taxes in Japan.

To register BO, person should have following documents:-

Firstly: Affidavit certified by Country’s Embassy/Consulate in Japan or

public notary of the company where the foreign company is registered.

Secondly: Seal Certificate or Signature attestation of Representation in

Japan (issued within 3 months)

Thirdly: Branch Office’s official seal (to be registered at the registry office)

After all these documents, then the same has to be registered. Step is
given as follows:-

First: Find a branch office address and representative in Japan

Second: Preparing an affidavit and the Articles of parent company as well

as the seal certificate of the representative in Japan

Third: Notarization of the Affidavit by a notary public or

Embassy/Consulate in Japan

Forth: Ordering a branch office’s official seal (stamp)

Fifth: Application of BO Registration (Registration Duties is 90000 yen)

Sixth: Registration Completed and certificate will be issued after due

compliance check which can be used for opening bank account and
proceed with tax and social security-related procedures.
Now let have a look on step by step procedure to incorporate
company in Japan which is described at brief in following steps:-

First: Find an Office Address

Second: Prepare the Article of Incorporation (AOA) and Notarize the AOA

Third: Deposit of Capital

Fourth: Preparing documents for the company’s registration.

Along with application form, it is required prepare other documents like

company seal & its registration, letter of agreement from the directors
assuming their office.

Fifth: Filing the application for the company’s registration

It cost minimum 150000 yen for KK and 60000 yen for GK.

Sixth: Registration certificate Issued

Once the entire process is completed from our end then the due assurance
and compliance check is done by department then issued a certificate of
incorporation which will be identity for company in future correspondence
and required to obtain other applicable registration prescribed by laws in
Japan.

Seventh: obtain Tax & Social insurance registration

After incorporation of company is completed the company is required to
obtain tax number as well as social insurance registration to work further in
Japanese law.

All these procedures require a total of 2 to 4 weeks, although it could take

longer if some of the investors are living overseas. However If the
business/trade need professional license to operate in Japan, it could take
2 to 4 months before being able to fully operate the business in Japan.