Startup Japan Biz

Types of business operation

When trying to establish a business in Japan, these are the three modes of business owners can choose from

①Representative office: this is usually a liaison office and doesn’t hold its own corporate legal status. Their main purpose is to conduct market surveys, or take care of the transactions between the business owner’s country and Japan, before the official incorporation of the company. These offices are not allowed to engage in sales activities or sign certain contracts in their own name. In case the company is sending over foreign employees to work at its representative office in Japan, they must have a valid residential address different from that of the office in order to qualify for the status of residence (as intracompany transferee).

②Subsidiary companies： As defined in Japan’s Companies Act , this refers to the action of investing a certain capital with the intention of opening up a company. The procedures needed are similar for foreigners and Japanese nationals. Once the establishments procedures for a company has been completed, they are allowed to engage in import and export of products and sales activities, as well as signing off contracts in their own name, and any other administrative procedures.

• Joint-stock Corporation (Kabushiki Kaisha): most common type of company
• Limited Liability Company (LLC, Godo Kaisha)： This type of business structure has been adopted after the revision of Japan’s Companies Act in 2006. In the case of a joint-stock corporation, the size of the investment (duties) determines the dividend (rights) for the investors, but in an LLC, it is possible to stipulate specific investments options and share distributions percentages. It is important however to mention that, in Japan, LLCs are being called so simply because of the freedom of action, and that in reality, they do not offer the same advantages as LLC in foreign countries, such as benefits on the taxation system. Greater freedom of actions can encourage greater rivalry between investors, hence the importance of precise and detailed Articles of Incorporation.
• Other types of companies：other than NPOs, General Incorporated Foundations are also considered as nonprofit organizations. Educational institutions as well as social welfare institutions are also categorized as companies. Foreign investments into these type of institutions are however very rare.

These companies are commonly referred to as Domestic Corporations, as opposed to foreign corporations.

③Establishing a branch office in Japan: This is the procedure for opening up a branch office of a company in Japan. A preliminary requirement is to have an already established mother company operating according to the laws and regulations of the country of origin, and the range of activities within Japan will be the same as in the home country. In addition, the accounting books must be kept following the home country yearly schedule, which makes the procedures more complicated and in reality, the branching option is seldom chosen. Branch offices do hold their own legal corporate status and can be contract holders.

<Comparison of Representative office, subsidiary company and branch office>

※Separate fees are applicable for seal stamps, rubber stamps, certified copy of register (certificate of registered matters) and if have the necessary documents prepared by a specialist.

Procedures for Establishing a Joint-Stock Corporation (Kabushiki Kaisha)

To establish a joint-stock corporation, it is necessary to list a number of important matters in the Articles of Incorporation, to have it notarized by a notary public and then registered at the Legal Affairs Bureau.

Below are the important items that must be included in the company’s articles of incorporation.

※This lists only the most important matters of the Articles of Corporation.

1) General flow of procedures for establishing a joint-stock corporation (Kabushiki Kaisha)

2) Obtaining licenses and permits

While there are activities that can be started at the owner’s convenience, for a number of them, it is necessary to obtain a license to engage in them or at least notify the adequate authorities.

The first step should be to figure out what licenses and notices are necessary. If a permit is needed, it is most likely that there will be specific requirements to meet regarding total of capital, net assets, qualified full time employee, the size and layout of the office, etc. As a result, it is essential to investigate and take note of all these details and establish your business in accordance of all the requirements.

<Required licenses/permit and governmental agency>

3) Notifications required after registration

Once the incorporation process is complete, it is necessary to fill the following notifications and submit them to the authorities in charge.