Company Formation in Japan

Company Formation in Japan

Japan is one of fastest growing hubs in the world. In Asia, it is ranked second place for Gross Domestic Product (GDP). When it comes to worldwide statistics, then the country is ranked third with the largest GDP. All these benefits would attract entrepreneurs to go for Company Formation in Japan. Company Formation in Japan is a straightforward process. However, it is important for the investor to be compliant with the local laws.

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  • Procedure for Company Formation in Japan
  • Documents required for Company Formation in Japan
  • Liaising the regulatory agency for company formation in Japan
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Company Formation in Japan

Company Formation in Japan- An Overview

Company Registration in Japan is a straightforward process. There are lot of benefits which attract several investors. The country is thriving with different opportunities for foreign companies to operate their business. Technology and infrastructural development has earned Japan its place in the global market. The government also provides incentives for foreign companies to establish their business.

Japan has large cities such as Tokyo and Yokohama which are major trading hubs and international financial centres. Japan is the eight largest seaport in the world. Hence commercial shipping industry is also booming in the country.

When it comes to business establishment and development, there are different free trade zones to cater to the needs of local as well as international businesses. These free trade zones are Tokyo, Nagasaki and Niigata. Infrastructural facilities along with modernised developments are offered in Japan. All these reasons make it beneficial for an investor to go for the process of company formation in Japan.

Benefits of Company Formation in Japan

There are different benefits by carrying out company registration in Japan. The following are the benefits:

Benefits of Company Formation in Japan
  • Infrastructural Facilities

    Japan offers robust infrastructural facilities for companies and different industries. Major global companies such as Sony and Toyota have carried out business and diversified their presence throughout the world. Companies can easily operate in Japan as there is excellent infrastructure.

  • Developed Hub in the World

    Japan is ranked second in Asia for the GDP. It is ranked third in the world for the largest GDP. Major boost caused by infrastructural facilities provides all the benefits for companies to thrive. Due to this, there is a steady growth of the GDP.

  • Major Trading Hub

    Japan is a major trading hub in the world. This would be in the areas related to fisheries. Commercial airline and shipping industries are also booming in the country. Japan is ranked as the eight largest seaport in the world.

  • Absence of Double Taxation

    Japan has entered into different forms of double taxation agreements with other countries. More than 90 such agreements are present with other countries. Hence if any form of investment from Japan has to be repatriated back to the home country, then these double taxation treaties would be an effective shield for not being taxed twice. This would directly minimise the amount of withholding tax.

  • Regulatory Environment

    Japan has one of the strongest regulatory environments. Hence there are different investors going for company formation in Japan. Japan is signatory to international conventions on protection of different forms of intellectual property rights.

    Due to the above benefits entrepreneurs and investors go for the process of company formation in Japan.

Eligible Business Structures for Company Formation in Japan

It is important for the investor to choose an eligible business structure for company formation in Japan. The entrepreneur has to choose the correct form of business structure for starting the business. The following are the business structures utilised in Japan:

Eligible Business Structures for Company Formation in Japan
  • Joint Stock Company (Kabushiki Kaisha (KK)

    This Company is also known as Kabushiki Kaisha (KK). This organisation is the preferred type of business chosen by an investor for incorporating a company in Japan. Shareholders have the status of limited liability. This would mean that their liability is limited to the amount of share contributions. Companies that want to have corporate governance structures can utilise this form of organisation.

  • Godo Kaisha (GK)

    This form of entity was introduced in 2006 through the Japanese Companies Act. Limited liability status for the shareholders is also present for this type of entity. However, there is more flexibility related to management decision making. When compared to Kabushiki Kaisha the annual compliance costs is lesser for Godo Kaisha. Using this structure has lot of tax advantages.

  • Registered Branch Office

    If an investor is going for company formation in Japan, then utilising this structure would be suitable. Usually foreign companies which are incorporated outside Japan would utilise this structure to carry out operations. If the company wants to regularly conduct business in Japan, then this type of entity can be established. A foreign company would not have to establish a subsidiary in Japan, if this type of organisation is formed.

Eligibility Criteria for Company Formation in Japan

The following eligibility criteria must be sufficed for company registration in Japan:

Eligibility Criteria for Company Formation in Japan
  • Minimum Capital Requirements

    Though there is no form of minimum capital requirements for forming a Kabushiki Kaisha and Godo Kaisha, still it is important to have some form of minimum capital for forming the company in Japan. Even for establishing a branch office in Japan there would be some form of minimum capital requirements.

  • Information on Shareholders

    Information on shareholders must be provided while filing the application. This would include name, address of the shareholders and other information.

  • Information on Directors

    Information on directors must be provided while filing the application. This would include name, address of the directors and other information if the directors have any other appointments. It has to be noted that there is no requirement to appoint a resident director in Japan. Hence the directors can be a non-resident of any nationality.

  • Other requirements

    There may be specific requirements which have to be carried out for company formation in Japan. For Kabushiki Kaisha, they can have different forms of committees such as the shareholders committee and executive directors committee. A Godo Kaisha has to appoint executive members known as ‘gyomu shikko shain’ to carry out business related to execution. The Godo Kaisha has to have an executive manager known as ‘shokumu shikkosha’ who is a resident in Japan.

Procedure for Company Formation in Japan

There are different forms of companies in Japan as per the requirements of the applicant. Depending on the type of company required to be formed by the applicant, the respective procedure has to be utilised.

Kabushiki Kaisha- Company formation in Japan

  • If the applicant chooses the above company to form in Japan, then information on the shareholders and directors must be provided. Forming this type of organisation would take about four weeks.
  • The applicant has to seek approval from the ‘Legal Affairs Bureau’ related to the name utilised by the company. If there is a conflicting name, then the applicant would have to choose another name for company formation in Japan. The ‘Legal Affairs Bureau’ is a part of the ‘Ministry of Justice’. This is the main authority which carries out registration of companies and other forms of compliances.
  • In the next step, the articles of association and other documents must be drafted and prepared.
  •  An affidavit must be provided by the parent company stating that the company is existing. Such affidavit must be attested in a public notary of the official country of the applicant. After this the articles of incorporation would be notarised in an official Japanese notary.
  •  In the next step, capital is remitted to the representative director of the company in Japan. After this process is carried out, the directors of the company must be appointed.
  • After the above step is carried out, the applicant would have to make an application to the ‘Japanese Legal Affairs Bureau’ for company formation in Japan.
  • Once the Japanese Legal Affairs Bureau receives the application, they would provide an acquisition certificate within 10 days. This would be evidence that the applicant has submitted the formalities as required for company formation in Japan.
  • Once the above step is carried out, a bank account would be opened in the name of the Kabushiki Kaisha and all funds would be transferred from the resident director to this account.

Godo Kaisha- Company Formation in Japan

  • A Godo Kaisha has to appoint executive members known as ‘gyomu shikko shain’ to carry out business related to execution. The Godo Kaisha has to have an executive manager known as “shokumu shikkosha” who is a resident in Japan.
  • For forming this type of organisation in Japan it would take about 4 weeks time. This would include the time required for filing all the documentation as required.
  • If the applicant chooses the above company to form in Japan, then information on the shareholders and directors must be provided.
  • The applicant has to seek approval from the ‘Legal Affairs Bureau’ related to the name utilised by the company. If there is a conflicting name, then the applicant would have to choose another name for company formation in Japan. The ‘Legal Affairs Bureau’ is a part of the ‘Ministry of Justice’. This is the main authority which carries out registration of companies and other forms of compliances.
  • The next step would include preparing the incorporation documents such as the MOA and the AOA for the applicant.
  • After this remittance would be transferred to the resident director of the Godo Kaisha. This will provide compliance with the procedural formalities for company formation.
  • Once this is carried out the applicant would have to prepare an application to the Japanese Legal Affairs Bureau.
  • Once the Japanese Legal Affairs Bureau receives the application, they would provide an acquisition of certificate within 10 days. This would be evidence that the applicant has submitted the formalities as required for company formation in Japan (Godo Kaisha).
  • In the final step the company would have to open a bank account and transfer the funds present in the resident director account to the company.

Registered Branch Office- Company Formation in Japan

  • For opening this form of organisation, one representative would be required to be appointed. This representative is the branch manager of the company. The representative must be a Japanese Citizen.
  • The other steps in the procedure to establish a registered branch office would be the same as the procedure to involved in Kabushiki Kaisha and Godo Kaisha.

Other Compliances for Company Formation in Japan

The following compliances are mandatory for all companies:

  • Payment of Japanese Corporate tax

    The Japanese Corporate Tax stands at the rate of 23.4%. This would be for companies that have turnover of more than JPY 8 Million per annum. Companies having a turnover below this would require to pay only 15% corporate tax.

  • Labour Law- The provisions of the Labour Standards Act would apply to all companies.
  • Appointment of Statutory Auditor.
  • Companies have to have a General meeting at least one every year. (Kabushiki Kaisha)
  • Board Meeting has to be held once every three months.
  • All the compliances must be filed at the Legal Affairs Bureau.

Documents required

  • Articles of Incorporation
  • Memorandum of Association
  • Affidavit from the parent company regarding the existence of the company
  • Information on the shareholders of the company
  • Information on the directors of the company
  • Signatures of representatives of the parent company
  • Information on the registered office of the business
  • Information on appointment of executive members (Godo Kaisha).

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Frequently Asked Questions

Usually incorporating a company in Japan would take about three to four weeks.

The following are the types of companies in Japan:

  • Joint Stock Company (Kabushiki Kaisha (KK))
  • Godo Kaisha (GK)
  • Registered Branch Office.

There are lot of advantages using the above business structures. However if your company would want to open a branch office then this is cost friendly. However, only if you are carrying out regular business in Japan then this type of structure should be utilised.

Yes, VAT would be charged in Japan. The rate of vat is 8%.

Yes, the government offers lucrative grants to foreign companies. For example, there is no approval required for foreign owners to run the company.

Yes, all companies have the status of limited liability.

It is the duty of the accounting advisor to create all the finance documents for the company. The requirements of the accounting advisor were brought out recently by the companies act.

Yes, an individual applicant going for company formation in Japan can form governance committees for managing the company.

The following have to be disclosed during the process of company formation in Japan:

  • Name of the Company
  • Registered Office of the Company
  • Capital Contribution
  • Information on shareholders and directors
  • Purpose of Business
  • Number of Shares- Authorised Shares and Shares which are issued
  • Addresses of the directors
  • All information on officers.

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