Establishing a business in Japan provides a fair and equitable playing field. Japan boasts many world-renowned companies, and several multinational companies have already established their presence there. Japan presents an attractive investment opportunity with a dynamic market and extensive business opportunities.
Japan’s economic policies and regulations promote free-market competition, providing an equal opportunity for domestic and foreign businesses to thrive. Additionally, the Japanese government provides ample support to foreign investors with several incentives, such as subsidies, low-interest loans, and tax breaks, making Japan an ideal destination for investment.
Foreign investors have multiple options to incorporate an overseas business entity in Japan. These options include:
- Representative Office
- Branch Office
- Subsidiary Company (Kabushiki-Kaisha or Godo-Kaisha)
- Limited Liability Partnership [LLP] (Yugen Sekinin Jigyo Kumiai)
However, for commercial business activities in Japan, the most popular options are to establish a “Branch Office” or a “Subsidiary Company” in the form of a Joint-Stock Company (Kabushiki-Kaisha) or a Limited Liability Company (Godo-Kaisha). The choice of the entity will depend on the investor’s objectives, business size, and desired level of liability protection.
It is important to assess the advantages and disadvantages of each option and seek professional advice to make an informed conclusion that aligns with the business objectives. Once the legal entity is established, the company must comply with all Japanese regulations, tax laws, and reporting requirements to operate smoothly in Japan.
Branch Office
A branch office is a business structure where a company establishes a presence in Japan. The branch office is considered an extension of the foreign enterprise and is not a separate legal entity. This means that the foreign company is liable for any debts or obligations incurred by the branch office in Japan. Setting up a branch office can be straightforward, but it requires approval from the Ministry of Justice and registration with the local government.
Representative Office
This business entity functions as a liaison office for foreign companies. It cannot engage in profit-generating activities and is not regarded as a legal entity. Instead, it serves as a non-commercial office that carries out market research, promotes the foreign company’s products or services, and facilitates communication with Japanese clients or partners.
Foreign companies often establish a representative office in Japan to explore the Japanese market, establish a local presence, and build relationships with Japanese businesses. A representative office can also serve as a stepping stone towards establishing a more permanent presence in Japan, such as a branch office or subsidiary.
Unlike a branch office, a representative office in Japan does not need to be registered with the government or have a minimum capital. But, representative offices have restrictions. It cannot contract, trade, or profit. Administrative workers are authorized, but no employees.
Subsidiary Company (Kabushiki Kaisha – KK)
A joint-stock company or corporation, known as Kabushiki Kaisha in Japan, is the most common business structure. It’s a legal entity that can issue shares to raise capital and distribute profits to shareholders. The company is run by a board of directors, with at least one director and shareholder. Shareholders enjoy limited liability protection, securing their assets from business liabilities. Despite the benefits, setting up a KK can be complex and requires a minimum capital investment of JPY 1 million.
Limited Liability Partnership (Godo Kaisha – GK)
A limited liability company or LLC, known as Godo Kaisha in Japan, is a popular business structure. It provides limited liability protection to its members, who are equivalent to shareholders in a KK. A GK can be managed by its members or a board of directors and does not require a minimum capital investment. On the other hand, a GK cannot issue shares, which can make it challenging to raise capital.
How can Iris International support you?
Navigating the complexities of incorporation abroad in Japan can be a daunting task. Iris International is your trusted partner in this journey, ensuring a smooth and successful entry into the Japanese market. With years of experience and a profound understanding of the local business landscape, we’re well-equipped to guide you through the entire process. But our support doesn’t end there.
In addition to overseas incorporation, we offer a comprehensive suite of services to enhance your business operations in Japan. From tax and accounting solutions that keep your finances in check to HR services that simplify payroll and employment compliance, we’ve got you covered. We can assist in finding the right office space for your company, ensuring a strategic and functional location.
Moreover, our Employer of Record (EOR) services empower you to effortlessly manage your team in Japan, handling all aspects of HR and compliance. We provide the comprehensive support you need to thrive in this dynamic market.
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