Many foreign companies and individuals are seeking to establish business operations in Japan. However, the incorporation procedures in Japan can be complicated and extremely time consuming for those not accustomed to Japanese laws and practices. The establishment of a legitimate business base requires professional services from experienced specialists.
Shinonome's professional team, specialized in corporate legal affairs, provides full support to foreign companies and individuals looking to incorporate in Japan. In addition to corporate registration, we also offer additional services including visa applications for the residential status of company officers or employees. All communication and consultation is of course provided in English and our services include English language translations of all registration documents.
If you are looking for professional assistance with your business start-up procedures in Japan, just contact Shinonome.
Types of Business Entities
Broadly speaking there are three types of business entities that a foreign company can set up in Japan each with its specific characteristics that can be briefly summarized as follows.
| Representative Office | Branch Office | Subsidiary (Joint-Stock Corporation) | |
|---|---|---|---|
| Business (Sales) Activity | No | Yes | Yes |
| Registration | Not Required | Required | Required |
| Capital | Not Required | Not Required | No minimum capitalization requirements (note that when applying for a Business Investor/Manager Visa, in principle a minimum of 5,000,000 yen is required) |
| Directors | Not Required | Japan Branch Representative is required | At least 1 resident director is required |
| Staff Employment | Yes | Yes | Yes |
| Public Disclosure Requirement | None | May be required under some circumstances | Periodic financial reporting requirement, public disclosure and preparation of public documents as required under Japanese Corporate Law. |
| Establishment of Bank Account | Can only open a personal bank account | Can open a business account under the branch name | Can open a business account under the subsidiary name |
Representative Office
The Representative Office is typically created as a preliminary to a Branch Office or Subsidiary to perform market research and business feasibility studies in Japan.
A Representative Office is not permitted to engage in sales activities. The Representative Office does not require any registration paperwork and as such can be established quickly and at low cost, however as it is prohibited from engaging in business activities, if sales activities are being considered, it will be necessary to setup either a Branch Office or Subsidiary.
Finally, since bank accounts cannot be opened under the name of a Representative Office, only a personal account under the name of the representative is permitted.
Branch Office
The Branch Office is one type of business entity that is available as an option for foreign companies seeking to engage in revenue generating activities in Japan. By formally registering a base of operations, a representative for the Japanese branch, and other company specifics, sales activities become possible.
There is no requirement for a Branch office to hold annual meetings of shareholders or publicly disclose financial statements and it has the advantage of relatively simple setup procedures. On the other hand however, financial statements of the parent company must also be submitted at the time of tax filing, making the taxes somewhat more complicated.
Subsidiary
The Subsidiary is the other form of business entity permitting sales activities for foreign companies in Japan. This option is the most appropriate for companies seeking to establish a serious business presence in Japan.
Compared to the Branch Office, the Subsidiary offers the advantage that interest on amounts borrowed from the parent company can be included in expenses and that there is no need to submit the financial statements of the parent company at time of income tax filing.
Disadvantages include the inability to offset startup losses with the parent company's profits, that repatriated dividends are taxed at source, the requirement to convene an annual shareholders meeting, and the requirement under Corporate Law to make company financial statements available for public viewing.
Set Up Procedures
1．Representative Office
Japanese Corporate Law does not treat representative offices as legitimate business establishments. As a general rule, you can freely set up a representative office without registration.
However, depending on the business type, you may be requested to make a notification of establishing a representative office to the administrative authorities. For example, if a foreign bank tries to have a representative office in Japan, it must submit notification to the Prime Minister. (Banking Law Article 52)
2．Branch
For a foreign company, having a Japanese branch means having a business office in Japan. Unlike establishing a Japanese subsidiary, setting up a branch is relatively simple and low cost.
Procedures for Setting up a Branch
1. Examination of the overseas company |
Requirement to follow the registration procedures of the closest equivalent Japanese business type to your business. To determine the closest equivalent Japanese business type, your company's documents including Articles of Incorporation, establishment certificate and registration certificate are reviewed. |
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2. Make an outline of the branch |
Decide the representative in Japan (branch representative), office location, publication method, etc. At least one representative must be a resident of Japan. |
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3．Confirm if prior notification is required by Foreign Exchange Law |
When a foreign company establishes a branch in Japan, under the Foreign Exchange Law prior notification and/or reporting to the Minister of Finance through the Bank of Japan is required. If prior reporting is needed, this will need to be completed before the establishment of the branch. |
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4. Set up an office |
Set up a business office. Actual business may not be conducted until registration is completed. |
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5. Make an affidavit for setting the branch |
The affidavit is used to prove the registered details of the company in your home country and some details about the branch in Japan. The authorities in your home country must certify the documents. As an alternative, the Japanese representative of the branch can sign the affidavit at the Embassy office of your country in Japan. |
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6. Apply for registration |
Registration takes about 1 to 2 weeks to complete. |
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7. Completion of the branch setting procedure |
When performed properly, it takes approximately one month from the start to the completion. |
Documents Required for Setting up a Branch
Generally speaking, the following documents are required from you when setting up a Branch in Japan. Shinonome prepares all other documents needed for the establishment process as well as submitting the registration documents.
- A) Decision to set up a branch in Japan, such as minutes prepared by the operating officers of your company.
- B) Articles of Incorporation, establishment certificates and business registration certificates of your company.
- C) An affidavit describing an outline of your company and branch in Japan. Shinonome will work with you to prepare this document.
- D) Letter of proxy for registration. This will be prepared by Shinonome.
- E) Registered personal seal certificate of the representative in Japan.
- F) Official branch seal. For convenience, Shinonome can order a set of branch seals for you if preferred.
* The necessary documents described above may vary depending on the laws and regulations of the country where the foreign company is registered. Please contact us for details.
3. Subsidiary (a Japanese corporation)
There are two types of companies that can be incorporated, a Joint-Stock Company (known as a Kabushiki Kaisha) or a Limited Liability Company (Godo Kaisha). The procedures for establishing a subsidiary differ depending on which type is selected, however in general the procedures to set up a Limited Liability Company are much simpler than compared to those of a Joint-Stock Company. Please contact us for more information about each.
The following is a summary of the incorporation procedures for a Joint-Stock Company and a Limited Liability Company.
Procedures for Incorporation
| Joint Stock Company | Limited Liability Company | |
|---|---|---|
| 1.Decide the outline of a company to be established
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Decide the basic details such as company name, business objectives, head office location, officers, accounting period, etc. | Decide the basic details such as company name, business objectives, head office location, corporate members, accounting period, etc. Corporate members are capital investors. Only capital investors can be corporate members of limited liability companies. At least one of the corporate members who represent a limited liability company must be a resident of Japan. |
| 2.Set up an office (company's headquarters)
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Set up an office to be used as a base during the procedures and later as the company's headquarter. Actual business may not be conducted until registration is completed. | Set up an office to be used as a base during the procedures and later as the company's headquarter. Actual business may not be conducted until registration is completed. |
| 3.Confirm if prior notification is required by Foreign Exchange Law
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When a foreign company establishes a subsidiary in Japan, under the Foreign Exchange Law prior notification and/or reporting to the Minister of Finance through the Bank of Japan is required. If prior reporting is needed, this will need to be completed before incorporation of the subsidiary. | |
| 4.Make an affidavit regarding the business outline of the foreign company
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Documents from the foreign company (capital investor) such as establishment certificate, registration certificate and signature certificate are required. Preparation of these documents early on in the procedures is recommended. An affidavit is commonly used as a substitute for these documents. | Documents from the foreign company (capital investor) such as establishment certificate, registration certificate and signature certificate are required. Preparation of these documents early on in the procedures is recommended. An affidavit is commonly used as a substitute for these documents. |
| 5.Make Articles of Incorporation
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Once the business outline is determined, the Articles of Incorporation can be created. Fundamental matters regarding the company are stipulated in the articles. | Once the business outline is determined, the Articles of Incorporation can be created. Fundamental matters regarding the company are stipulated in the articles. The articles of a limited liability company are relatively simple compared to those of a joint stock company. |
| 6.Have a Japanese notary public certify the Articles of Incorporation
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Need to have the Articles of Incorporation notarized by a notary public who has jurisdiction over the prefecture where the subsidiary headquarter is to be located. | |
| 7.Transfer of investments to bank account
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Transfer investment money to founder's bank account. The account must be at a Japanese bank or a Japanese branch of a foreign bank. | Transfer investment money to corporate member's bank account. The account must be at a Japanese bank or a Japanese branch of a foreign bank. |
| 8.Elect officers
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Upon confirming the capital payment, elect president, executive directors and officers in accordance with the articles. At least one of the representative directors must be a resident of Japan. | |
| 9.Apply for registration
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Registration takes about 1 to 2 weeks to complete. | Registration takes about 1 to 2 weeks to complete. |
| 10.Completion of incorporation procedure | When performed properly, it takes approximately one month from the start to the completion. | When performed properly, it takes approximately one month from the start to the completion. |
Documents Required for Setting up a Subsidiary
Generally speaking, the following documents are required from you for the incorporation of a subsidiary. Shinonome prepares all other documents needed for the incorporation process as well as submitting all documents needed for registration.
| Joint Stock Company | Limited Liability Company |
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| (a) Resolution to establish a Joint-Stock Company in Japan. (b) Articles of Incorporation, establishment certificate and business registration certificate of the foreign company. (c) An affidavit describing an outline of the foreign company. (d) A signature certificate of the representative of the foreign company. (e) Articles of Incorporation of the new joint stock company (Prepared by Shinonome) (f) A certificate of capital payment (Prepared by Shinonome) (g) Resolution electing directors of the Joint-Stock Company and acknowlegdement of appointment (Prepared by Shinonome) (h) Seal certificate of the Representative Director of the new Joint-Stock Company (i) Seal certificate or signature certificate of the director(s) of the new Joint-Stock Company (j) Investigative report for the incorporation procedures, etc. (Prepared by Shinonome) |
(a) Resolution to establish a Limited Liability Company in Japan. (b) Articles of Incorporation, establishment certificate and business registration certificate of the foreign company. (c) An affidavit describing an outline of the foreign company. (d) A signature certificate of the representative of the foreign company. (e) Resolution electing directors and acknowledgement of appointment (Prepared by Shinonome) (f) Articles of Incorporation of the Limited Liability Company (Prepared by Shinonome) (g) A certificate of capital payment (Prepared by Shinonome) (h) Seal certificate of the Representative Partner of the Limited Liability Company |
In addition to the above, an official corporate seal is required for the new company. For convenience, Shinonome can order a set of corporate seals for you if preferred.
* The necessary documents described above may vary depending on the laws and regulations of the country where the foreign company is registered. Please contact us for details.
Note: The determination for the necessity of Prior Notification is typicaly based on the investors’ citizenship and the type business activities being considered. Currently, almost all direct domestic investments only require Subsequent Reporting. Businesses requiring Prior Notification are typically limited to those engaging in a certain class of activties including the manufacture of weapons, aircraft, or parts that could be used to develop military weaponry.
