Setup company in Japan

Questions and Answers

What is the model of establish a business in Japan?

Typical model for setting up business in Japan is in one of following three types.

	Representative office	Branch office	Kabushiki Kaisha (K.K.) as a subsidiary company (possible to set up LLC but KK is more common)
Characteristics	The simplest setting up procedure. Sales activity is disallowed. The best entity to carry out preparatory and supplemental tasks for future business expansion.	Easier to set up branch than subsidiary (KK). However the head office of the foreign company is responsible for the debts owed by the branch office in Japan.	Creditworthy. Independent from the head office of the foreign country. Minimize the risk that the debt owed by Japan entity has an impact to the head office.
Sales activity	Not permitted (permitted to do marketing, collect information, purchase goods, advertising etc.	Permitted	Permitted
Open bank account?	No (use the representative person’s personal bank a/c)	Yes	Yes
Lease contract?	No (head office of the foreign country or the representative person personally make contract)	Sometimes Yes Sometimes NO	Yes
Decision made independently?	Not expected independently. The decision to be authorized by head office of the foreign country.	Not expected independently. The decision to be authorized by head office of the foreign country.	Decision is made independently
Legal Registration	Not required	Required	Required
A responsibility of the head office of the foreign country to the debts owed by the Japan entity	The head office of the foreign country is responsible for all debts owed by the representative office in Japan.	The head office of the foreign country is responsible for all debts owed by the branch office in Japan.	The head office of the foreign country is not responsible for debts owed by its subsidiary company (K.K.) in Japan.
Taxation	Taxed on JP sourced income. (It is rare for rep. office to earn income in Japan.	Taxed on JP sourced income.	Taxed on JP and non JP sourced income.
Accounting	If the transaction is recorded according to the JP rule (especially for income tax calculation purpose), head office need to make necessary adjustment to record them in their book according to their county’s GAAP or tax calculation purpose. The rule of accounting code, capitalization, depreciation, recognition standard of entertainment expenses etc. may be different between both countries and adjustment may be needed.
Director or executive	1 representative person at least	1 representative person at least (1 Japan resident at least)	1 director at least (1 Japan resident at least)
Capital	Not required		1 yen or more
Shareholders meeting	Not required		Held every year
Accounting period	Same as head office		Determined by the KK

What is the procedures of setup and registration of Japan entity?

The following is a brief description. For detailed procedures, please feel free to contact us.

	Representative office	Branch office	Kabushiki Kaisha (K.K.)
1	Determination of following information Address of the office Representative person of the representative office	Determination of following information to be registered Address of the branch Representative person of the branch office Purpose of business in Japan	Determination of following information to be registered Address of the head office Directors and representative of the directors Company name Capital amount, number of share issued and authorized Fiscal year Purpose of business Founder of the company Term of directors,etc
2	Register representative person’s address in Japan. (it is not required if the representative has an address in Japan)	Register representative person’s address in Japan. (it is not required if the representative has an address in Japan)	Register representative director’s address in Japan. (it is not required if the representative has an address in Japan)
3		Examine similar corporate names at the Legal Affairs Bureau.	Examine similar corporate names at the Legal Affairs Bureau.
		Prepare the stamp (seal) for the stamp registration.	Prepare stamp (seal) for the stamp registration.
		Certification of affidavit on establishment of branch office by embassy.	If the shareholder is foreign company, following information of the shareholder (parent company) is generally to be presented. Registration certificate Affidavits regarding profile of the shareholder Affidavits regarding signatures of representatives of the shareholder. (affidavits must be attested by a public notary in the shareholder’s own country)
			Preparation of the articles of incorporation. Notarization of the article of incorporation by Japanese notary public.
			Remittance of the capital.
			Appointment of directors, representative directors and auditor
	<Registration>	<Registration>	<Registration>
		Application to the Legal Affairs Bureau for the registration of the branch and its stamp.	Application to the Legal Affairs Bureau for the registration of the company and its stamp.
	Opening bank account under the name of the representative person etc. (please be noted that th representative office cannot open the bank account on its own name)	Opening bank account after the acquisition of the registration record (about 2 weeks after application).	Opening bank account after the acquisition of the registration record (about 2 weeks after application).

What is the typical organization of the Japanese company (Kabushiki Kaisha = KK). Is the company secretary required to be appointed?

Shareholders meeting appoint "directors" and "auditors". Directors appoint representative of directors. The number of directors can be 1(one) and appointment of the auditors can be omitted. The representative of director should be Japanese resident.
Unlike the incorporation procedure in Singapore or Hong Kong, There is no "company secretary" system in Japan.

What are the troublesome tasks for the non Japanese speaking staff to set up business in Japan?

It seems that the non Japanese speaking staff finds it difficult to deal with following procedures due to the language problem.

• Open bank account in Japan
• Banking transaction in Japan
• Find residence in Japan
• Have a telephone line, mobile phone, internet line etc.
• Hire local staff

We are available to support above procedures as well.

Which is better to setup business in Japan, KK or Branch?

The type of entity to be chosen is up to the situation. However we first recommend Kabushiki Kaisha (KK). It will be a firewall for your company against various risks caused by Japan entity. If your company choose branch, the risks caused by Japan entity may spill over to your company.

KK is also better for sales promotion, recruiting and financing. KK is given more credence than branch in Japan. In accounting side, Japan branch sometimes goes more complicated work steps. If the Japan branch employs same accounting standard as your company (=head office), the calculation of depreciation and capitalization etc may differ from JP tax rule and adjustments are required in filing tax return in Japan.

On the contrary, if your company does not intend to give greater authority to Japan entity, we recommend to setting up branch.

Our team has bilingual professionals for company set up. We will advise you if you provide us further information.