Basic Overview of Company Incorporation in Japan

This topic will cover the basics of incorporating a company in Japan. Navigating the Japanese bureaucratic system can be complicated, so this overview will help you understand where to start. 

Understanding Company Types and Legal Structure

The first initial step is understanding the type of company structures available in Japan, for further information please refer to one of our previous articles on the topic here.  This overview will mainly explain the process for  Kabushiki Kaisha (KK) and Godo Kaisha (GK). As a quick explanation, the KK company structure is a corporation with stock, enabling it to raise capital through investors, while GK  is a limited liability company similar to a limited partnership, with simpler requirements than a KK. 

Key Requirements and Initial Steps

Before initiating paperwork, consider the following.

• Capital Investment: A company can be registered with as little as 1 yen in capital, although foreign business owners under the Business Manager visa must invest at least 5 million yen.
  
• Company Name: Choose a unique name that adheres to Japan’s naming conventions, allowing letters from the English and Japanese alphabets but avoiding special characters. Remember to include “Kabushiki Kaisha” or “Godo Kaisha” depending on company structure. 
  
• Location: Your office location determines the specific Legal Affairs Bureau to file documents. For example, if based in Tokyo, filings must be submitted to the Tokyo Legal Affairs Bureau.

In Japan, it is possible to establish a company with a single director; however, companies with multiple shareholders may benefit from appointing a board. A board requires at least three directors and an external auditor to ensure accountability and compliance.

The Incorporation Process

Now let’s go over the flow of the incorporation process. 

1. Company Seal: Obtain a registered company seal, and ensure each director has a personal seal with a registered certificate.
   
2. Articles of Incorporation: Draft the Articles of Incorporation, outlining details such as the company name, office address, purpose, investment capital, and shareholders. A public notary must notarize this document, and capital must be deposited in a designated bank account before proceeding.
   
3. Filing with Legal Affairs Bureau: Submit all required documents to the Legal Affairs Bureau. The registration process generally takes 7 to 10 days.
   
4. Post-Incorporation Notifications: Once incorporated, notify the tax office, the Labor Standards Inspection Office, the Japan Pension Service Office, and the Public Employment Security Office. Failure to do so may lead to penalties and delays in official recognition.
   

Documentation Requirements 

The registration process in Japan involves submitting a series of required documents to the Legal Affairs Bureau. Below is a list of the primary documents needed for both KK and GK.

1. Application for Authority to Do Business (Touki Shinseisho)
   This application formally notifies the Legal Affairs Bureau of the establishment of a company. It includes details specific to the company type (KK or GK).
   
2. Registration License Tax Payment Slip (Tourokumenkyozei Noufuyoudaishi)
   A revenue stamp indicating payment of the registration tax is required. For stock KK, this is set at ¥150,000, while for GK, it’s ¥60,000.
   
3. Articles of Incorporation (Teikan)
   This document outlines essential details about the company, including its name, location, business objectives, capital investment, founders, share issuance, and date of incorporation. Notarization by a notary public is required for KK and GK.
   
4. Founders’ Written Decision (Hokkinin Ketteisho)
   If the Articles of Incorporation don’t specify the full address of the head office, this decision document is required.
   
5. Letter of Acceptance of Appointment from the Director (Shuninn Shoudakusho)
   This letter confirms that the appointed individual has accepted the role of representative director.
   
6. Letter of Acceptance of Appointment from the Auditor
   It is required if the company has appointed an auditor to ensure transparent governance.
   
7. Director’s Seal Registration Certificate (Torishimariyaku no Inkanshoumeisho)
   Each director needs a seal registration certificate. However, for companies with a board, only the representative director’s certificate is needed.
   
8. Seal Notification Form (Inkan Todokedesho)
   This form is used to register the official company seal, a mandatory step.
   
9. Documents Proving Capital Deposit
   Proof of capital deposit is essential. A copy of a bank book showing the capital deposit is typically acceptable.

Differences in Requirements Between KK and GK

 For a KK, the Articles of Incorporation must be notarized by a public Japanese notary. Additionally, capital must be transferred to a Japanese bank account owned by either the incorporator or a director before registration. In contrast, a GK does not require notarization of the AOI, nor a pre-registration capital transfer. Due to the notarization and regulatory steps required for a KK, establishing one generally takes between 1 to 3 months. For GKs, the process is typically shorter, averaging about 1 to 2 months.

KKs are also subject to stricter public disclosure requirements, including the regular release of financial results. GKs, on the other hand, have no obligation for public disclosure of financials.

For a KK, expect to allocate 200,000 to 250,000 yen in setup fees, while costs for a GK are generally lower. Additional expenses, such as visa fees and bank charges, may also apply, so budget accordingly.

Conclusion

Additional things to keep in mind are the language requirements, all documentation must be submitted in Japanese. Plus it’s important to avoid errors and use the correct types of seals on documentation. Incorporating a company in Japan requires attention to detail and adherence to specific regulations. However, our Market Entry Services are here to streamline your journey by providing expert support in company incorporation and administrative compliance. We’ll make sure there are zero mistakes in all your documentation, and speed up the incorporation process.

Resources:

MailMate. (n.d.). Company incorporation in Japan.

Japan External Trade Organization (JETRO). (n.d.). Setting up business in Japan.

Japan External Trade Organization (JETRO). (n.d.). Setting up business in Japan: Types of business structures.