Japan is one of the most attractive business destinations in Asia, offering a stable economy, advanced infrastructure, and a strategic location for accessing other key markets in the region. With a population of over 125 million and a high standard of living, it presents significant opportunities for businesses looking to expand their reach. Japan’s emphasis on technological innovation and its reputation for high-quality products also make it an ideal environment for companies aiming to build credibility and brand value.
The process of company incorporation in Japan involves several key steps, including choosing the best business structure for your needs, registering the company name, securing a registered office address, drafting the articles of incorporation, and filing the necessary documents with the Legal Affairs Bureau.
Depending on the business type and industry, you might also need additional permits and licenses. Even though the process can seem complicated, careful planning and understanding of the legal requirements helps ensure a smooth and efficient Japanese incorporation.
Contents:
- Do you need a subsidiary, a branch office or a representative office?
- Understanding Business Entity Types in Japan
- Capital Requirements for Incorporation in Japan
- Step-by-Step Guide to Incorporating in Japan
- What are the costs of Japan company incorporation?
- Timeline for the Incorporation Process
- Key Documents Required for Incorporation
- FAQs on Entity Incorporation in Japan
- Incorporate Your Japanese Business with Confidence and Ease
Need Some Guidance on Japan Incorporation?
Do you need a subsidiary, a branch office or a representative office?
When incorporating a business in Japan, companies can choose between three main options: subsidiary, branch office, or representative office. Each structure has its own legal and operational implications, and it’s important to choose the one that best aligns with your business goals.
A subsidiary (which you would set up as a Kabushiki Kaisha (KK) or Godo Kaisha (GK) entity), operates as an independent legal entity with limited liability. This structure is best for businesses planning long-term operations. It offers the flexibility to engage in any legal business activity in Japan and is subject to Japanese corporate tax.
A branch office, on the other hand, is an extension of the parent company. It allows for a wide range of business activities, but the parent company abroad is ultimately liable for any financial or legal obligations. This option is ideal for expanding foreign businesses looking to establish a direct presence without forming a separate legal entity.
A representative office is the most basic option. This is geared towards businesses conducting market research or liaison activities. It’s not a legal entity and is restricted from conducting business operations or earning income in Japan. As a result, it is not subject to taxation.
Comparison Table: Subsidiary, Branch Office, and Representative Office
| Feature | Subsidiary (KK/GK) | Branch Office | Representative Office |
| Legal Entity | Independent | Extension of Parent | Not a Legal Entity |
| Liability | Limited | Parent Liable | No Business Operations |
| Business Scope | Any Legal Business | Same as Parent | Limited to Research, Liaison |
| Taxation | Subject to Corporate Tax | Taxed as Foreign Company | No Taxation |
| Registration Time | 2-4 Weeks | 2-3 Weeks | 1-2 Weeks |
| Best for | Long-Term Operations | Expanding Foreign Business | Market Research |
When deciding on the right structure, it’s crucial to consider factors like tax and compliance to avoid tricky legal situations down the road. For example, many companies have been burned by using Employer of Record (EOR) in foreign countries when they should have opted for some type of incorporation, with hefty penalties from tax authorities as a result. Japan is no different, and it’s a good idea to consult with local experts during the incorporation process to avoid these risks.
Understanding Business Entity Types in Japan
There are two main types of Japanese business entities for company incorporation: Kabushiki Kaisha (KK) and Godo Kaisha (GK). Each structure has its own advantages, making them suitable for different business needs.
Kabushiki Kaisha (KK) – Joint Stock Company
Kabushiki Kaisha, commonly known as KK, is the most popular entity type for larger businesses in Japan. It operates as a joint-stock company with a limited liability structure, ensuring that shareholders’ personal assets are protected. This entity type is known for its credibility and is widely recognized by Japanese consumers and business partners. But it also comes with strict requirements for corporate governance, like the need for a board of directors and annual shareholder meetings.
Godo Kaisha (GK) – LLC Equivalent
Godo Kaisha, or GK, is the Japanese equivalent of a limited liability company (LLC). It offers more flexibility and cost-effectiveness compared to a KK, making it a popular choice among small and medium enterprises (SMEs). GKs require fewer formalities and have simpler management structures, allowing owners to directly manage the company without a board of directors. This makes them an attractive option for entrepreneurs and foreign investors looking for a more straightforward setup.
Capital Requirements for Incorporation in Japan
When incorporating a company in Japan, understanding the capital requirements is crucial. Both Kabushiki Kaisha (KK) and Godo Kaisha (GK) have flexible capital regulations, making it easier for foreign businesses to establish their presence.
Minimum Capital for KK and GK
In Japan, there is no strict minimum capital requirement for either KK or GK. Technically, companies can be incorporated with as little as 1 yen, which makes the entry barrier relatively low. However, having a realistic capital amount is recommended to establish credibility with banks, suppliers, and clients.
Common Investment Amounts
While the minimum requirement is low, most businesses typically invest at least ¥5 million to ¥10 million (approximately USD 35,000 to USD 70,000) to ensure smooth operations and build trust with stakeholders. For larger ventures, especially those seeking investor backing or regulatory approval, higher capital amounts are common.
Step-by-Step Guide to Incorporating in Japan
Step #1 – Choosing the Business Structure
Selecting the right business structure for your company in Japan isn’t just about legal classification—it has real operational and strategic implications that can affect everything from banking and hiring to taxation and long-term flexibility.
For example, many foreign companies initially opt for a Godo Kaisha (GK) because of its lower setup costs and simpler governance structure, only to later realize that a Kabushiki Kaisha (KK) is often viewed as more credible by Japanese banks, investors, and potential clients. If your business plans to seek local financing, bid for government contracts, or attract Japanese partners, choosing a KK from the start could save time and restructuring costs down the line.
Another key consideration is profit distribution and decision-making. While a GK allows for direct profit allocation among members (similar to an LLC), a KK operates with a stricter dividend distribution model, which could impact how funds flow between your Japan entity and its foreign parent company.
Beyond structure, it’s also important to consider industry-specific norms—certain sectors in Japan have an unwritten preference for working with KKs, while others (especially startups and foreign-owned businesses) operate comfortably as GKs. Thinking beyond just incorporation and focusing on how your company will actually operate within Japan’s business environment is crucial to making the right choice.
Step #2 – Selecting a Company Name (Regulations & Availability Check)
Your company name must be unique and not infringe on existing trademarks. It can be in any language but must use Japanese characters (Kanji, Hiragana, or Katakana) or the Roman alphabet. To avoid conflicts, you can check name availability with the Legal Affairs Bureau before registering.
Step #3 – Registered Office Address Requirement
A physical registered office address in Japan is mandatory for company incorporation. It serves as the official business location for legal correspondence and tax purposes. Virtual offices are acceptable, but the address must be valid and verifiable.
Step #4 – Drafting the Articles of Incorporation
The Articles of Incorporation (定款, teikan) outline the company’s objectives, structure, capital, and governance policies. Key elements include:
- Company Name and Address
- Business Objectives
- Shareholder Information and Capital Contribution
- Director and Auditor Roles This document acts as the company’s constitution and must comply with Japanese corporate laws.
There are a few nuances to keep in mind. For example, while your Articles must specify what your company will do, it’s common practice to list broader activities since this allows for future expansion. However, some industries—like finance or import/export—may require specific wording or approvals for certain business activities, so it’s worth verifying this in advance.
Capital requirements are another factor to consider. Japan technically allows companies to be incorporated with just 1 yen of capital. But, in reality, having such a low stated capital can make it harder to open a bank account, secure an office lease, or gain credibility with clients and partners. For that reason, many businesses set their initial capital at ¥5 million–¥10 million.
It’s also important to ensure that the company name and registered office address in the Articles exactly match what is filed with the Legal Affairs Bureau. A mismatch can cause delays, and while virtual offices are sometimes accepted as a registered address, this should be confirmed in advance.
Step #5 – Notarization of Articles (For KK Only)
For Kabushiki Kaisha (KK), the Articles of Incorporation must be notarized by a public notary in Japan. This step is not required for Godo Kaisha (GK), which simplifies the process for LLC-type companies.
Step #6 – Deposit of Capital in a Japanese Bank Account
Capital must be deposited into a Japanese bank account under the founder’s name before registration. After incorporation, the account is transferred to the company’s name. This step is essential because you’ll need a Bank Deposit Certificate as proof of capital investment during the registration process.
Step #7 – Filing the Registration with the Legal Affairs Bureau
The next step is filing your company registration with the Legal Affairs Bureau. This includes submitting the Articles of Incorporation, the Bank Deposit Certificate, and identification documents for directors and shareholders. Once approved, the company is officially registered as a legal entity in Japan.
Step #8 – Obtaining the Company Seal (Hanko)
A Hanko or company seal is required for signing official documents in Japan. It’s a crucial part of doing business and serves as a legally binding signature. The seal must be registered with the Legal Affairs Bureau for it to be legally recognized.
Step #9 – Applying for Business Licenses & Permits (If Required)
Depending on the industry and business activities, specific licenses and permits may be required. For example, companies in the financial services, food, or retail sectors may need additional regulatory approvals. It’s essential to check the requirements for your industry and factor these licenses into your overall set-up process if needed.
Step #10 – Tax Registration & Social Insurance Enrollment
After incorporation, companies must register for the different types of tax that apply to their legal structure and business activities. This can include corporate tax, consumption tax, and social insurance and the processes involved are:
- Corporate Tax Registration with the local tax office
- Social Insurance Enrollment for employees, including health insurance and pension contributions
What are the costs of Japan company incorporation?
Legal & Administrative Fees
Legal and administrative fees for incorporation range from ¥100,000 to ¥300,000 (USD 700 to USD 2,100), depending on the complexity and services used.
Notary Costs (For KK)
For Kabushiki Kaisha (KK), notarizing the Articles of Incorporation costs about ¥50,000 (USD 350). This is not required for Godo Kaisha (GK).
Registration Fees
Registration fees are paid to the Legal Affairs Bureau:
- KK: Minimum ¥150,000 (USD 1,050)
- GK: Minimum ¥60,000 (USD 420)
Typical Full Cost Estimate
The total cost for incorporation typically ranges from ¥300,000 to ¥600,000 (USD 2,100 to USD 4,200), with GK being more cost-effective than KK.
Timeline for the Incorporation Process
The timeline for incorporating a company in Japan typically ranges from 2 to 4 weeks for Kabushiki Kaisha (KK) and 1 to 3 weeks for Godo Kaisha (GK). However, this assumes that nothing goes wrong and everything is submitted correctly at every step of the process.
Step-by-Step Timeline Estimation
- Choosing Business Structure & Name Check (1-2 Days)
- Drafting & Notarizing Articles of Incorporation (3-5 Days)
- Deposit of Capital & Document Preparation (2-3 Days)
- Filing with Legal Affairs Bureau (1-2 Weeks)
- Registration Approval & Company Seal (Hanko) (1 Week)
Factors That Can Delay the Process
- Incomplete or Incorrect Documentation: Errors or omissions in your documents is one of the most common reasons for rejections and delays.
- Bank Account Opening: Verification and compliance checks by Japanese banks can be time-consuming.
- Notary Scheduling (For KK): Availability of public notaries may impact the timeline for notarization.
- Holiday Periods: Public holidays and year-end closures can extend processing times.
Key Documents Required for Incorporation
- Articles of Incorporation
- Certificate of Registered Seal (Hanko)
- Bank Deposit Certificate for Capital
- Director and Shareholder Identification Documents: Identification documents, such as passports or residence cards, are required for all directors and shareholders. For foreign nationals, notarized translations may be needed.
- Business Plan (if required for licensing or visa applications): You might also need a detailed Business Plan if applying for certain licenses or visas. It should outline the company’s objectives, target market, financial projections, and operational strategies. This is particularly important for foreign entrepreneurs seeking an Investor/Business Manager Visa.
FAQs on Entity Incorporation in Japan
Can a foreigner start a company in Japan without a resident director?
No, at least one resident director is required for Kabushiki Kaisha (KK) incorporation. However, Godo Kaisha (GK) does not require a resident director, so it’s a more flexible option for foreign businesses. In cases where a resident director is needed, companies often appoint a trusted local representative.
Do I need a physical office in Japan to incorporate?
Yes, a registered office address in Japan is mandatory for all business entities. It serves as the official business location for legal correspondence and tax purposes. Virtual offices are accepted, but the address must be verifiable and meet legal requirements.
What are the main tax obligations for a Japanese company?
Companies are subject to several Japanese corporate taxes, including:
- Corporate Tax: Based on company profits.
- Consumption Tax: Similar to VAT, currently set at 10%.
- Withholding Tax: Applicable to certain payments, such as dividends and salaries. Companies must also enroll in social insurance programs for employees.
Can a foreign company open a bank account in Japan before incorporation?
No, opening a corporate bank account in Japan requires a Certificate of Company Registration, which is issued after the company is incorporated. However, capital can be temporarily deposited into a personal bank account in Japan during the registration process.
Incorporate Your Japanese Business with Confidence and Ease
Successfully incorporating a company in Japan requires a clear understanding of entity types, legal procedures, capital requirements, and compliance obligations. Whether you’re setting up a KK, GK, or a branch office, each structure has its own benefits depending on your business needs. The process can certainly be complicated, but careful planning and expert guidance can make registration smooth and efficient.
At weConnect, we simplify company incorporation in Japan by handling the legal, administrative, and compliance requirements for you. From choosing the right entity type to registering your business seamlessly, our team ensures a hassle-free experience, allowing you to focus on growing your business in Japan. Get in touch with us today for a free consultation on your incorporation needs.