Japan’s market still tops many expansion short-lists thanks to its political stability, deep consumer base and rock-solid intellectual-property regime. The trade-off is a rule-dense environment: every corporate decision (capital structure, labor contracts, even the size of your company seal) ultimately points back to a statute, cabinet order or ministry guideline. The upside? Foreign founders can own 100 % of their company, but only if they respect those rules and file in flawless Japanese.
This article isn’t another step-by-step “how to incorporate” tutorial (our Japan Incorporation Guide already covers that). Instead, it maps the legal infrastructure itself, starting with the Companies Act (Kaisha Hō, Act No. 86 of 2005) and layering on the Foreign Exchange and Foreign Trade Act (FEFTA), Labor Standards Act, sector-specific licensing statutes and the tax code. We also spotlight the regulators that police each requirement and the civil fines (up to ¥1 million for missed registrations) that can ambush unwary directors.
Key Takeaways:
- Companies Act is the backbone. Every KK, GK, branch or representative office ultimately derives its formation and governance rules from Act No. 86 of 2005.
- 100 % foreign ownership is welcome, but paperwork speaks Japanese. Core filings must be lodged with the Legal Affairs Bureau in Japanese and stamped with an inkan (seal).
- Registration is just the starting line. Annual shareholder meetings, corporate tax returns and social-insurance enrolments carry hard statutory deadlines from day one.
- Penalties can sting. Failure to register changes can incur civil fines of up to ¥1 million under Article 976 of the Companies Act, and directors may be held personally liable.
- Licensing layers add complexity. Finance, food, construction and other regulated fields require additional approvals from agencies such as the FSA, MHLW or MLIT before operations begin.
- A bilingual compliance calendar beats emergency legal fees. Investing in local counsel and a year-round filing schedule is cheaper (and calmer) than scrambling after a missed deadline.
What legal framework underpins company formation in Japan?
Most company formation in Japan today is governed by the Companies Act (Kaisha Hō, Act No. 86 of 2005), which came into force in 2006. It replaced large parts of the older Commercial Code, though some legacy provisions still apply, particularly in areas like general civil procedure and contract enforcement.
The Companies Act sets out the core requirements for forming and managing Japanese entities, including:
- Entity types permitted under law (e.g. KK, GK)
- Capital and share structure rules
- Director and officer duties
- Registration, recordkeeping, and audit obligations
In parallel, several other legal frameworks affect how a business can be structured and who can own it:
- Foreign Exchange and Foreign Trade Act (FEFTA): Governs inward foreign direct investment, particularly in “designated business sectors.” Filings may be required before incorporation if you’re setting up in areas like defense, telecoms, energy, or semiconductors. (Statute: Act No. 228 of 1949)
- Financial Instruments and Exchange Act (FIEA): Relevant if your company will offer regulated financial products or services in Japan. It imposes registration and disclosure duties for securities firms, asset managers, crypto exchanges and others. (Statute: Act No. 25 of 1948)
- Civil Code (Act No. 89 of 1896): Although not company-specific, the Civil Code provides the legal foundation for contracts, torts, and obligations that underpin most business transactions.
Each of these statutes is supplemented by cabinet orders, ministry ordinances, and local implementation guidelines, many of which are only available in Japanese. This layered structure means that even basic incorporation decisions (like your share class or business purpose) can trigger compliance obligations in more than one law.
Which regulators enforce Japan’s key business laws and what are their roles?
Japan’s legal framework for business is enforced through a web of ministries, bureaus, and financial regulators. Understanding which agency oversees which statute is essential not just for registration, but also for compliance and licensing down the line.
Here’s a breakdown of the core business-related laws and the agencies responsible for enforcing them:
| Law / Statute | Primary Regulator | Role in Company Setup & Operation |
| Companies Act (Act No. 86 of 2005) | Ministry of Justicevia the Legal Affairs Bureau | Handles commercial registration, corporate governance, Articles of Incorporation, and company records |
| Foreign Exchange and Foreign Trade Act (FEFTA) | Ministry of Finance (MOF) & Ministry of Economy, Trade and Industry (METI) | Reviews and approves foreign direct investment in sensitive sectors |
| Financial Instruments and Exchange Act (FIEA) | Financial Services Agency (FSA) | Regulates securities, investment management, crypto exchanges, and financial disclosures |
| Labor Standards Act (Act No. 49 of 1947) | Ministry of Health, Labour and Welfare (MHLW)via local Labour Standards Inspection Offices | Enforces workplace laws, including contracts, overtime, and safety |
| Industrial Safety and Health Act / Other Labor Laws | MHLW | Oversees occupational health, safety, and mandatory training and documentation |
| Consumption Tax Act / Corporate Tax Code | National Tax Agency (NTA) | Administers tax filings, blue-return applications, and consumption tax registration |
| Building Standards Act / Food Sanitation Act, etc. | Municipal Authorities(e.g. city halls, public health centres) | Issue location-specific business licenses and permits |
⚠️ Important note: Japanese regulatory enforcement is procedurally strict. Many filings must be submitted in-person, in Japanese, and using approved templates or seal formats. Agencies do not always provide English support, even for critical compliance matters.
Which Japanese laws authorize each type of business structure?
The legal basis for each business structure in Japan comes directly from statutory law (primarily the Companies Act), with some distinctions for foreign-registered entities. Understanding the legal source for your structure not only clarifies your formation requirements but also shapes your compliance obligations going forward.
Here’s a quick overview:
- Kabushiki Kaisha (KK): Authorized under the Companies Act, Chapter II, Section 1. This is Japan’s most formal joint-stock company structure, often preferred by larger enterprises and foreign investors for its perceived credibility.
→ Read the full KK guide → - Godo Kaisha (GK): Established under Companies Act, Chapter II, Section 4. A more flexible, LLC-style entity that’s simpler to manage and more popular with startups and SMEs.
→ Read the full GK guide → - Branch Office: Permitted under the Companies Act, Article 817, as a foreign company’s local extension. It’s not a separate legal entity, but must still register and comply with Japanese accounting and tax laws.
→ Read the Branch Office guide → - Representative Office: Not recognized as a legal entity under the Companies Act. Instead, its use is limited and governed by administrative practice, typically via METI and the Immigration Services Agency. These offices cannot engage in revenue-generating activity.
→ Read the Representative Office guide →
While KK and GK are incorporated entities under Japanese law, branch and rep offices are foreign-registered extensions that come with different legal limitations. Your choice of structure determines everything from your director requirements to your tax filings—so the statute behind each option matters from day one.
Where can I find the statutory capital, director, and document requirements?
The Companies Act lays out the foundational rules for capital, governance, and documentation when setting up a company in Japan. While much of the procedure is administrative, several key requirements are set by statute and must be met precisely to pass commercial registration.
Here are the essentials:
Minimum Capital Requirements
KK and GK structures can be formed with as little as ¥1 in paid-in capital (Companies Act, Article 452), though most banks and immigration authorities expect significantly more.
Director and Shareholder Rules
- Kabushiki Kaisha (KK): Requires at least one director, and optionally a statutory auditor if no board is appointed (Companies Act, Articles 326–331).
- Godo Kaisha (GK): Requires at least one executive member (equivalent to a managing partner) under Article 576.
- Residency: As of the latest reforms, there is no longer a legal requirement for directors to reside in Japan, but banks and visa authorities may still ask for a local contact.
Required Documents for Registration
- Articles of Incorporation (teikan): Must include the company’s purpose, share structure, and governance rules (Companies Act, Article 27–38).
- Affidavit or certification of foreign investor details: Notarized and translated if applicable.
- Capital contribution proof: Typically a bank statement showing funds deposited into a founder’s account.
- Company seal (inkan): Required for registration and post-incorporation filings. Must be registered with the Legal Affairs Bureau.
- Personal seal certificates (inkan shōmei-sho): Often required if any Japanese nationals are involved as directors or incorporators.
How does the commercial registration process work and what fees apply under law?
All companies in Japan must be registered with the Legal Affairs Bureau (Hōmukyoku), a division of the Ministry of Justice. The registration process is a legal requirement under the Companies Act, Article 911, and a company does not formally exist until registration is complete.
Core Steps in the Registration Process
- Prepare the Articles of Incorporation
- For KKs, these must be notarized by a Japanese notary public.
- For GKs, notarization is not required.
- Deposit Capital
- Capital must be deposited into a founder’s personal bank account (or a designated incorporation account).
- Assemble Registration Documents
- Includes Articles, affidavit, seal registration forms, proof of capital, director consents, and more.
- Submit to Legal Affairs Bureau
- Submission must be made in Japanese and typically in person (though e-filing is available in some regions).
What Are the Statutory Registration Fees?
- Registration Tax:
- Set by law under the Stamp Duty Act and related ordinances.
- For most Kabushiki Kaisha (KK) setups:
- The fee is 0.7% of paid-in capital, with a minimum of ¥150,000.
- For Godo Kaisha (GK):
- The minimum fee is lower: ¥60,000, regardless of capital.
- Notarisation Fee (for KKs only):
- Approximately ¥50,000, plus a small revenue stamp fee.
- Company Seal Registration:
- Around ¥450, payable at the time of seal registration with the Legal Affairs Bureau.
E-Filing Option
The Ministry of Justice offers electronic incorporation filing through its online platform.
Discount: If all required documents are submitted digitally, the registration tax may be reduced in certain cases (e.g. a ¥5,000 discount on the corporate seal registration).
What ongoing compliance duties apply once my company is registered?
Incorporation in Japan is only the beginning. Once your entity is registered, it takes on a range of statutory maintenance obligations, many of which are enforced by the Legal Affairs Bureau or the National Tax Agency. These aren’t optional admin tasks; they’re legal duties set out in the Companies Act, the Corporate Tax Act, and related regulations.
Here are the most common compliance requirements companies must observe after registration:
Maintain Statutory Company Books
Under Companies Act, Articles 31 and 120, all KKs and GKs must maintain accurate internal records, including:
- Shareholder registry
- Board and shareholder meeting minutes
- Accounting books and financial statements
These must be stored at the registered office and made available to shareholders upon request.
Hold Annual Shareholder Meetings (KKs only)
KKs are required to hold a general meeting of shareholders at least once per year (Article 295).
Meeting minutes must be recorded and retained, even for single-shareholder companies.
Report Changes to Company Details
The Companies Act requires prompt filing of notifications for changes including:
- Company address
- Representative director or executive member
- Capital increases
- Business purpose changes
- Company name or seal updates
These changes must be filed with the Legal Affairs Bureau, typically within two weeks of the change.
Renew and Manage Company Seal (inkan)
Your registered seal must be used for official filings. If it’s lost, damaged, or replaced, you’ll need to:
- Cancel the previous seal registration
- File a new seal notification at the Legal Affairs Bureau
Failing to do so can result in rejected filings or invalid contracts.
Other Ongoing Duties
- Tax filings and payments (covered in a later section)
- Social insurance enrolments and payroll withholding
- Audit and financial statement filing for larger or listed companies
For new companies, most filings must be made manually, in Japanese, and to the correct local authority.
Which sector-specific licences or permits might a new business need and who issues them?
While many businesses in Japan can begin operating after completing commercial registration, others (especially in regulated industries) require additional licences or permits before they can legally open their doors. These sector-specific approvals are granted by national ministries or local authorities and come with their own documentation, inspections, and processing timelines.
Below are some of the most common regulated sectors and the permits they require:
| Sector | Permit / Licence | Regulator | Required For |
| Financial Services | Financial Instruments Business Licence, Crypto Exchange Registration | Financial Services Agency (FSA) | Securities firms, crypto exchanges, fund managers, robo-advisors |
| Food & Beverage | Food Business Licence (eigyō kyoka) | Local Public Health Centre(under MHLW supervision) | Restaurants, cafés, food importers, manufacturers |
| Construction | Construction Business Licence (kensetsugyō kyoka) | Ministry of Land, Infrastructure, Transport and Tourism (MLIT) | General contractors, subcontractors |
| Healthcare / Medical | Medical Practice Opening Permit, Pharmacy Licence | MHLW + Prefectural Governments | Clinics, dental practices, pharmacies |
| Recruitment / Staffing | Worker Dispatching Licence (haken gyōsha kyoka) | Ministry of Health, Labour and Welfare (MHLW) | Temp agencies, employee dispatch firms |
| Retail (large scale) | Large-Scale Retail Store Location Act Notification | Ministry of Economy, Trade and Industry (METI) + Local Gov. | Shops over 1,000m² floor space |
| Import / Export | Customs Registration, Import Notifications (sector-dependent) | Customs Bureau / METI / MAFF | Food, alcohol, cosmetics, industrial goods, and other controlled imports |
⚠️ Important: These permits are not handled by the Legal Affairs Bureau and are not included in the standard incorporation process. Many must be secured before opening, and operating without them can lead to immediate shutdowns or criminal penalties.
Even businesses in non-regulated sectors should check with their local city or ward office for any small-scale licence requirements, especially related to signage, fire safety, or zoning.
How do labour and immigration regulations affect newly formed companies?
Once your company is registered, it becomes subject to a range of labour and social insurance obligations, even if you only employ one person. These rules are enforced under the Labour Standards Act, the Employment Insurance Act, and the Health Insurance and Pension Act. They are tightly monitored by the Labour Standards Inspection Office and Japan Pension Service. Non-compliance can trigger fines, back payments, and in some cases, restrictions on hiring foreign staff.
At the same time, companies that plan to sponsor foreign workers or founders must comply with immigration requirements under the Immigration Control and Refugee Recognition Act, overseen by the Immigration Services Agency of Japan.
Mandatory Labour and Social Insurance Enrolments
Once you hire your first employee (even if part-time) you are legally required to register for and pay into the following schemes:
| System | Required When | Submitted To |
| Labour Insurance (accidents + employment insurance) | Hiring any employees | Labour Standards Inspection Office |
| Employees’ Health Insurance | Hiring full-time (or qualifying part-time) staff | Japan Pension Service via regional office |
| Employees’ Pension Insurance | Same as above | Japan Pension Service |
| Withholding Tax (Gensen Chōshū) | Paying salaries | National Tax Agency |
- Deadlines for enrolment are typically within 5 days of the first employment contract.
- Contributions are split between employer and employee and must be paid monthly.
- Failure to enrol may result in backdated penalties or audits.
Visa Sponsorship and Immigration Compliance
If your company plans to hire or be founded by non-Japanese nationals, you may need to engage with the Immigration Services Agency to secure appropriate residence status. Common visa categories include:
| Visa Type | Used For | Requirements |
| Business Manager Visa | Foreign entrepreneurs starting a company in Japan | Physical office, 5 million yen in capital or 2 full-time employees |
| Engineer / Specialist in Humanities | Hiring skilled foreign professionals | Job role must match academic / career background; employer must be a legal entity |
| Highly Skilled Professional Visa | Fast-track residency for advanced degree holders | Points-based system; must meet income, education, and experience thresholds |
Visa processing often requires supporting company documents, including Articles of Incorporation, tax certificates, and proof of office lease. It’s strongly advised to consult an immigration lawyer if you plan to sponsor visas as a newly formed entity.
What tax, accounting, and audit rules must startups follow to stay compliant?
Once your company is formed in Japan, you are automatically entered into the country’s corporate tax system and must comply with ongoing tax filing, bookkeeping, and accounting requirements under the Corporate Tax Act, Consumption Tax Act, and the Income Tax Act. These duties apply regardless of whether your business is profitable or even operational yet.
The National Tax Agency (NTA) oversees most corporate tax matters, while larger companies may also fall under local tax bureau supervision.
Corporate Income Tax (CIT)
Tax rate: For small companies with capital under ¥100M, the first ¥8M of annual income is taxed at a reduced 15%, with the remainder at 23.2% (standard national rate).
- Filing deadline: Must file a corporate tax return within 2 months of the end of your fiscal year. Extensions are possible but must be requested in advance.
- Local taxes: Prefectural and municipal “inhabitant taxes” and enterprise taxes also apply, usually calculated based on income and capital.
Consumption Tax (VAT equivalent)
- Standard rate: 10% (8% for food and beverages under certain conditions).
- Exemption threshold: Businesses with taxable sales under ¥10 million in the prior fiscal year are typically exempt from paying consumption tax.
- Mandatory registration: If you exceed the threshold or voluntarily opt in (e.g. to reclaim input tax), you must file regular returns, usually quarterly or annually.
- New rule (2023 onward): Invoicing businesses must now register for Japan’s Qualified Invoice System to issue tax-deductible invoices to B2B clients.
Blue-Return Filing System
- Filing under the “Blue Return” (a privileged tax filing method) gives access to:
- Income deductions
- Loss carryforward (up to 10 years)
- Accelerated depreciation options
To use it, you must:
- Apply to the NTA within 3 months of incorporation
- Maintain double-entry bookkeeping
- Submit a balance sheet and profit & loss statement with your return
This is strongly recommended for startups planning to scale or take on investment.
Accounting Standards and Audits
- Accounting basis: Japanese companies generally follow J-GAAP, though larger entities and multinationals may adopt IFRS or US GAAP for group reporting.
- Audit requirement:
- Only large companies (e.g. capital over ¥500 million or public companies) are subject to mandatory audits.
- Startups and small private companies are not required to undergo annual audits unless stated in the Articles of Incorporation.
What penalties apply for non-compliance and how can they be avoided?
Japan’s business environment is rules-driven and, while enforcement is generally predictable, penalties for non-compliance can be steep, especially if filings are delayed or if directors neglect their legal duties. The Companies Act, Tax Code, and various labour and immigration laws all carry administrative sanctions, and in some cases, directors may be held personally liable.
Here’s what can go wrong and how to stay ahead of it.
Common Penalties for Corporate Non-Compliance in Japan
| Breach | Relevant Law | Penalty |
| Failure to register changes (e.g. address, directors) | Companies Act, Article 976 | Up to ¥1 million administrative fine |
| Late tax filings or payments | Corporate Tax Act, Consumption Tax Act | Penalties from 5–20% of tax owed, plus interest |
| Failure to hold annual shareholder meetings | Companies Act, Article 296 | Director liability; potential shareholder lawsuits |
| Missing social insurance enrolments | Health Insurance and Pension Act | Backdated premiums, surcharges, and denial of coverage |
| Operating without required licence/permit | Sector-specific legislation | Fines, suspension orders, or forced business closure |
| Visa sponsorship violations | Immigration Control Act | Revocation of company’s sponsoring rights, potential legal action |
Director Liability and Company Dissolution
Under Companies Act, Article 429, directors may be held personally liable for damages caused by negligence, including failure to file, pay taxes, or secure required licences. In serious cases, the Legal Affairs Bureau may move to administratively dissolve companies that have failed to meet statutory obligations for an extended period (e.g. not updating records or submitting tax returns).
Frequently Asked Questions About Laws and Regulations for Company Incorporation in Japan
Which statutes govern a Kabushiki Kaisha versus a Godo Kaisha?
Both entity types are governed by the Companies Act (Act No. 86 of 2005). A Kabushiki Kaisha (KK) is covered under Chapter II, Section 1, while a Godo Kaisha (GK) is outlined in Chapter II, Section 4.
Can all directors of a Japanese company reside overseas?
Yes, Japanese law no longer requires at least one resident director. However, in practice, many banks and visa authorities still expect a local point of contact or may require one for account opening or business licensing.
How long does registration take once the Legal Affairs Bureau accepts documents?
Processing usually takes 1–2 weeks after submission, though this can vary by region, workload, and whether documents are filed correctly on the first attempt.
Is a physical office address mandatory for incorporation?
Yes. All Japanese companies must register a real physical address. Virtual offices may be accepted if they meet legal and practical requirements, but P.O. boxes are not permitted.
Do I need a domestic bank account before filing the Articles of Incorporation?
No. For initial capital verification, founders typically deposit funds into a personal bank account (in Japan) and use that proof in the application. A corporate bank account is opened after incorporation is complete.
What’s the smartest next step for navigating Japan’s legal landscape?
Japan offers a stable, rules-based environment for business. But that structure only works in your favour if you understand how to operate within it. From the Companies Act to industry-specific licensing, the legal system isn’t just about paperwork. It’s the framework that protects your investment, your IP, and your growth potential. Whether you’re forming a KK, launching a branch office, or testing the waters with a representative office, staying compliant from day one is a strategic advantage.
If you’re not sure which rules apply to your setup (or how to meet them without delay) weConnect can help. Our team specialises in helping international founders and expanding businesses structure and register correctly in Japan, from the very first step through to long-term compliance. Book a free consultation to talk through your plans with a Japan incorporation expert.