A sole proprietorship in Japan, known as Kojin Jigyo (個人事業), is the simplest way to run a business as an individual. It requires no formal company incorporation, has minimal administrative overhead, and is widely used by freelancers, remote contractors, language teachers, consultants, and expats looking to operate independently in Japan.
Unlike forming a Godo Kaisha (GK) or Kabushiki Kaisha (KK), which are both recognized corporate entities, Kojin Jigyo offers a more flexible, low-cost structure with no legal separation between you and your business. That means you retain full control, but also assume full liability for all debts and obligations.
If you’re starting out or testing a market, a sole proprietorship may be your fastest path to doing business legally in Japan.
Contents:
- What Is a Sole Proprietorship in Japan?
- Who Should Choose a Sole Proprietorship?
- How to Register as a Sole Proprietor in Japan
- Taxation for Sole Proprietors in Japan
- Pros and Cons of Sole Proprietorship in Japan
- Common Misconceptions (And Their Realities)
- Sole Proprietor vs GK vs KK: What’s Right for You?
- Frequently Asked Questions
- How WeConnect Can Help
What Is a Sole Proprietorship in Japan?
A sole proprietorship in Japan is known as a Kojin Jigyo (個人事業). It’s the most basic form of business structure, allowing individuals to operate a business under their own name without incorporating a company.
What is a sole proprietorship called in Japan?
In Japan, a sole proprietorship is called Kojin Jigyo. It translates directly to “individual business” and is recognized by the National Tax Agency (NTA) for personal income tax purposes.
Unlike a Godo Kaisha (GK) or Kabushiki Kaisha (KK), a Kojin Jigyo is not a separate legal entity. This means that you and your business are legally the same person and you are personally responsible for all contracts, debts, and tax obligations.
Legal Classification in Japan
A sole proprietorship:
- Is not incorporated under Japan’s Companies Act.
- Registers directly with the local tax office (Zeimusho).
- Does not require a minimum capital contribution.
- Is often used by freelancers, small traders, remote workers, and sole consultants.
Comparison: Sole Proprietorship vs GK vs KK
Key Facts
- No corporate registration required
- Taxed as personal income via self-assessment
- Annual tax filing required (choose Blue or White tax return)
- Ideal for solo professionals testing a business model or freelancing
| Feature | Sole Proprietorship (Kojin Jigyo) | GK (Godo Kaisha) | KK (Kabushiki Kaisha) |
| Legal Entity | No | Yes | Yes |
| Setup Time | 1 day | ~2 weeks | ~4–6 weeks |
| Cost to Register | Free | ¥60,000+ | ¥200,000+ |
| Tax Filing Type | Personal (Income Tax) | Corporate Tax | Corporate Tax |
| Investor-Friendly | No | Limited | High |
| Liability Protection | No (unlimited liability) | Yes | Yes |
Who Should Choose a Sole Proprietorship?
A Kojin Jigyo is best suited to individuals who want to operate independently in Japan with minimal bureaucracy. It’s ideal for professionals who prioritize speed, flexibility, and low overhead rather than legal separation or external investment.
Sole proprietorships are commonly used by:
- Freelancers (designers, developers, writers, translators)
- Remote workers and independent contractors (including those working for overseas clients)
- English teachers and tutors
- Consultants (business, language, creative)
- Ecommerce operators and digital sellers
- Expats testing a business idea before setting up a GK or KK
If you’re working solo, not planning to hire employees, and don’t need external investors or a formal business structure, then registering as a Kojin Jigyo is often the fastest legal way to begin.
Not ideal if you:
- Want limited liability protection
- Plan to raise capital or onboard investors
- Need to issue formal invoices to corporations
- Want to build brand credibility with Japanese clients or institutions
- Need a work visa based on your business alone
📌 Note: Registering as a sole proprietor does not grant you a business visa. For long-term business residency, setting up a GK or KK is typically required.
How to Register as a Sole Proprietor in Japan
Setting up a Kojin Jigyo (sole proprietorship) in Japan is fast, low-cost, and requires no company formation. In most cases, you can register in a single visit to your local tax office.
Step-by-Step: Registering a Sole Proprietorship in Japan
- Determine Your Tax Filing Type
Decide whether to file a White Return (Shiroshinkoku) or a Blue Return (Aoshinkoku).- Blue returns require pre-approval and bookkeeping but offer greater deductions.
- White returns are simpler but offer fewer tax advantages.
- Visit Your Local Tax Office (Zeimusho)
Complete and submit the following forms:- Notification of Commencement of Business (開業届 / Kaigyotodoke)
- Application for Approval to File Blue Return (青色申告承認申請書 / Aoiro Shinkoku Shounin Shinseisho) (optional, for tax benefits)
- Receive Confirmation
Once accepted, you are officially registered as a sole proprietor. - Open a Business Bank Account (Optional)
While not legally required, it helps to separate personal and business finances. - Register for National Pension & Health Insurance
You’re obligated to enroll in:- Kokumin Kenko Hoken (National Health Insurance)
- Kokumin Nenkin (National Pension)
These are handled at your local city/ward office, not the tax office.
- Set Up Invoicing & Bookkeeping
Keep records of all income and expenses, especially if filing a Blue Return. You don’t need a company seal, but may want one for client credibility.
Documents Needed
- Residence Card or Zairyu Card (for foreigners)
- Personal seal (hanko) or signature
- Completed tax forms (available at Zeimusho or online)
- Proof of address
Quick Tips
- You must register at the tax office where your residential address is located.
- It’s best to register within 1–2 months of starting activity.
- If working with overseas clients, registering helps show legal compliance for invoices.
Taxation for Sole Proprietors in Japan
As a Kojin Jigyo, you’re taxed as an individual, not as a corporation. This simplifies reporting but also means you’re personally liable for all tax obligations. You’ll pay income tax based on your total net earnings and must also contribute to social insurance.
How You’re Taxed
- Personal Income Tax: Progressive rates from 5% to 45% depending on income level.
- Local Inhabitant Tax (Juminzei): Typically around 10% of taxable income.
- National Pension & Health Insurance: Mandatory contributions calculated annually.
Blue Return vs White Return (青色申告 vs 白色申告)
| Feature | White Return (Shiroshinkoku) | Blue Return (Aoshinkoku) |
| Filing Simplicity | Simple | Requires pre-approval |
| Deductions | Basic | Up to ¥650,000 in tax deductions |
| Bookkeeping Required | Minimal | Double-entry, detailed |
| Who Should Use | Hobbyists, casual earners | Full-time freelancers, consultants |
Blue returns must be applied for within 2 months of starting your business.
Deductible Expenses
As a sole proprietor, you’re allowed to deduct ordinary and necessary business expenses, including:
- Home office expenses (portion of rent, utilities)
- Software subscriptions
- Business-related travel
- Internet and phone bills
- Professional services (legal, tax)
You can also depreciate equipment like laptops or cameras over time.
Do I Need an Accountant?
Not necessarily. Many sole proprietors manage taxes themselves using free or paid software. However, if you:
- Earn over ¥10M/year
- Use the Blue Return
- Have foreign income or multiple revenue streams
Then a Japanese tax accountant (Zeirishi) is highly recommended.
Filing Timeline
| Task | Deadline |
| Annual Tax Return Filing | March 15 (for previous tax year) |
| Blue Return Application | Within 2 months of starting |
| National Insurance Payment | Ongoing, based on prior income |
Pros and Cons of Sole Proprietorship in Japan
Like any business structure, becoming a Kojin Jigyo has clear upsides and limitations. Here’s what you need to weigh before committing.
Pros
1. Simple and Fast Setup
No need to register with the Legal Affairs Bureau or pay incorporation fees. You can start after a single visit to your local tax office.
2. Low Ongoing Costs
No company registration tax, legal maintenance, or notary fees. Suitable for lean startups and solo workers.
3. Full Control
You own 100% of the business and make all decisions, ideal for solo operators.
4. Straightforward Taxation
Taxed as personal income. You don’t file corporate taxes or maintain detailed company records unless using a Blue Return.
5. Expense Deductions
You can deduct a portion of your rent, utility bills, and even internet if working from home.
6. No Accountant Required
Many sole proprietors file their own taxes using Japanese accounting software or templates.
Cons
1. Unlimited Personal Liability
You are legally responsible for all debts and obligations. There is no legal separation between you and the business.
2. Lower Credibility
Some Japanese clients, banks, and partners may view sole proprietorships as less credible than incorporated entities.
3. Limited Access to Capital
You can’t issue shares or attract investors. Loans may be harder to secure.
4. No Employee Benefits
You’re not eligible for social insurance benefits typically offered to company employees.
5. No Unemployment Insurance
If business slows down, you can’t fall back on unemployment benefits.
6. Potentially Higher Tax Burden at Scale
As income increases, progressive personal tax rates can exceed corporate tax rates, especially above ¥9 million/year.
Common Misconceptions (And Their Realities)
Sole proprietorships in Japan are simple, but not always well understood. Here are the most common myths we encounter, and the facts that clear them up.
❌ “I don’t need to register anything.”
Reality:
Even though you’re not forming a company, you must still file a Notification of Business Commencement (開業届 / Kaigyotodoke) with your local tax office to operate legally and file income tax.
❌ “Becoming a sole proprietor will help me get a visa.”
Reality:
Registering as a Kojin Jigyo does not qualify you for a business manager visa or self-sponsorship. Immigration and tax authorities are separate in Japan. To sponsor your own visa, you typically need to incorporate a company (GK or KK) with a proper business plan and office space.
❌ “I can avoid paying pension and health insurance.”
Reality:
All residents of Japan, including sole proprietors, are required to join the National Health Insurance (Kokumin Kenko Hoken) and National Pension (Kokumin Nenkin) systems. These are enforced at the city/ward level, not the tax office.
❌ “I’ll save more money than incorporating.”
Reality:
For freelancers with low to mid-range income, that’s often true. But once your annual income exceeds around ¥9 million, a GK or KK may offer lower tax rates, better deductions, and limited liability, offsetting the initial setup cost.
❌ “Kojin Jigyo is just the Japanese word for freelancer.”
Reality:
Not exactly. Many freelancers are sole proprietors, but the legal term Kojin Jigyo refers specifically to someone who has formally registered with the tax office and files income tax accordingly.
Still unsure whether to stay lean or incorporate?
Read our guide comparing GK, KK, and sole proprietorships in Japan →
Sole Proprietor vs GK vs KK: What’s Right for You?
Choosing the right business structure in Japan comes down to your goals: flexibility, credibility, liability protection, or scalability. Here’s how a Sole Proprietorship (Kojin Jigyo) compares to Godo Kaisha (GK) and Kabushiki Kaisha (KK), the two main company types.
Business Structure Comparison
| Feature | Sole Proprietor (Kojin Jigyo) | GK (Godo Kaisha) | KK (Kabushiki Kaisha) |
| Legal Entity | No | Yes | Yes |
| Setup Time | 1–2 days | ~2 weeks | ~4–6 weeks |
| Setup Cost | Free | ¥60,000–¥100,000+ | ¥200,000–¥250,000+ |
| Taxation | Personal income tax | Corporate + personal tax | Corporate + personal tax |
| Liability Protection | ❌ No (unlimited liability) | ✅ Yes | ✅ Yes |
| Bookkeeping Complexity | Low | Moderate | High |
| Visa Sponsorship | ❌ No | ✅ Possible | ✅ Preferred route |
| Credibility with Clients | Low | Moderate | High |
| Best For | Freelancers, side projects | Small businesses, startups | Scalable companies, funding |
Quick Guidelines
- Choose Sole Proprietorship if you’re freelancing, working solo, and want to start fast with minimal cost.
- Choose GK if you want limited liability, need to hire, or plan to grow beyond freelancing.
- Choose KK if you’re targeting investment, applying for a business visa, or want maximum business credibility.
Frequently Asked Questions
What is a sole proprietorship called in Japan?
A sole proprietorship in Japan is called a Kojin Jigyo (個人事業). It’s a non-incorporated business structure where the owner and the business are legally the same entity.
Can foreigners become sole proprietors in Japan?
Yes, foreign residents with a valid visa (e.g., spouse visa, permanent resident, dependent, etc.) can register as sole proprietors. However, you cannot use a sole proprietorship to obtain a business visa.
Do I need to register a sole proprietorship in Japan?
Yes. You must file a Notification of Business Commencement (開業届 / Kaigyotodoke) at your local tax office to operate legally and file taxes.
What are the tax rates for sole proprietors in Japan?
You’ll pay progressive personal income tax (5–45%), plus a local inhabitant tax (~10%). Social insurance (health and pension) is also mandatory.
Can I register a sole proprietorship while working remotely for overseas clients?
Yes. Many remote workers and freelancers in Japan operate as sole proprietors while working for clients outside the country. Just ensure proper invoicing and tax declarations.
Can I deduct home office expenses?
Yes. If you work from home, a percentage of your rent, utilities, internet, and other expenses can be deducted from your taxable income.
When should I apply for a Blue Return?
Within two months of starting your business. Blue Returns offer enhanced tax deductions but require proper bookkeeping and pre-approval.
Can I get unemployment insurance as a sole proprietor?
No. Sole proprietors are not eligible for unemployment insurance in Japan, even if business slows down.
How WeConnect Can Help
Setting up a sole proprietorship in Japan is a practical choice for many freelancers, consultants, and independent professionals, but it’s not always the best long-term fit.
At WeConnect, we help you:
- Understand if Kojin Jigyo is right for your goals
- Navigate the tax office paperwork and deadlines
- Compare your options (Sole Proprietor vs GK vs KK)
- Plan for visa eligibility, scaling, or investor readiness
Whether you’re starting small or thinking big, we can guide you through every step, from sole proprietorship setup to company incorporation, so you stay compliant and positioned for growth in Japan.
- Compare all company types →
- Book a free consultation →