(Uploaded on: 2024/6/4)

Kabushiki Kaisha (K.K) or Godo Kaisha (G.K)?

Setting up a company is a new challenge and a great one. There are a lot of decisions to be made, though.

If you decide to set up a company, you have to decide whether it will be a Kabushiki Kaisha or a Godo Kaisha. A Kabushiki Kaisha is abbreviated as K.K. and a Godo Kaisha as G.K. Many people wonder what the difference between the two is. You will want to choose the one that is as advantageous to your business as possible. The differences are indeed there. In fact, there are many details, but I don’t think it makes much sense to know them in detail. The two most important differences, in my opinion, are as follows. In addition, you don’t need to worry about annual taxes such as corporation tax and consumption tax, as they are exactly the same in both cases.

(i) Familiarity.

If you ask which is better known to the general public, a Kabushiki Kaisha or a Godo Kaisha, it is by far the Kabushiki Kaisha. This is not to say that Godo Kaisha is not well known, but most people think of a Kabushiki Kaisha when they think of a company. Familiarity may be paraphrased as trustworthiness. Consider how this might affect your business. If you are not sure, it is probably safer to go for a Kabushiki Kaisha. However, you will also need to consider the costs of incorporation, which are described next.

(ii) Incorporation costs.

Establishing a company is not free. When establishing a company, it is necessary to pay taxes etc. The costs of establishing a Kabushiki Kaisha and a Godo Kaisha are different. This cannot be helped because the law requires it to be so. Generally speaking, a Kabushiki Kaisha costs about JPY 230,000 and a Godo Kaisha about JPY 110,000. If the costs are lower and you do not care about the company’s name recognition, a Godo Kaisha is better. However, it is important to remember that the cost of establishing a company is a one-off cost, but the name recognition of the company is something that will affect it for a long time.

Conslusion

There is no absolute answer as to whether a Kabushiki Kaisha or a Godo Kaisha is better. It is up to you. If you are going to set up a company with your colleagues, there may be other differences than these that you need to consider. In such circumstances, it is wise to consult an expert.

By the way, a company has a capital, and you have to decide how much it should be. If you have a company with a capital of less than 10 million yen, it is advisable to set the capital to less than JPY 10 million, not exactly JPY 10 million, but less than JPY 9,999,999, because if you set the capital to less than 10 million yen, you are generally exempt from paying consumption tax for the first two years or so. If you are in the business of exporting, for example, you may want to file a consumption tax return for a consumption tax refund, but this is not a problem as long as you submit the documents to the tax office at the appropriate time.

One further point is that when drafting the articles of association (Teikan) of a company, it is possible to include a statement regarding the timing for convening a general meeting of shareholders with regard to a Kabushiki Kaisha, and with regard to a Godo Kaisha, it is possible to include a statement regarding the timing for finalising the financial statements. In this regard, the text should state that it should be within three months from the day after the end of the financial year. By doing so, the deadline for filing corporate income tax and consumption tax returns is extended from two months to three months (forever, not just once). On the other hand, it is recommended to pay the taxes within two months, as it is not extended with regard to the timing of the tax payment (this is before the final tax return is submitted, so it is advisable to pay the estimated tax). The articles of association are generally prepared by a legal professional called a judicial scrivener (Shiho Shoshi), so be sure to tell them.