(Published: 2024/6/5)

How to set up a company in Japan

When considering establishing a company in Japan, some people think it requires dealing with various complex matters. Some may consider running their business as a sole proprietorship (sole proprietorship or a company?). However, establishing a company can make it easier to gain social credibility and, from a tax-saving perspective, there can be more advantages than running a sole proprietorship. Therefore, even for relatively small-scale businesses, some people choose to establish a corporation instead of operating as an individual.

For those who do not normally use Japanese in business, the abundance of information in Japanese can make establishing a company seem difficult. Indeed, it is challenging to establish a company on one’s own, so this perception is accurate. Generally, however, companies are established with the help of a judicial scrivener (Shiho-Shoshi). Therefore, if you leave it to them, there should essentially be no problem.

That said, even if you are leaving it to them, it is important to understand the process of company establishment. This article briefly explains the steps for establishing a company.

  1. Decide on basic company details

Determine basic details such as the company name, business activities, location, capital, shareholders, directors/officers, and fiscal year. These will be recorded in the articles of incorporation.

Company name:

The company name is very important. It should ideally reflect the business activities. Since having a name similar to others can be disadvantageous, choosing a unique name to some extent is recommended. The name should include the corporate status, such as Kabushiki Kaisha or Godo Kaisha (See K.K. or G.K.).

Business activities:

You need to specify the business activities in the company’s articles of incorporation. While it’s not forbidden to engage in activities not listed, it’s best to clearly define the main business activities beforehand.

Location:

The company needs an address. Choose a convenient location as documents will be regularly mailed from the tax office, pension office, etc. Initially, a virtual office or rental office (serviced office) can be an option (detail).

Capital:

Legally, any amount is acceptable, but too small an amount can leave a bad impression, so it’s better to set it at a reasonable level. The amount of capital also affects tax rules, so consulting a tax accountant in advance can be beneficial if you are unsure, especially if planning to set capital at JPY 10 million or more (detail).

Shareholders:

If you are starting the business, you typically provide the funds to establish the company, making you the shareholder. If there are others involved, they will also become shareholders.

Directors/Officers:

They are not shareholders, but if you are the sole investor, you will be both a shareholder and a director/officer. They are the ones who actually run the business.

Fiscal year:

A company reports its sales, profits, etc. once a year. You can decide when to mark this cutoff. While December and March are common, any other month is equally acceptable. Choosing a time outside your busy season can be beneficial. Typically, the fiscal year-end is often about a year after the establishment date.

  1. Create and certify the articles of incorporation

The articles of incorporation, which can be considered the company’s rulebook, list the company’s business activities, location, etc. The created articles of incorporation need to be certified at a notary public’s office. However, this certification is not necessary for a Godo Kaisha.

  1. Payment of capital

The founders (usually the shareholders, including yourself) pay the capital in your personal name. Since the company is not yet established at this point, you deposit the funds into a personal bank account. A copy of the bankbook is used as proof of this transaction.

  1. Registration of establishment

Register the company’s establishment at the Legal Affairs Bureau that has jurisdiction over the company’s address. Required documents include a certified copy of the articles of incorporation, the application for registration of incorporation, a seal registration form, the directors/officers’ consent forms, and proof of capital payment. You can submit these documents either in person at the Legal Affairs Bureau or by mail. Ensure you have created the company’s seal/hanko beforehand.

  1. Procedures after establishment

Once the registration is completed at the Legal Affairs Bureau, the company is officially established. There are still other procedures to follow. First, obtain a Certificate of Registered Matters (Rirekijikoshomeisho), also known as a certified copy (Tohon) or corporate registry (Tokibo). This document, listing the company name, address, etc., is necessary for opening a bank account, signing office leases, and submitting documents to the tax office, among other things. It’s handy to get 2-3 copies. Also, obtain a seal certificate. These can be obtained at the Legal Affairs Bureau, either at the counter or by mail.

After the establishment, submit incorporation notifications etc. to the tax office as part of tax procedures. The required documents vary depending on the company’s situation. Be aware of documents like the application for blue return, which have crucial submission timing. If there are directors/officers’ or employees’ salaries, notify the pension office regarding health insurance and pension insurance, and handle labor insurance procedures at the Labor Standards Inspection Office.

Summary

The above outlines the general process of establishing a company. The procedures (and costs) differ between Kabushiki Kaisha and Godo Kaisha. Understanding the intricate details of the documents can be challenging, so it is typical to request assistance from a judicial scrivener (Shiho-Shoshi), a specialist in company establishment. After establishment, it is common to consult a tax accountant for tax-related procedures and a social insurance labor consultant for social insurance-related procedures. If you have any questions regarding taxes, please consult with us.

(See also Introduction to Japan tax)

(See also Loan for Startups)