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Incorporation

Setting up a company in Japan

When setting up a company you may want to consider these factors:

  1. Business factors

    • The industry and type of business
    • Nationality of the headquarters/individual(s) and
    • Presence of existing trade agreements or relationships
  2. Regional factors

    Separate cities and regions such as the different wards and prefectures, may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Regional language

    Language barriers may be an influence. Although Tokyo’s dialect (“Tokyo-ben”) is the national way of speaking, different locations in Japan use different dialects, such as “Kansai-ben” in Osaka and Kyoto. While all areas should understand and be able to use Tokyo-dialect meaning, some local terminology may be different in various regions.

  4. Authorities

    Anecdotal evidence suggests that official applications such as visa or licensing can be very dependent on a ‘case by case, case-manager by case-manager’ basis. Therefore, in principle, the strictness of any two similar applications by two different people may have different results.

Your Options

There are three types of business forms available to foreign companies in Japan.  Each of these business forms has distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements.  In most cases it will depend on the degree of commitment a company has to Japan and the planned business activity. 

This page provides a general guideline for foreign businesses on entering Japan for business purposes. In particular it looks at common pathways to establishing a business presence in Japan, generally through a representative office, branch office or subsidiary company. In addition various economic, tax and regulatory facts are provided throughout as a source of useful information to assist those who will enter the Japanese economy. The guide also looks at some immigration requirements such as obtaining the appropriate visa status.

Data is based on the time of writing this article, June 2015, or closest available dates.

Japan is an island nation and home to the largest metropolis in the world: Tokyo. The government is a parliamentary government with a constitutional monarchy, although the emperor effectively acts in only a ceremonial role. The legal system is a civil law system based on the German model; combining western influence with Japanese traditions.

Population: 126,000,000

Capital: Tokyo

National Language: Japanese

Time zone: UTC+9

Calling code: +81

Currency: Japanese Yen (¥) [International code: JPY] | USD$1 = roughly 123 JPY (10,000JPY = roughly 81 USD)

Nominal GDP: $4.210 trillion ($33,223 per capita)

Internet Domain: .jp .co .jp

According to the CIA World Factbook, after WW2 the nation recovered and grew to enjoy three decades of unprecedented economic growth, beginning to slow down in the 1990s, and then more recently impacted by a natural disaster in 2011. Nonetheless the nation remains one of the major economic powers in the world.

Things to Consider

Disclaimer: It is important to clarify that this guide is provided as general information. The exact steps and requirements will depend upon the specific circumstances and business needs.

Subsidiary Company (KK)

A.  Requirements / Restrictions

A foreign company establishing a subsidiary company locally incorporated in Japan can choose to establish it as a joint-stock corporation, known in Japanese as “Kabushiki-Kaisha” (株式会社) or “KK” for short, or a limited liability company type called “Godo-Kaisha” (五度会社) or “GK” for short.  Joint-stock corporations and limited liability companies are similar insofar as liability in them is limited to the assets contributed by equity participants. Either form of subsidiary company can be established by completing similar procedures (this guide is based on the KK form).

KK’s require a board of at least three directors, with at least one director designated as a representative director (daihyō torishimariyaku / 代表取締役), who holds the corporate seal and is empowered to represent the company in transactions, and at least one director must be resident in Japan.

B.  Advantages / Disadvantages

A subsidiary is a separate corporation from the foreign parent company, so the foreign company is not liable for the subsidiaries debts or obligations (although can bear liability as an equity participant).

According to June Advisors Group, a subsidiary is generally selected if there will be a certain amount of turnover in Japan that would be likely to generate profit locally. It is recommended if wanting to keep the foreign parent and subsidiary separate, such as wanting to maintain separate accounting from the parent company.

C.  Registration steps

1. Check Availability of Name

According to the Doing Business Project, the name must be checked but applying for an examination at the Legal Affairs Bureau of Similar Corporate Names, to ensure if does not conflict with any existing Japanese companies with similar corporate names.

To do so, it is necessary to go to the local Legal Affairs Bureau (Homukyoku / 法務局). Since the website is only in Japanese, it will likely require assistance from a Japanese lawyer or agent.

Time: 1 day

Cost: 450 JPY

2.  Register Company Seal and Directors’ Seals

According to the Doing Business Project, the company will also need a company seal (inkan / 印鑑) and these seals will need to be certified. The company will use these in the coming registration steps, as well as to sign business agreements and the like in its name.

A seal can be generally made at any local Seal maker and can be certified at the city hall or ward office, which will issue a registration certificate (印鑑登録証明書).

Time: 1-3 days

Signature attestation at embassy: Requires booking an appointment, so may take 1 week or more depending on the embassy.

Cost:

  • Creation of ‘name seal’ (inkan / 印鑑): 300 yen (per person)
  • Certifying the seal (inkan shomeisho / 印鑑証明書): 300 yen (per person)
  • Company seal: 10,000 – 20,000 yen

3.  Certify the Articles of Incorporation

The Articles of Incorporation (teikan / 定款) determine how the company will be managed and need to be prepared and specify the interests of shareholders / investors and their relationship with directors.

Directors must be formally appointed, and the seal of each investor and director is also required to be stamped on the Articles of Incorporation and other company documents. If any of these parties are not residing in Japan, they can instead use a signature attestation from a notary public of their home country.

The Articles of Incorporation once prepared will then need to be certified by using auditors to examine the legality of the company’s establishment procedures. Little information on what this actually involves is available, although the local Legal Affairs Bureau (Homukyoku / 法務局) would most probably provide guidance. The Articles must also be notarized by a Japanese notary public. Since the Legal Affairs Bureau is only available in Japanese, this process will also likely require assistance from a Japanese lawyer or agent.

Time: 1 day

(Additional time depends on availability of appropriate parties e.g. legal professionals to prepare the documents).

Cost:

  • Notarization fee : 50,000 yen
  • Revenue stamps: 40,000 yen

4.  File Articles of Incorporation at Legal Affairs Bureau

Once all the documents are prepared and legalized, the company can be registered through the local Legal Affairs Bureau (Homukyoku / 法務局) as well as have its seal certified.

Required documents include:

  • Certified Articles of Incorporation
  • Company Seal (inkan / 印鑑)
  • Seal certificate (inkan shomeisho / 印鑑証明書) of each director (and private investor if there is any). If a private investor also is a director, two certified copies are required.

Alternatively a seal certificate can be replaced by a signature attestation certified by the Embassy/Consulate in Japan or a notary public of your home country.

Once the company is registered, it will obtain a registry certificate and the company’s seal certificate, which will then be required at various occasions such as opening a corporate bank account, signing contracts in company’s name, etc.

Time: 3-7 days

Cost: 0.7% of the capital amount or JPY 60,000, whichever is higher

5.  Establish an Office

Although there is not a formal registration process, according to the June Advisors Group, it is required to have a company office in order to register a company in Japan.

An advantage of establishing a physical office is that having a lease agreement under the company’s name proves a certain level of reliability and can smooth other steps, in particular opening a bank account.

Services and virtual offices are also available. However, a guide on GaijinPot states that if the company is to be used to sponsor certain classes of visas, the company must registered at an actual physical office (virtual office will not suffice). Another account on Momo-Catalogue also notes that when opening a bank account, the bank wanted to perform an inspection of the company office space and assets to prove the company was not a fake company.

Time: n/a

Cost: n/a

6.  Notify Tax Office

According to the Doing Business Project, notification of the company incorporation must be filed within 2 months of the incorporation date. The application for the approval of blue tax returns must be filed either within 3 months of the incorporation date, or a day prior to the end of the first fiscal year, whichever comes first.

Time: 1 day

Cost: No charge

7.  Notify Local Tax Office

According to the Doing Business Project, the company will need to also file a Notification for the Commencement of Business at the local tax office.

If the company head office is located in the Tokyo Metropolitan Government region, it must file notification within 15 days of company incorporation. If the head office is outside Tokyo’s wards, the company must file a Notification of Incorporation at the tax office of the local municipal government and prefectural government within 1 month of company incorporation.

Time: 1 day

Cost: No charge

8.  File labour insurance notifications and employment rules at Labor Standards Inspection Office

Upon recruitment, the company must file without delay the following documents at the competent Labor Standards Inspection Office:

  • Notification of the application for labor insurance
  • Notification of the commencement of labor insurance within 10 days of the insurance coverage commencement date
  • Notification of the approximate insurance contributions within 50 days of the insurance coverage commencement date
  • The rules of employment (once the company hires 10 or more employees)
  • Agreement on overtime and holiday work (the “36 agreement”) if the company anticipates that its employees will work overtime or on public holidays, irrespective of the number of employees.

Time: 1 day

Cost: No charge

9.  Apply for health insurance and public welfare pension at Japan Pension Service

According to the Doing Business Project, as soon as the company and its employees are covered for health insurance and public welfare pension, the company must file the following documents at the Social Insurance Office within 5 days of the business insurance coverage commencement date:

  • Notification of the acquisition of insured status
  • The insurance details covering Health and Employee Pension insurance

Time: instant (online)

Cost: No charge

10.  File company application for employment insurance at Public Employment Security Office

According to the Doing Business Project, the notification of the company’s application for employment insurance must be filed at the Public Employment Security Office within 10 days of commencement of employment by the company.

When a new employee is recruited, he/she is automatically insured under the company’s employment insurance. The company must thus file a “Notification of Acquisition of Insured Status under Employment Insurance” at the Public Employment Security Office by the 10th day of the month immediately consecutive to that of the employee’s appointment date.

Time: instant (online)

Cost: No charge

11.  Open Commercial Bank Account

Once the company has been registered, a corporate bank account can be opened. However, it may be an involved process due to Japanese laws requiring bank account holders to be cleared before approval. Furthermore, as seen in comments on this Quora discussion, Japanese banks (not including international banks) generally offer little English and may also place strict controls on foreign transfers, such as needing in-person clarifications each time payments are received from overseas.

A personal anecdote of a foreigner who started a small business in Japan describes the initial documents for opening a business bank account including the following:

  • An explanation of your company’s activities and what you plan to use the bank account for.
  • Certificate showing complete records of your company to-date (rireki jikou zenbu shoumeisho /履歴事項全部証明書) obtained from the local Legal Affairs Bureau.
  • Company seal certificate
  • Identification of person applying for account
  • Copy of certificate of incorporation (teiken no utushi / 定款の写し).
  • Notification of incorporation as submitted to the tax office (houjin setsuritsu todokedesho / 法人設立届出書)
  • Tax report for commencement of payroll as submitted to the tax office (kyuryou shiharai jimusho tou no kaisetsu todokedesho / 給与支払事務所等の開設届出書)

The bank will review the application and may contact you for additional information such as promotional materials such as company brochures, or the tenancy agreement for its premises, or information about the products sold.

Time: 3 days – 2 weeks

Cost: no charge (monthly fees and minimum deposit requirements can depend on the bank)

Branch office

A.  Requirements / Restrictions

A Japanese branch office is a business location that provides services in Japan but under direction by the foreign company.  It can engage in profitable activities, but is not expected to engage in independent decision making. A branch office is a relatively simple method for establishing a base of operations in Japan and must be registered, and have a resident representative who is authorized to represent the branch.

B.  Advantages / Disadvantages

Like the representative office, a branch office does not have its own legal entity status, but instead is encompassed by the corporate status of the foreign company. Therefore the foreign company is ultimately liable for debts and credits generated by the activities of its Japanese branch office. A Japanese branch office, however, may open bank accounts and lease real estate in its own name.

According to June Advisors Group, branch offices are used if a company needs an officially registered legal entity in Japan and a Japanese bank account to deal with Japanese clients, but without having to manage separate capital in Japan.

C.  Registration steps

1.  Check Availability of Name

According to the Doing Business Project, the name must be checked but applying for an examination at the Legal Affairs Bureau of Similar Corporate Names, to ensure if does not conflict with any existing Japanese companies with similar corporate names.

To do so, it is necessary to go to the local Legal Affairs Bureau (Homukyoku / 法務局). Since the website is only in Japanese, it will likely require assistance from a Japanese lawyer or agent.

Time: 1 day

Cost: 450 JPY

2.  Appoint a Representative

A branch will require a representative who is resident in Japan that is authorized to act on behalf of the company. There is no formal process for appointment, but some kind of written agreement between the representative and the foreign company should be created. Ideally it is a good idea to get a copy translated into Japanese if any authority or potential business partner or client needs to see it in future.

If the representative needs to sign anything, e.g. contacts or a lease, they will need to first obtain an official ‘name seal’ (inkan / 印鑑) and then have this seal certified (inkan shomeisho / 印鑑証明書), usually done at the resident’s local city hall. They will need to bring their Japanese resident ID.

Alternatively they can organize to have a signature attestation issued by the Embassy/Consulate of the person’s country of citizenship. However this would be required for every time something is signed, and generally requires booking an appointment at the embassy. If a representative is likely to only sign one or two things this may be sufficient. However if they are expected to sign multiple or regular agreements, obtaining and certifying a name seal would be recommended, especially as the process is cheap and fast.

Time:

If applying for the official seal, it reportedly can take anywhere from 1 day to 3 months, but around 3 weeks should be more than enough in most cases.

Signature attestation at embassy: Requires booking an appointment, so may take 1 week or more depending on the embassy.

Cost:

  • No costs directly associated with appointment of the representative
  • Creation of ‘name seal’ (inkan / 印鑑): 300 yen
  • Certifying the seal (inkan shomeisho / 印鑑証明書): 300 yen
  • Translation of the agreement may also attract translator fees.
  • Signature attestation at embassy: Generally no charge

3.  Prepare and Certify Articles of Incorporation

An affidavit is based on the Registry Certificate and the Articles of Incorporation of the parent company as well as the seal certificate (inkan shomeisho / 印鑑証明書) of the Representative in Japan. The affidavit needs to be certified at the relevant embassy/consulate or a public notary of the parent company’s home country.

An affidavit for registering a branch office contains the details such as the name of the parent company, address of the head office, the company’s activities, amount of capital, names of the Directors, the date of establishment of the branch office in Japan, address of the branch office, name and address of the Representative in Japan.

To be able to prepare such affidavit, the following documents are required:

  • Registry certificate of the foreign parent company
  • Articles of Incorporation of the parent company
  • Japanese translation of the above documents
  • Seal certificate (inkan shomeisho / 印鑑証明書) or signature attestation of the Representative from their local embassy
  • Branch office’s official seal (to be registered at the registry office) 

The affidavit must be certified by the relevant country’s Embassy/Consulate in Japan, or a public notary of the country where the foreign company is registered.

Time: 1 day

(Additional time may depend on availability of appropriate parties e.g. legal professionals to prepare the documents).

Cost: Notarization Fee: 50,000 yen

4.  Register Branch Office at Legal Affairs Bureau

A branch office may begin business operations after registering its establishment with the Legal Affairs Bureau (Homukyoku / 法務局). In bigger cities (i.e. Tokyo) you will most likely need to make an appointment in advance.

Because it is seen as a foreign owned and directed office, the exact process will depend on what is determined to be the most similar form of Japanese corporation, based on documents such as the foreign company’s articles of incorporation, establishment certificate, registration certificate, and so on.

The exact documents required depend on the parent company business structure, so it is recommended to confirm what documents you will need while making an appointment. At the very least you would most probably need:

  • Branch office address, lease and date of establishment
  • Resident ID of representative
  • Article of association of parent company (translated to Japanese)
  • A copy of the agreement between parent company and representative

Once the application is processed, a Certificate of Seal Registration & Certificate of Registered Matters is required to open a bank account in the branch’s name.

Cost: 90,000 yen

Time:

  • Appointment waiting time may take 1-2 weeks
  • Application itself may be processed on the day but more likely will take 1-2 weeks.

5.  Establish an Office

Although there is no formal registration process it is required to have a company office in order to register a company in Japan.

An advantage of establishing a physical office is that having a lease agreement under the company’s name proves a certain level of reliability and can smooth other steps, in particular opening a bank account.

Services and virtual offices are also available. However, a guide on GaijinPot states that if the company is to be used to sponsor certain classes of visas, the company must registered at an actual physical office (virtual office will not suffice). Another account on Momo-Catalogue also notes that when opening a bank account, the bank wanted to perform an inspection of the company office space and assets to prove the company was not a fake company.

Time: n/a

Cost: n/a

6. Notify Tax Office

According to the Doing Business Project, notification of the company incorporation must be filed within 2 months of the incorporation date. The application for the approval of blue tax returns must be filed either within 3 months of the incorporation date, or a day prior to the end of the first fiscal year, whichever comes first.

Time: 1 day

Cost: No charge

7.  Notify Local Tax Office

According to the Doing Business Project, the company will need to also file a Notification for the Commencement of Business at the local tax office.

If the company head office is located in the Tokyo Metropolitan Government region, it must file notification within 15 days of company incorporation. If the head office is outside Tokyo’s wards, the company must file a Notification of Incorporation at the tax office of the local municipal government and prefectural government within 1 month of company incorporation.

Time: 1 day

Cost: No charge

8.  File labour insurance notifications and employment rules at Labor Standards Inspection Office

Upon recruitment, the company must file without delay the following documents at the competent Labor Standards Inspection Office:

  • Notification of the application for labor insurance
  • Notification of the commencement of labor insurance within 10 days of the insurance coverage commencement date
  • Notification of the approximate insurance contributions within 50 days of the insurance coverage commencement date
  • The rules of employment (once the company hires 10 or more employees)
  • Agreement on overtime and holiday work (the “36 agreement”) if the company anticipates that its employees will work overtime or on public holidays, irrespective of the number of employees.

Time: 1 day

Cost: No charge

9.  Apply for health insurance and public welfare pension at Japan Pension Service

As soon as the company and its employees are covered for health insurance and public welfare pension, the company must file the following documents at the Social Insurance Office within 5 days of the business insurance coverage commencement date:

  • Notification of the acquisition of insured status
  • The insurance details covering Health and Employee Pension insurance

Time: instant (online)

Cost: No charge

10.  File company application for employment insurance at Public Employment Security Office

The notification of the company’s application for employment insurance must be filed at the Public Employment Security Office within 10 days of commencement of employment by the company.

When a new employee is recruited, he/she is automatically insured under the company’s employment insurance. The company must thus file a “Notification of Acquisition of Insured Status under Employment Insurance” at the Public Employment Security Office by the 10th day of the month immediately consecutive to that of the employee’s appointment date.

Time: instant (online)

Cost: No charge

11.  Open Commercial Bank Account

Once the company has been registered, a corporate bank account can be opened. However, it may be an involved process due to Japanese laws requiring bank account holders to be cleared before approval. Furthermore, as seen in comments on this Quora discussion, Japanese banks (not including international banks) generally offer little English and may also place strict controls on foreign transfers, such as needing in-person clarifications each time payments are received from overseas.

A personal anecdote of a foreigner who started a small business in Japan describes the initial documents for opening a business bank account including the following:

  • An explanation of your company’s activities and what you plan to use the bank account for.
  • Certificate showing complete records of your company to-date (rireki jikou zenbu shoumeisho /履歴事項全部証明書) obtained from the local Legal Affairs Bureau.
  • Company seal certificate
  • Identification of person applying for account
  • Copy of certificate of incorporation (teiken no utushi / 定款の写し).
  • notification of incorporation as submitted to the tax office (houjin setsuritsu todokedesho / 法人設立届出書)
  • tax report for commencement of payroll as submitted to the tax office (kyuryou shiharai jimusho tou no kaisetsu todokedesho / 給与支払事務所等の開設届出書)

The bank will review the application and may contact you for additional information such as promotional materials such as company brochures, or the tenancy agreement for its premises, or information about the products sold.

Time: 3 days – 2 weeks

Cost: no charge (monthly fees and minimum deposit requirements can depend on the bank)

Representative office

A.  Requirements / Restrictions

The establishment of representative offices does not require registration with authorities like the Legal Affairs Bureau, but it cannot engage in “commercial” activities.

A representative office is not considered a legal entity and not permitted to engage in ‘sales or commerce’ activity, such as not being able to open bank accounts, or lease real estate under its name. The precise meaning of “sales or commerce” however is not clearly defined but is generally considered as prohibiting any “for profit” activity that would be taxable in Japan. While this generally means the representative office cannot engage in direct sales, some sources report that advertising activities are OK, for example. It would be highly recommended to visit your local or nearest Japan Chamber of Commerce to discuss your particular plan.

The representative office does not require any formal registration as a business, however it does require the appointment of a permanent agent, which means they must be a resident in Japan and will require the appropriate visa if not already based in Japan.

The Representative Office can hire employees in Japan however, without still being registered with legal authorities like the Legal Affairs Bureau. The only registration needed is with tax office for payment of employees withheld income taxes.

While the business will not exist as a legal entity, this means business-related agreements such as leasing an office or opening a bank account must be instead be signed by the head office of the foreign company or the representative in an individual capacity. Note that if the individual signs, they would have personal and unlimited liability for such agreements, however.

B.  Advantages / Disadvantages

Generally the purpose of a representative office is a preparatory phase whereby a business can gather information, do market research, and begin publicity or networking efforts, before getting too deeply involved. It is a limited but easy way to begin a presence in Japan without the burden of a full-size company set up or paying taxes.

Representative offices are only useful if there will be no sales in Japan and the company only wishes to send personnel to engage in activities such as market research, PR, advertisement or contacting Japanese business. It can be beneficial as a way of testing the market if it is uncertain whether the business will grow in the Japanese market.

C.  Registration steps

1.  Appoint a Representative

There is no formal process for appointment, but some kind of written agreement between the representative and the foreign company should be created. Ideally it is a good idea to get a copy translated into Japanese if any authority or potential business partner or client needs to see it in future.

If the representative needs to sign anything, e.g. contacts or a lease, they will need to first obtain an official ‘name seal’ (inkan / 印鑑) and then have this seal certified (inkan shomeisho / 印鑑証明書), usually done at the resident’s local city hall. They will need to bring their Japanese resident ID.

Alternatively, they can organize to have a signature attestation issued by the Embassy/Consulate of the person’s country of citizenship. However this would be required for every time something is signed, and generally requires booking an appointment at the embassy. If a representative is likely to only sign one or two things this may be sufficient. However if they are expected to sign multiple or regular agreements, obtaining and certifying a name seal would be recommended, especially since the process is cheap and fast.

Time:

No time to register the appointment in Japan

If applying for the official seal, it reportedly can take anywhere from 1 day to 3 months, but in most cases, 3 weeks should be a safe estimate.

Signature attestation at embassy: Requires booking an appointment, so may take 1 week or more depending on the embassy.

Cost:

  • Creation of ‘name seal’ (inkan / 印鑑): 300 yen
  • Certifying the seal (inkan shomeisho / 印鑑証明書): 300 yen
  • Signature attestation at embassy: Generally no charge 

2.  Establish an Office

As mentioned previously a representative office cannot sign a lease in its own name. This means that if wishing to establish a physical office or sign an agreement with a virtual office, the foreign company directly or the representative will need to sign a lease in their own name.

Alternatively the representative’s home address can be used for this purpose.

Time:

No time directly associated with registering the office.

For signing a lease, it will vary depending on the real estate agent, but set aside 1 to 4 weeks as a minimum for paperwork to be approved.

Cost: There is no cost/process directly associated with registering an office.

Side note: signing a lease will of course include fees, such as a deposit, some rent payments in advance, insurance and possibly guarantor fees. Note that Japan is also known for the existence of something called “Key money” or various other names (reikin, 礼金), which is an additional payment on top of the security deposit, and is generally non-refundable (it is considered a ‘gift’ to the landlord). It can be up to several months worth of rent.

3.  Register with Social Security Office

While not being about to engage in taxable “for profit” activities, it is possible to employ people in the representative office, such as the appointed representative.

To do so, paperwork must be provided to the Social Security Office. The following documents are required:

  • Lease for office space in the Representative Office name*
  • Utility bill in the Representative Office name*
  • Copy of the contract between the representative and the foreign company

The representative will also need to provide proof of their residence in Japan:

  • Resident registration (Juminhyo / 住民票) with the local ward office
  • Registration with Social Insurance, typically a copy of Pension Book is needed.
  • If applicable, proof of payment of resident tax and national tax.
  • Note that while sources on this topic say that paperwork should include documents in the ‘Representative Office’ name, this is assumed to mean the foreign company or representative name, given that a representative office cannot sign leases itself.

Time: 1 day

Cost: No registration costs,

* translating the agreement between representative and company would incur translation service fees

4.  Notify Tax Office

Next, if maintaining a payroll, the representative office also needs to register with tax office to report and pay the tax on each employee’s salary.

It is not so clear on how to do this step as a representative office. However, since there is no formal company registration documents, it is likely you will need to supply the same documents as to the social security office, and any documents provided by social security.

Time: 1 day

Cost: No charge

5.  Notify Local Tax Office

Companies will need to also file a Notification for the Commencement of Business at the local tax office. It is presumed this would also apply to Representative Offices if they hold a payroll.

If the company head office is located in the Tokyo Metropolitan Government region, it must file notification within 15 days of company incorporation. If the head office is outside Tokyo’s wards, the company must file a Notification of Incorporation at the tax office of the local municipal government and prefectural government within 1 month of company incorporation.

Time: 1 day

Cost: No charge

6.  Open Commercial Bank Account

Opening a bank account can be an involved and difficult process for foreign companies, due to Japanese laws requiring bank account holders to be cleared before approval. Furthermore, as seen in comments on this Quora discussion, Japanese banks (not including international banks) generally offer little English and may also place strict controls on foreign transfers, such as needing in-person clarifications each time payments are received from overseas.

For representative offices, the local representative will likely need to create the account under their own name.

A personal anecdote of a foreigner who started a small business in Japan describes the initial documents for opening a business bank account including the following:

  • An explanation of your company’s activities and what you plan to use the bank account for.
  • Certificate showing complete records of your company to-date (rireki jikou zenbu shoumeisho /履歴事項全部証明書) obtained from the local Legal Affairs Bureau.
  • Company seal certificate
  • Identification of person applying for account
  • Copy of certificate of incorporation (teiken no utushi / 定款の写し).
  • Notification of incorporation as submitted to the tax office (houjin setsuritsu todokedesho / 法人設立届出書)
  • Tax report for commencement of payroll as submitted to the tax office (kyuryou shiharai jimusho tou no kaisetsu todokedesho / 給与支払事務所等の開設届出書)

The bank will review the application and may contact you for additional information such as promotional materials such as company brochures, or the tenancy agreement for its premises, or information about the products sold.

Time: 3 days – 2 weeks

Cost: no charge (monthly fees and minimum deposit requirements can depend on the bank)

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Japan, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Japan they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where:

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Japan
  • the company needs help with tax, employment, immigration and payroll compliance in Japan

The complexity of employment regulations in Japan makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Japan allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Japan.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Japan. Read more about outsourced employment through Shield GEO.

Summary of Set Up Steps

Subsidiary Company Branch Office Rep. Office Time Cost (JPY)
Check Availability of Name Yes Yes 1 day 450
Appoint a Representative Yes Yes 1-3 days 600
Register Company/Directors Seals Yes 1-3 days 11,800-20,800
+600 per additional director
Certify Articles of Incorporation (company) Yes 1 day 90,000
Certify Articles of Incorporation (branch) Yes 1 day 50,000
File Articles at Legal Affairs Bureau Yes 3-7 days 60,000
Register Branch at Legal Affairs Bureau Yes 2-4 weeks 90,000
Establish Office Yes Yes Yes n/a 0
Notify Tax Office Yes Yes Yes 1 day 0
Notify Local Tax Office Yes Yes Yes 1 day 0
Notify Labour Insurance Office Yes Yes Yes 1 day 0
Apply for Health Insurance and Public Welfare Insurance Yes Yes Yes Instant 0
Application for Employment Insurance Yes Yes Yes instant 0
Open Commercial Bank Account Yes Yes Yes 3 – 14 days 0
TOTALS:*applications and processing times, not including internal document preparation, lawyer fees, etc Subsidiary12-29 daysJPY 162,250- 172,250+600 per additional director Branch23- 50 daysJPY 141,050 Rep.7-20 daysJPY 600

Conclusion

According to June Advisors Group, a subsidiary is generally selected if there will be a certain amount of turnover in Japan that would be likely to generate profit locally. It is recommended if wanting to keep the foreign parent and subsidiary separate, such as wanting to maintain separate accounting from the parent company. Branch offices are used if needing to an officially registered legal entity in Japan and a Japanese bank account to deal with Japanese clients, but do not wish to manage separate capital in Japan. Representative offices are used if there will be no sales in Japan and the company only wishes to send personnel to engage in activities such as market research, PR, advertisement or contacting Japanese business. It is a vehicle used if it is uncertain whether the business will grow in the Japanese market.

APPENDIX – TERMINOLOGY

English Japanese (Romanised) Japanese (Kana) Japanese (Kanji)
Articles of Association Teikan ていかん 定款
Bank Ginkou ぎんこう 銀行
Certificate certifying Official Seal inkan shomeisho いんかんしょうめいしょ 印鑑証明書
Japanese notary public koshonin yakuba こしょにん・やくば こしょにん役場
Joint-stock corporation Kabushiki-Kaisha (KK) かびしくかいしゃ 株式会社
Legal Affairs Bureau / Civil Affairs Office Homukyoku ほうむきょく 法務局
Limited liability company Godo-Kaisha (LLC) ごどかいしゃ 五度会社
Limited Liability Partnership Yugen Sekinin Jigyo Kumiai ゆげんせきにんじぎょうくみあい 湧現責任事業組合
Limited partnership Goshi-Kaisha (LLC) ごしかいしゃ 五司会者
“gift” payment to a landlord Reikin れいきん 礼金
Ministry of Foreign Affairs Gaimusho がいむしょ 外務省
Name seal inkan いんかん 印鑑
Resident card Zairyu kado ざいりゅかど 在留カード
Resident registration Juminhyo じゅうみんひょう 住民票
Security Deposit (for leases) Shikikin しききん 敷金
Sole Proprietor Kojin Jigyo こじん・じぎょう 個人事業
The symbol used to represent the currency Yen えん
Unlimited partnership Gomei-Kaisha ごめおかいしゃ 五名会社

Japan

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