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Minding your own business in Japan

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“Doing business in Japan,” is usually near the top of every global-minded executive’s list. But starting a business in Japan is whole different ball game. Yes, there are many hurdles to overcome before you can be up and running. And, compared a place like Hong Kong, Japan's dense layers of legal requirements can make it seem like an unwelcome place for entrepreneurs.

However, in the last half decade there has been significant easing of restrictions, such as the former ¥10 million capital requirement. Today, as the country prepares for the 2020 Olympics and seeks to attract even more overseas investors, the message is clear: Japan is open for business and new businesses.

Coming in from overseas

The first thing to consider when starting a business in Japan is what kind of operation to launch. If you are an existing overseas firm seeking to open shop here, there are three typical models:

-Representative office: While it cannot engage in sales activities, a representative office can do market research and preparatory work prior to a full and formal Japanese market entry.

  • Branch office: In this instance, the overseas parent company assumes responsibility for all debts. Tax levels are calculated based on the head office’s capital stock.
  • Subsidiary company: A new company is established, with responsibility for all its own debts. Taxes are based on the subsidiary’s capital stock.

Those setting up a subsidiary or starting up an entirely new company will need to consider what type of Japanese company to establish. Most will choose between a kabushiki-gaisha (KK), which roughly equates to a “corporation,” and Godo-gaisha (GK), which replaced the former yugen gaishia (YK) in 2006 and is similar to a “limited liability company” (LLC). While the KK presents a more established, hefty corporate image, the GK is a cheaper option for entrepreneurs and smaller operations.

Prior to registration, the Japan External Trade Organization (JETRO), recommends preparing the following items: business objectives, trade name, any relevant permits (such as food and beverage licenses), the representative director’s personal name seal (hanko), company hanko, and a designated bank account for investment capital. On their website, JETRO provides a handy start-up scenario flow chart in English and plenty of relevant information.

“If you are starting a new venture from scratch, it’s best include as many possibilities as you can imagine when designating what kind of business you will operate,” suggests Tom Boatman of Tokyo-based advertising boutique Native Creative.

“A marketing start up might want to include movie production, recording and publishing, along with more typical services, just in case,” he explains. “As your business evolves, you may want to diversify, but it is difficult to add services that were not included in your initial plan, without consulting a lawyer and doing mountains of paperwork.”

Also of importance to the budget minded is the selection of a corporate address, particularly in Tokyo where “establishment” and “enterprise” taxes on businesses vary considerably by ward. For example, Minato Ward, in central Tokyo, might be an ideal business address, but it would be much cheaper tax-wise to launch a business in more suburban ward, such as Nerima or Suginami. The “official” tax filing address, or corporate headquarters, and the place you actually work and hold meetings need not be the same.

In terms of branding, in Tokyo at least, your business address can also have an impact on how your company is perceived. A phone number with a “03” prefix (indicating one of Tokyo's main 23 wards) will make a far more positive impression on most executives than the “04” numbers that indicate city’s westward expansion.

Visa? Make sure it’s in order or find a local partner

Having a Japanese business partner solves a lot of problems, but for those without, visa status is an essential business consideration. Foreigners married to Japanese or those holding permanent residence status have less to worry about. But for someone in the country on a temporary or restricted visa, an Investor/Business Manager visa will mostly likely be necessary. To qualify for this visa, you must prove you have prepared the following:

-- Office space -- At least one full-time employee who is also a legal Japan resident (this can be yourself) -- Investment capital of at least ¥5 million -- A business plan including a detailed profit/loss statement

One frustrating problem can be the “Catch 22” scenario where real estate agencies are unwilling to rent office space to people who do not already have visas and residence permits. Fortunately, there are lots of temporary office space options that cater to foreign entrepreneurs and start-ups, but prices vary wildly. Shop around for the more reasonable, “do-it-yourself” facilities.

Registering a company? Japanese help needed

Finally, to manage the paperwork required to register a company in Japan, legal and accounting help are absolute musts. The kinds of services you will need generally fall under the following categories:

-- Legal counselling and representation in corporate matters -- Assistance in registration of the business or office -- Acquisition of visas and permits (e.g. food hygiene certificates for restaurants) -- Consulting in matters relating to patents and licenses -- Bookkeeping and taxation

When looking for help, accounting is a good place to start. Many Japanese accounting firms will integrate and offer most of the legal services required to launch a business. Fees vary and are directly related to the need for English assistance.

Tokyo-based marketing consultant Don Kratzer, who has started his own company in Japan, warned to expect an outlay of least ¥300,000 for launch services alone. “Once, you are up and running, corporate tax reporting services can run ¥30,000 to ¥50,000 yen per month,” he says. Of course, there is a big difference in fees between firms that offer English language services and those that don't. Even most native Japanese speakers struggle with the legalese of business forms, but being able to at least speak to your accountant in Japanese could give you access to a broader range of low-cost assistance and help you get the most out of your launch capital. That’s where a Japanese business partner, or personal assistant becomes invaluable.

© Japan Today

©2024 GPlusMedia Inc.

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This is a pretty good article, lots of good information.

Most will choose between a kabushiki-gaisha (KK), which roughly equates to a “corporation,” and Godo-gaisha (GK), which replaced the former yugen gaishia (YK) in 2006 and is similar to a “limited liability company” (LLC). While the KK presents a more established, hefty corporate image, the GK is a cheaper option for entrepreneurs and smaller operations.

There is one major difference between a KK and a GK that was a major factor in my decision on which one to choose. Consider three directors, owning the following percentage of shares in the company:

Director 1: 51%

Director 2: 29%

Director 3: 20%

With a KK, director 1 always wins the vote, as Director 1 has more than 50% of stock. With a GK, if director 2 and 3 vote one way, and director 1 votes another way, the vote goes to director's 2 and 3, as their two votes outweigh director 1's vote. In other words, with a KK, votes are based on the percentage of stock owned. With a GK, each director has one vote, and each vote is weighted equally.

1 ( +1 / -0 )

With a GK, each director has one vote, and each vote is weighted equally.

I don't claim to be an expert on this but I believe that while you are free to incorporate a GK to include this type of voting structure in the articles, I'm fairly sure that there is no law that makes this a requirement or a default of all GKs.

I think the GK simply gives you the freedom to structure your company in any way you wish. So you are actually free to say that 1 share equals 1 vote (just like in a KK) or that each director gets 1 vote (as in your case) or that family members of the founder get double the votes etc. But as you said, the point is just that with a KK the law gives you no freedom. It must be 1 share 1 vote.

0 ( +0 / -0 )

I don't claim to be an expert on this but I believe that while you are free to incorporate a GK to include this type of voting structure in the articles, I'm fairly sure that there is no law that makes this a requirement or a default of all GKs.

I believe there is: Link: http://kasegullc.com/entry-241.html

議決権

Voting Right

株式会社では出資額に応じて、株主総会の議決権を持ちます。 基本は1株=1議決権です。 株式会社は多く出資をしている人の持ち物であり、その運営等について大株主の意見が通りやすい仕組みになっています。

"With a kabushikigaisha, at stockholder's general meetings, the voting right is determined by the amount of investment. Basically 1 stock = 1 vote. A kabushikigaisha is structured so that the people who have invested the most can according to the amount of stock they hold, can do things like managing the company more easily according to their own ideas."

合同会社では、議決権は出資額とは関係がなく、社員一人が1議決権を持ちます。 つまり、1000万円出資している人も1万円しか出資していない人も出資をしていれば対等に扱われるということになる訳です。そして原則として全出資者の過半数の同意により、会社の運営についての意思決定が行われます。

"With a godogaisha, voting right is not connected to the amount of investement, rather each company member has a single vote. That is to say, anyone who has invested money into the company, whether it be 10 million yen or 10 thousand yen, is considered to be equal. Therefore as a general rule, according the majority vote of investors the management direction of the company is decided."

Now this all said, I have to admit that I'm not an expert on these matters, I'm only going on what I've read in the past (and what I read right now in finding the above text). It may be possible that with a GK, the voters could all make a vote to say that decisions will be made based on the amount of stock held. I don't have a GK so I'm not clear on the minutiae of the rules. But I suspect that this wouldn't be possible, and that all investors hold a single vote.

1 ( +1 / -0 )

@Strangerland

Thanks for that. I had a look at a few sites and they seem to confirm what you are saying. I have shares in a GK and we specify a byzantine voting and profit sharing structure in the articles. It was accepted by the Legal Affairs Bureau but perhaps it's all a nullity... I need to look into this!

0 ( +0 / -0 )

No problem - hopefully this may open up something good for you!

Can I ask, what is byzantine voting/profit sharing?

0 ( +0 / -0 )

Thanks! I'll have to calculate how many shares vs members.

(Oh, 'byzantine' is just an expression used to describe rules that are ridiculously complex and difficult to understand... nothing technical. I guess there were many strange rules in Byzantium?)

0 ( +0 / -0 )

There is one major difference between a KK and a GK that was a major factor in my decision on which one to choose. Consider three directors, owning the following percentage of shares in the company:

Director 1: 51%

Director 2: 29%

Director 3: 20%

With a KK, director 1 always wins the vote,

Strangerland -- not necessarily true. Unless they revised the commercial code since I left, in KK's a share-holder with 34% or greater can block certain actions by the company -- mainly ones related to financing -- like issuing new stock, taking on debt, etc.

-1 ( +0 / -1 )

It's possible. I've never heard anything like that, but due to our stock breakdown, I'm the only one with over 34% stock (I have over half), so it's not something that is an issue. I'm going to look into that though.

0 ( +0 / -0 )

It all sounds ludicrously complex and specifically designed to provide jobs for as many hangers-on as possible.

0 ( +0 / -0 )

It all sounds ludicrously complex and specifically designed to provide jobs for as many hangers-on as possible.

It is as you say, why pay one bureaucrat to do a task when you can pay three?

But if you are going to stay in Japan for some time, your best bet is to go into business for yourself. The reasons being that Japanese employers do whatever they can to take advantage of foreign workers, and give them contracts, jobs, and working conditions which are, lets say, often less than fair or legal. And those three bureaucrats who do the work of one never find the time to enforce Japan's myriad labor/contract laws whenever foreigners are the injured party.

0 ( +2 / -2 )

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