Japan Branch & Company Registration - Setting up a legal-entity & business presence in Japan
How a foreign company or entrepreneurs sets up business presence in terms of formation of a legal entity depends upon the nature and magnitude of the business, proposed business operation, as well as legal, tax and other considerations. Many options exist, ranging from a Branch office or a local Japanese subsidiary company such as Kabushiki-Kaisha (KK Co), Godo-Kaisha (GK Co) and there are several local types of company formations available. There is also a Japanese version of a limited liability partnership (LLP), is not a corporation, but a partnership format.
A foreign company or entrepreneurs can set up a business presence (legal-entity) in Japan in one of following four(4) options:
Representative office is generally established for carrying out market research & liaison activities on behalf of head office. It does not allow to conduct commercial business activities in Japan and therefore no registration is required at the legal affairs bureau nor be subjected to corporate tax under Japanese tax laws, except banking or security business.
The simplest mode for a foreign company to establish a legal entity for commercial business operations in Japan is to set up a branch office. In terms of the range of business activities allowed, there are no basic differences between branch office and domestic corporations. Taxed on branch office income only and the rate is same as local co. For registration there is no requirement to establish statutory officers / management body, it only needs a local physical address (not PO Box) & a Representative in Japan (must be a resident of Japan). In general, transfer of operational funds between the branch and its head office can be made without restrictions, and is not subject to withholding tax.
A foreign company willing to establish a subsidiary company may choose from the followings:
There are also formats such as unlimited partnerships (Gomei-Kaisha) and limited partnerships (Goshi-Kaisha) under the Companies Act, but they are rarely chosen in practice because equity participants burden unlimited rather than limited liability.
A subsidiary is a separate legal entity from the foreign parent company, therefore foreign company will bear the liability of an equity participant stipulated by law for all debts and credits generated by the activities of the subsidiary. Minimum requirement for establishing a subsidiary co in Japan is to have a local physical address (not PO Box) & a local resident director.
Please see note below re exception allowed for KK Co since the change of regulation effective Mar'15.
This format is also allows to do business by using a Yugen Sekinin Jigyo Kumiai. It is considered as Japanese version of a limited liability partnership (LLP), is not a corporation, but a partnership formed only by the equity participants, who have limited liability. Taxes are levied on profits allocated to equity participants but no tax on LLP. The format is normally used for carrying out a time bound project.
The option is either to establish a Branch Office or a Local Subsidiary Co (either a Joint-stock corporation (Kabushiki-Kaisha) [K.K. Co] or Limited Liability Company (LLC) (Godo-Kaisha) [G.K. Co]). For any of the said formats the minimum requirement is a local physical address in Japan (not PO Box address) and a local resident in Japan (either a Japanese or a foreign national but in case of a foreign national the person must have an appropriate status of residence or may require change of status of residence).
Please note effective Mar’15 the Japanese government has allowed foreign company and or individual to register Japanese KK Company with director(s) and shareholders residing abroad and the mandatory requirement of at least one local Resident Director has been relaxed! (But for the procedure of “paid-up capital” of the local co a local resident shareholder is required at the time of registration & upon completion the share of local resident can be transferred back to foreign co or individual for holding 100% share in the Japan KK Co.). For details please visit “Japan Local Co. Formation”.
For further details re establishment of a legal business entity in Japan please download the PDF file, check the content and send us your inquiry via mail.
sojk-enquiry @ sarkaroffice dot com
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