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How to Start a Company in Japan

I recently started my own IT consulting business here in Japan, and needless to say it was quite a learning experience.  Hoping to relieve others from some of the tedium, I compiled an outline of the process along with some tips for starting your very own Japanese company.

Get a JETRO Library Card - www.jetro.go.jp
JETRO stands for “The Japan External Trade Organization,” and they're a prime information resource for starting your own business in Japan.  Although their free consulting services only apply to foreign companies seeking to start operations in Japan, their free library contains a surprisingly comprehensive amount of information in English, so it's a fantastic place to educate yourself.  In fact, much of the basic information about starting your own company is even download-able from their website, so the JETRO website and library are highly-recommended starting points.  I spent only a few hours there and walked out infinitely better prepared to proceed.

Choose Between an LLC or Joint Stock Company
I'm greatly oversimplifying, but there are 2 basic types of company you can start―a Goudou Gaisha (合同会社) or a Kabushiki Kaisha (株式会社).  Goudou Gaisha is the Japanese equivalent to an LLC, while Kabushiki Kaisha (K.K.) is a joint stock corporation.  By far the most common is the K.K. because of the status and image it projects.  K.K. is structurally tantamount to large corporations like Sony or Nintendo, so there is no glaring indication of how small your operation might be.  All Japanese know what a K.K. is, so prospective employees won't be raising eyebrows at interviews.

A Goudou Gaisha is not as popular in Japan as it projects a kind of “mom and pop” shop image.  However, it's cheaper and easier to register, works almost the same as a K.K., and can be changed to a K.K. later (for a fee) if you so choose.

I started a Goudou Gaisha because I have no proximate plans to hire employees and do not intend to hide the fact I'm a small operation.  I'm simply an IT consultant that wanted to further legitimize his consulting business.  I mostly make websites, so I figured most of my business would come via referral or based on the quality of other sites in my portfolio.  As such, I didn't care much about that high-class K.K. image.

Each person's situation is different, so choose a company type based on your particular needs.  It's also worth noting that laws change, so consult JETRO for the most up-to-date information.  For example, many people―including myself―were under the false impression that it takes millions and millions of yen in paid-in capital and a 3-person board of directors to start a K.K., discouraging many from even trying.  While true in the past, this is no longer the case.  Laws have been revised to foster economic growth by removing barriers to establishing new businesses.  It's now easier than ever to start your own company.

Register a Personal Seal
Most foreigners living in Japan are already familiar with the inkan system, so I won't go into exhaustive detail.  If you haven't already done so, register a personal seal (aka “hanko” or “inkan”) with your city / ward office.  You can purchase one from a local inkan shop or even order online using a site like www.hankoya.com.  Take the seal to the office and they will “connect” it with your identity (like a signature).  They will ask you how many copies of the seal registration certificate you want.  Get 2~3 of them.  You'll need one for the company registration process.  Keep the others for yourself.

The entire procedure is quick and straightforward.  When finished you'll also receive a card similar to an ATM card to make any future changes to the seal registration.  This is a security measure to prevent identity theft.

Write a Company Profile
Along with the obvious things like name and address, the company registration process requires a profile describing what your new company will do.  Make a list of around 5 or more things.  Try to cover a wide range of activities within your chosen industry as your company must remain inside these established objectives.  In other words, you can't say that your new company will build websites only to start manufacturing cars.

The profile should also list
* Company Name – decide whether you want to use kanji, katakana, or romaji for the name.  Believe it or not, you can use romaji.  I did.  Prepare the katakana pronunciation of the name as well because the bank will ask for this when opening the account.  The name you choose will appear on your company registration certificate and seal.
* Address – a permanent address is best because you'll have to pay a fee to change the address later.
* Paid-In Capital―decide how much money you'll contribute to start the new company.  This money will be transferred into the company bank account you establish after registration is complete.  Make sure you have the money!  You'll have to provide a photocopy of your bankbook to prove you have the capital.
* Tax Year – Is your company tax year January ~ December or April ~ March?  A good rule of thumb is to get your registration date as far from the tax filing date as possible .  This way you don't have to file taxes a month after registering the company.
* Owners―Are you the only owner or are others involved?

Hire an Accountant
A quick Google search will list a few English-speaking accounting firms that can register your company for you.  I contacted them, and found them helpful and professional, albeit expensive.  You'll pay a premium (50%~100% more) for English-speaking service, so hire a Japanese accountant if you want to save money on the registration process.  While it is possible to register a company on your own, the extra assurance that everything was handled properly was more than worth the accountant's fee I paid.

I personally went with a friend's referral, a Japanese accountant that provided start-to-finish service for a very reasonable fee.  He was a pleasure to work with and answered any and all questions I had.  He even got my company seal made for me.  Here is his contact information: http://www.mondaiji.com/directory/entry/view/25-kanda-accounting.  If you do end up using his services, please let him know that David Pavlina referred you since he may give you a discount!

The accountant will ask you to provide the information I listed in the “Write a Company Profile” step above along with your personal seal and seal registration certificate.  The accountant will prepare your company profile and registration paperwork.  (S)he will later ask you for a copy of your bankbook proving you have the start-up capital.  In my case he asked me to transfer it so that it appeared as 1 transaction item.

Open Your Company Bank Account
4 or more weeks later, you'll receive your company registration certificate and seal registration.  Think of your company as a person―it has its own name, address, and seal.  It also pays its own taxes.  It's a separate entity.

Therefore, it needs its own bank account too.  Bring your company registration certificate, company seal certificate, and seals (personal & company) to the bank you'd like to use.  Make sure you know how to spell your company name in katakana.  Unfortunately, Shinsei―the most foreigner-friendly of the Japanese banks―does not do business bank accounts.  I went with Mitsubishi UFJ, but I'm sure Mizuho is another apt possibility.

Register with the Post Office
If you used your home address as your business address, then inform the post office that mail addressed to your company might be coming.  This is a very simple half-page form available at any post office.

That's it!  After you have a bank account in your company's name, you're ready to rock'n'roll.  You can pay business expenses, accept payments, and conduct business in Japan.  Good luck!

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  • Guest - Daniel

    Hi, thanks for the post. Very informative. I was wondering if you need a dedicated office space? Or were you able to register your home address?

  • Guest - Sebastian

    Thank you for this information!
    I was wondering, you say "register a personal inkan", is it not necessary to get a "company" inkan for a G.K. ?

  • Guest - westisnishi

    Hi Mr. David Pavlina.
    I just want to thank you so much for this post you shared. it is very informative, helpful and encouraging to people planning to start a small business in this country, especially to foreigners that cannot speak, read nor write Japanese very well. I have been seeking for a long time, guidelines or anything that will lead me in establishing my own business. I would like to send you a message again when I succeed in my registration process. Thank you very much. More power to your IT Cinsulting business.
    By the way, i might be needing your service someday. Please send me some ads to my email. Thanks again. :)

  • Guest - Scott

    Great article. I'm in the position to have to de-register my company as I'm going home. Do you have any advice on what's needed? Thanks.

  • Guest - Tim

    Great post! Thank you for sharing, it was really informative.

    Could you share a little more detail about why you chose to start a company instead of trading as a Jieigyoushya or sole proprietor?
    I run a similar business as a designer and I have considered changing from jieigyoushya to a goudou gaishya. But everybody I have
    spoken to previously said not to as you have to pay much higher taxes.

    Thanks!

  • Guest - Dave

    Guest - Tim

    I registered a proper company on the advice of friends that had also started companies. Namely, they recommended it because of the limited liability the separate identity status of a true company provides. It also looks like a more professional operation from the client perspective. Admittedly, a big part of me regrets not starting out with a sole proprietorship because you're indeed right about the tax burden.

    It depends on the nature of your business. I know plenty of freelance English teachers and graphic designers that don't bother with any of this.

  • Guest - Dan

    Guest - Dave

    Let me chime in here about the a tax. My accountant said it was cheaper to be a GK or a KK if you make more than 10-12M per year because the income tax burden shoots up at that point. And remember, you don't need to make a profit as a company, so you might not pay any tax at all.

  • Guest - Sam

    Guest - Dave

    Thanks for the post - it was really informative and exactly the information I've been looking for. I also found the comments really useful. Would it be possible to give a little more detail on the pros and cons of the jieigyosha vs goudougaisha choice or point me towards somewhere I can get more information?

    Thanks
    Sam

  • Guest - Joelle

    Thanks so much for posting all this info in how to start a small business in Japan!
    I'm wanting to start a small business in Japan too, by giving tours. How did you do marketing your company in Japan?
    Was it expensive? Difficult to do? Thanks!!
    P.S. I'm looking for your Facebook profile link but I'm not seeing it...i might be blind....

    from Naju-si, Jeollanam-do, South Korea
  • Guest - Mondaiji

    Guest - Joelle

    It's at the top-right next to the search bar. Look for the "follow me" icons.

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