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FAQ : setting up a company in Japan

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Content :
  • What kind of companies exist ?
  • What are the advantages and disadvantages of each ?
  • How much does it cost ?

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What kind of companies exist ?
 
Except for the sole proprietorships, there are 4 types of companies recognised by Japanese laws :
 
- Go-mei Gaisha (commercial partnership)
- Go-shi Gaisha (limited partnership)
- Yugen Kaisha (limited liability corporation ; Ltd.)
- Kabushiki Kaisha (general corporation limited by shares)
 
We could also add the Go-ben Gaisha (joint venture).
 
What are the advantages and disadvantages of each ?
 
Liabilities
 
Both the sole proprietorships and partnerships have unlimited liabilities, which can be very dangerous, as any personal possessions (house, car, savings...) can be seized to repay potential debts. The go-shi gaisha type of partnership actually has unlimited and limited liabilities, depending on whether they are general or limited partners. In any case, there must be people carrying unlimited liabilities, and all partners have direct liabilities (i.e. each person can be sued individually).
 
The advantage of incorporating one's business into a yugen or kabushiki kaisha, is that the shareholders have an indirect and limited liability, which means they are only liable to creditors for the amount they have invested (shares) and cannot be sued personally, but always in the name of the corporation.
 
Size
 
- Partnerships must have at least 2 partners. It is difficult to increase the size of the company, as new partners must be approved unanimously by other partners.
- Yugen Kaisha requires just one director and the number of employees is restricted to 50 people.
- Kabushiki Kaisha must have at least 3 directors and 1 accountant, but are not limited in size. 
 
Cost
 
Partnerships are cheaper to establish than corporations. They do not require any notary fee (50.000yen) nor the revenue stamp (40.000yen) for the articles of incorporation of the Y.K. and K.K. Among corporations, the Kabushiki Kaisha's complex structure will cost more in lawyer's fee than the Yugen Kaisha.
 
Conclusion
 
Corporations are safer than partnerships but more costly to establish. I would anyway recommend to go for a yugen kaisha as a first, small or medium company. Partnerships are too risky and difficult to increase in size. Kabushiki kaisha have more obligations, such as submitting an annual report (which requires an accountant), are more suitable for big companies.
Both Y.K. and K.K. command more prestige than partnerships, and therefore faciltate business with other Japanese companies. The most prestigious of the two is of course the K.K.
 
How much does it cost ?
 
Since early 2003, the minimum capital to create a company in Japan is only 1 yen. Nevertheless, they must reach a minimum capital within 5 years (3 million yen for the Y.K. and 10 million yen for the K.K.).
 
The registration fee cost at least 181.000 yen for a Yugen Kaisha and 321.000 yen for a Kabushiki Kaisha (this is if you start with a 1yen capital, otherwise, it's a bit more).

These cost cover :
- certification of the articles of incorporation (teikan ninshouryou) : 50.000yen
- revenue stamp for the articles of incorporation (tekian ni haru inshidai) : 40.000 yen
- registration licence tax (touroku menkyo zei) : 60.000 yen for Y.K. / 150.000 yen for K.K.
- company's seals (kaisha inkan) : 30.000 yen (includes real seal, bank seal, square seal, rubber seal)