Business in Japan - Adesse Co., Ltd. Q&A Commercial/Legal affairs in Japan

Q1: I would like to start business in Japan. What do I need to do first?

A1: There are three options to do business in Japan which are:
-to establish a corporation under the Japanese Corporation Law,
-to set up a branch office and,
-to set up a representative office.
To set up a branch office of a foreign company, it is possible to register the same directors of the head office which is located in their home country. Representative director can be a foreigner /Japanese whichever. In order to be regarded as a legal entity, the filing to the local Legal Affairs Bureau and the Tax Offices are necessary. The corporation income tax should be imposed. Note that any foreign company's branch cannot be automatically transformed to a Japanese corporation. To that end, you should establish a new corporation and then abolish the branch.
A representative office is an vehicle through which an alien corporation get information to do business in Japan. There is no need to submit documents to the public office. The corporation tax will not be imposed because it should not earn. The corporate registration cannot be filed and a corporate bank account is impossible.

Q2: When a company is established in Japan, what kind of types are there?

A2: When establishing a company in Japan, there are some types of company formations as below.
i) Kabushiki-Kaisya (stock corporation)
ii) Goushi-Kaisya (joint-stock company)
iii)Goumei-Kaisya (general partnership)
iv) Goudou-Kaisya (Limited Liability Company = LLC)
v) Tokutei-Hi-Eirikatsudou-Houjin (Not-for-profit corporation)
vi) Yugensekinin-Chukan-Houjin (independent nonprofit organization)
viii)Yugensekinin-Jigyou-kumiai (Limited Liability Partnership)
ix) Toushijigyou-Yugensekinin-Kumiai(Limited liability partnership for investment)

Q3:Please let me know in detail about stock corporation.

A3: It is the most common legal form of a company in Japan. It is a type of organizations which aims to raise profit by accumulating a fund by issuing securities (shares). The shareholders' liabilities are limited to the amount they invest. Management dicision are made by directors who are elected at a general shareholders meeting.

Q4: What is Company law?

A4:Until April 2006, the company code had been included in Commercial law. But it has been an independent law as "Company law", enforced on 1 May, 2006. Some regulations about establishment of companies, such as the conventional minimum capital (stock corporation needed at least 10 million yen of for their capital) or trade name investigation were abolished.

Q5:What is LLP / LLC ?

A5: LLP is an organization of which every partner has the limited liability. What you need to take care is that it does not have juridical personality. It will be collected tax by constituent member taxation (pass-through taxation), not by corporate tax.
Regarding LLC, it is a company which has juridical personality and all the workers are limited partners. Since it has juridical personality, they have to pay corporate tax. (for detail of the corporate tax, please refer "Tax practice in Japan")

Q6: What is the limited partner? What is the general partner?

A6:A limited partner is a partner whose liability is limited to the amount he/she invests.
On the other hand, a general partner is a partner who should owe its partnership liability with no limit.
At least one general partner is needed for Goshi-kaisha, Gomei-kaisha and Limited Liability Partnership for Investment.

Q7: What is Not-for-profit organization (NPO houjin)?

A7: Not-for-profit organization is a nonprofitable corporation which does not distribute the profit to its members. It require the approval of the prefectural governor of the home city of the headquarter.

Q8: When the company is established, what kind of process should be carried out ?

A8: When the company is established, it is necessary to file the statutory registration paper to the Legal Affairs Bureaus in its jurisdiction. For that purpose, you have to take lots of steps such as preparation of the articles of Incorporation (and it needs to be certified by a public notary), preparation of the seal of a company, payment of the capital, sealing to the minutes, etc. Furthermore, after a company has been established, you should open an bank account for the company, provide a notification to the tax office, file the social-labor insurance application and so on.

Q9: About how much does it cost to establish a company?

A9: As to a Kabushiki-kaisha,
/Articles of Incorporation notary fee --- 50,000 Yen
/Attested note fee -- 250yen per page.
/Stamp tax for the articles of Incorporation --- 40,000 Yen (This can be omitted by using electronic authentication, though it needs special software and a particular procedure.)
/Additionally, upon submitting it to Legal Affairs Bureau, again you need stamp tax 150,000 Yen.
/ To obtain the complete copy of a company register, you have to pay 1000 Yen for each copy.(As this copy is necessary for the notification to the tax office, it is good to obtain several copies at this timiing.)
To summed up all the above, the total cost become more than 250,000 Yen.
If you are asking these procedure to an administrative scrivener, additional cost will be required.
Please take note that the above was calculated on the assumption of a kabushiki-kaisa (stock company). Depending on the type of legal form, the cost would vary.(e.g. the necessity of notary certification or the amount of the stamp tax differs.)

Q10: What are the "Shogo","Mokuteki", and "Hontenshozaichi"?

A10:"Shogo" is the trade name of the company. Like "xxx Kabushikigaisya(company limited)" / Kabushikigaisya xxxx , such as "Kabushikigaisya" etc(type of the company) have to be attached to the trade name.
"Mokuteki" is the description of business offered by the company. With the execution of the Company law, criterion for examination has been liberalized.
"Honten Shozaichi" is the address of the head office. Like xxxCho, xxxChome, xxxBanchi, check on the formal and correct expression of the address and register correctly.
The name of the building, apartment, mansion etc. can be omitted as they are likely to change.

Q11: What kind of positions are there in the board member?

A11: There is various positions such as the officers, the directors, the auditors and the accounting director. After May 2006, the installation of the board become flexible. The term of directors is normally 2years, but it can be extended to 10years maximum if its AOI is changed as such.

Q12: What do they do with certification of AOI?

A12: After the articles of Incorporation is drafted up, you should go to the notary office and ask for the certification.

Q13: Please let me know about the stock(share).

A13: With the enforcement of the company law, it became possible to issue some classified stocks. There are preferred stock, stocks with acquisition provision, stocks with the right of acquisition claim and so on.
If its AOI states Joutoseigen(a restriction on transfer of shares), any purchase (and selling) of the stocks needs the approval of the company.

Q14: What is the general meeting of shareholders?

A14: There are two types of general meeting of shareholders. An annual meeting of shareholders (where a financial report to be done) and an extraordinary meeting of shareholders (where important issues to be resolved). There are several types of shareholders meeting. Mostly, more-than-half approval votes is enough. But some special agenda need special resolution.

Q15: How can I change the registered directors ?

A15: A filing to the Legal Bureau is needed. The new directors must be legally elected in the general meeting of shareholders. To save a document(the letter of acceptance), the minutes of S/H meeting is better to state "the elected person has accepted the immediate inauguration".

Q16: When the address of the company change, what should I do?

A16: You need to do the registration of the relocation of the head office. Two kinds of application forms are required. One is the closure of the existing registration to the Legal Affairs Bureau of current address, and the other is for new registration of home office to the Legal Affairs Burearu of new address. Moreover, just samely as the time of the company establishment, you have to submit a notification to the tax office as well.

Q17: What is "merger" and "partition" of company?

A17: A Merger of company is to integrate more than 2 companies to 1. A partition of company is to let other company succeed a part of its company. When you proceed with company merger or partition, you also need to care about tax.

Q18: I would like to increace the capital of my company.

A18: Issue of new stock is necessary. As the capital increases, the registration of change is necessary as well. A copy of bankbook where the fund increase is shown should be attached to the application form.

Q19: What is the "Tokurei Yugen Kaisha"

A19:Afer the company law revision, Yugen Kaisha(a kind of limited company) is abolished. Thus a Yugen Kaisha cannot be newly established. But Yugen Kaisha which had established before the enforcement of new corporate law have to choose from 2 options.
i) Continue to be a (Exceptional)Yugen-Kaisha, called "Tokurei Yugen Kaisya".
ii)Change to a "Kabushiki Kaisha(Stock corporation)", with the registration of trade name change. Note that once you have changed the trade name, you will never be able to restore to be a Tokurei Yugen Kaisha.

Q20: What is "Debt Equity Swap (DES)"?

A20: DES is legal technique which changes the debt to the capital. As the capital increases, the registration will be necessary. Contrary to an usual capital increase by new stocks (needs money transfer to an bank account), DES can be done by paper and it is called as a "contribution-in-kind".