Corporate Services

Setting Up a Company

Setting Up a Company (Registering an Entity)

Companies (entities) are established to create a fixed place of business in Japan. If activities related to business development, sales, marketing, manufacturing and construction are being conducted on a continuous basis, an entity will likely need to be established. Tricor can assist with the establishment of Japanese corporations, special purpose companies (SPC) and branch offices as needed.

Permanent Establishment (PE)

Tax law defines permanent establishment as a branch, factory or other fixed place of business in Japan. Even if there isn’t a physical fixed place of business, activity in Japan can be considered de facto permanent establishment. Once permanent establishment is confirmed, in most cases an entity should be formed to handle appropriate compliance related to such permanent establishment. This compliance includes human resource and social benefit statutory administration for employees, corporate tax compliance and corporate secretarial compliance as required by company law.

Establishing an entity

Entities are registered through the Legal Affairs Bureau. The application date for registration will also be the date of establishment, and the company may carry out business operations from that date. For subsidiary establishment procedures, foreign companies need to provide documents certifying the profile, authority and authenticity of signature of the foreign company and its representatives, which can include the foreign company’s articles of incorporation, establishment certificate, registration certificate and other official documents; or an affidavit notarized by a notary public in the home country of the foreign company. A company name availability check, drafting of the local articles of incorporation and company bylaws, confirming of directors and evidence of capital should be handled before application for establishment.

There are four main types of entities available for establishment, but only three (Kabushiki Kaisha, Goudou Kaisha and Branch Office) of these entities can book revenue and are required to pay taxes.

Most Common Entity Choices in Japan:

  • Kabushiki Kaisha (KK)
  • Goudou Kaisha (GK)
  • Branch Office (BO)
  • Representative Office (not a registered entity, see Setting Up a Representative Office below)

General Overview of Each Entity:

Kabushiki Kaisha (KK)

  • The Kabushiki Kaisha (joint stock company) is the most widely used form of business in Japan. It consists of a number of shareholders whose liabilities are limited to the capital invested.
  • Incorporation procedure, management, accounting and audit requirements of a KK have greater advantages than other forms of business.
  • Joint stock companies enjoy better financial and business credibility in Japan.
  • Funds are subject to withholding income tax upon being transferred to a parent company (as they are considered two separate entities). However, the withholding income tax applied to a KK can be reduced to zero through certain tax treaties.
  • A Representative Director is required to set up the KK. As of March 16, 2015, this individual no longer needs to be a local resident and can live abroad.
  • The Representative Director, if local, is unable to enroll into government labor insurance programs (unemployment and workman’s compensation), meaning they will not be covered if they lose their job or if they are hurt on the job.
  • The salary of local Representative Directors beyond what is declared and fixed in shareholders meeting minutes is not tax deductible to the company.
  • Required to have at minimum an annual shareholders meeting (also known as an annual general meeting).
  • If a board of directors is required by the client, a statutory auditor must be appointed and quarterly director meeting minutes must be written according to the Company Act of Japan.
  • Financial statements should be published once a year to the public.

Goudou Kaisha (GK)

  • The Goudou Kaisha is a new type of company in Japan, modeled after the US limited liability company (LLC).
  • An Executive Manager is required. As of March 16, 2015, the person no longer has to be a local. This is effectively the same as the Representative Director of a KK. They are likewise not able to enroll into government labor insurance.
  • Accumulated loss can be carried forward to the HQ for tax deductibility (applicable only to US parent companies).
  • GKs have less credibility than KKs, and the majority of companies in Japan are KKs (over 95%). However, GKs do have higher credibility than a Branch Office with less bureaucracy, and requires less time and cost than a KK to establish.
  • An accounting auditor cannot be appointed by the GK, even if its size is the same as a “large corporation” (i.e., an entity having capital of JPY 500 million or more, or owing aggregate debts of JPY 20 billion or more).

Differences Between a KK and a GK

  • Shareholders meeting minutes are not required for a GK.
  • GKs have no obligation to facilitate an internal control system or to disclose its balance sheet to the public. KKs are required to do both.
  • Shares are issued for KKs. Owners or “Members” are appointed for GKs – there are no shares to give out.
  • GKs afford US tax benefits like carry-forward loss from the Japan books to the US books.

Branch Office (BO)

  • BOs can perform sales and conduct business transactions, and is taxed on ongoing operations.
  • BOs have unlimited liability and all obligations will be passed to the parent company.
  • BOs cannot perform mergers, though they can purchase other companies, which from a regulatory point of view is considered the parent company purchasing the company.
  • The Japanese view BOs as a “foreign company”; both Japanese clients and employees have more reservations working with a branch company than a local Japanese entity.
  • Funds can be transferred between a BO and the parent company without being subject to withholding income tax.
  • Possible double taxation on the difference in US and Japan tax rate (approximately 10%).
  • A BO representative is required and must be a Japan resident. This person is considered a director and not eligible for government labor insurance.

Setting Up a Representative Office

In Japan, a “Representative Office” is not a registered entity, is not required to pay taxes, and does not have any statutory compliance requirements. Prior to 2006, when the minimum capital to establish a Japan entity was JPY 10 million, this type of office was a more practical stepping-stone to entering Japan. However, with the reduction of minimum capital requirements to JPY 1, the Representative Office is becoming less common.

This type of office, which is defined by its allowed business activities, can be summarized in the following points:

  • A Representative Office is “established” once an independent contractor is hired in Japan.
  • Companies will typically utilize this structure to perform market analysis while determining whether to establish an entity. Representative Offices can perform preparatory activities for business transactions such as market research, collection of information and advertisement. However, certain activities are considered “gray” or even disallowed, rendering the business noncompliant with Japanese Company Law. These disallowed activities generally include business development and sales. All revenue generated by these activities could be deemed domestic-sourced income and thus taxed in Japan (permanent establishment risk). This means if a Representative Office generates USD 10 million in sales, the full amount could be deemed taxable in Japan. In such cases, the most accepted solution is to establish an entity such as a Kabushiki Kaisha (KK), Goudou Kaisha (GK) or Branch Office (BO).
  • Representative Offices do not need to register a legal entity, adhere to corporate statutory compliance or pay taxes.
  • As the Representative Office is run by an individual or individuals, there is a possibility that they will have a difficult time concluding rental agreements, opening up a bank account or contracting with vendors.
  • If more than one person is working for the Representative Office, the labor office does recognize such nonregistered entity and will provide labor insurance to all employees other than the original hire or “representative employee.” The representative employee is not applicable for labor insurance, much like the Representative Director of the KK.

Working Through a Distributor

When foreign-owned multinational groups want to bring their product to Japan, sometimes they elect to begin initial distribution through a third party Japanese distributor. This eliminates the need to set up a branch or subsidiary, and third party Japanese distributors often have the industry connections and relationships necessary to establish sales and distribution channels. Working through a third party Japanese distributor versus setting up an entity and managing distribution internally has its pros and cons. In our experience a hybrid of the two strategies proved most successful, but that is not to say initially working with a distributor is the wrong way to approach this market.

If the business is successfully set up through a distribution channel, the foreign-owned multinational will generally set up a branch or subsidiary in Japan that provides marketing and sales support to the distribution channel, such as providing training or other information on new products and marketing materials used in overseas jurisdictions. Such services are generally rewarded using a cost plus markup methodology, but alternatively may receive a commission based on percentage of sales.

As the business continues to grow, the foreign-owned multinational must consider whether to take over the sales and distribution or to continue to use the third party Japanese distributor. We have seen the following considerations tending to push a multinational toward the in-house distribution model:

  • The third party Japanese distributor is not making the investment or spending the energy in selling the multinational’s products as an in-house distributor would.
  • The multinational group has now developed its own relationships with customers and distribution channels, and no longer needs the third party Japanese distributor.
  • In-house marketing and sales support is increasingly dovetailing with actual sales, which creates a risk of permanent establishment from the tax perspective.
  • The multinational group wishes to save on the cost of a third party Japanese distributor (distributor margins can be considerable).

However, not all foreign-owned multinationals in Japan opt to bring distribution in-house. Factors that may persuade against such option are:

  • The multinational group is relatively small and does not have the resources to manage the Japanese distribution itself.
  • The third party Japanese distributor is sufficiently powerful within the industry or is doing a sufficient job of selling the products, and moving distribution in-house would actually be detrimental to the business.

Tax Impact of Moving Distribution In-House 

If a multinational group decides to move distribution in-house, the following tax issues will need to be considered:

  • Whether the distribution will occur through the same legal entity that formerly performed marketing and sales support services or a new legal entity.
  • What the transaction structure will be (i.e., pure buy/sell or commissionaire [agent for undisclosed principal]) and what new intercompany agreements should be prepared.
  • The new consumption tax and/or customs obligations, depending on the scope of the distribution activities a local entity takes over.
  • A transfer pricing analysis to determine an arm’s length return for distribution activities. This would generally be based on a target operating margin, as cost plus markup would no longer be appropriate. This would likely cause some additional tax to be paid in Japan, even if the target operating margin was relatively low.
  • The need for (additional) debt or equity funding from the multinational group, depending on the size of the distribution business taken over.

Nominee Services

Nominee Resident Director

The Representative Director of a Kabushiki Kaisha (called an Executive Manager for a Goudou Kaisha) must be appointed at the time of establishment. As of March 16, 2015, this person no longer needs to be a resident of Japan, but common practice suggests appointing a Nominee individual locally in order to ensure a smooth setup. The individual in this position gives up their right to unemployment and workman’s compensation, and bears the risk that any litigation toward the company could fall upon them, as they are not considered an employee but a principal of the company. They also have the ability to independently bind the company to any contract. Given this, foreign companies are hesitant to appoint someone living in Japan to this role. With all of these risks, some companies will choose to appoint a Nominee Resident Director, which ultimately resolves all these issues by practically reinstating the power of attorney of the foreign office and removing any risk associated with appointing someone locally.

Nominee Registered Address

Foreign companies that do not need a physical office space to operate their business must still register an address with the local authorities. A Nominee Address is used so the foreign company can remain compliant while paying a minimal amount for a registered address. Tricor offers its own offices as a Nominee Address and will handle any government notices and forward personal mail appropriately.

Corporate Sercretarial Support

Corporate Secretarial Compliance

The only type of entity that has statutory corporate secretarial compliance is the Kabushiki Kaisha (KK). This generally refers to the annual shareholders meeting and public disclosure of financial statements in the Official Gazette. If the KK has a board of directors, quarterly held directors meeting minutes become statutorily required. Goudou Kaisha (GK) and Branch Office (BO) entities do not have any government-mandated corporate secretarial compliance.

Statutory Compliance Details

A Shareholders Meeting is required to be held within three months of fiscal year end. The standard agenda should be as follows:

  1. Reporting of business activities for the fiscal period to the shareholders


  1. Approval of financial statements (balance sheet, income statement, statements of shareholders equity and notes to the financial statements) for the fiscal period
  2. The election or reelection of company officers (directors and auditors) if the term of office is to expire at the close of the annual general meeting

Directors Meetings are required to be held four times a year within three months of each other. The Representative Director and all company directors executing operations of the company must provide a status report on the execution of their duties for the quarter.

A Public Notice in the Official Gazette is required to be filed after each fiscal year once the financials have been approved. The notice must include a summarized version of the financial statements approved at the annual general meeting (limited to companies that have chosen the Official Gazette as their method of public notice).

For creditor protection purposes, public notice is required in advance of:

  • Dissolution
  • Capital reduction
  • Merger

Note: There are other cases as well, but the above are the most common times public notice is needed. Creditors with objections to the above are given a prescribed period of time (two months for dissolution, one month for the others) to file an objection. The above may be performed only after the prescribed creditor protection period concludes.

Be aware that applying to have a public notice published in the Gazette must be done well in advance (typically two weeks before publication), so this must be factored in when scheduling.

Corporate Legal Changes

Corporate legal changes include appointing or removing directors, changing the registered address and merger documentation drafting. Each type of entity has its own legal documents and procedures for making changes. The procedures usually involve drafting necessary documents in a government-accepted format by a licensed professional and filing with the representative Legal Affairs Bureau. Listed below are possible procedures for each type of entity.

Kabushiki Kaisha (KK)

  • Director appointment or replacement
  • Company address change
  • Company name change
  • Amendment to the method of public notice
  • Amendment to the business purposes
  • Abolition of the board of directors
  • Capital increase or decrease
  • Merger
  • Share transfer
  • Amendment to the articles of incorporation
  • Report to the Bank of Japan regarding equity acquisition

Goudou Kaisha (GK)

  • Member change (equity transfer)
  • Change of member’s home address
  • Executive Manager (listed director) appointment or replacement
  • Company address change
  • Company name change
  • Amendment to the method of public notice
  • Amendment to the business purposes
  • Capital increase or decrease
  • Report to the Bank of Japan regarding equity acquisition

Branch Office (BO)

  • Branch manager change
  • Change of branch manager’s home address
  • Registration changes relating to the head office
  • Change of Japan company address
  • Abolition of Japan branch

Tricor is the only company in Japan that holds all the necessary licenses to completely support a company’s back office without outsourcing work to third party firms. The Tricor Judicial Scrivener Office holds the necessary licenses to compliantly perform any legal work and government filing related to the change of registered entity information.

Visa and Immigration Support

If foreign resources are required to help start, run or support business in Japan, a work visa is most likely needed. Occasionally, clients may experience immigration issues with employees or executives who have been – or are in danger of being – disallowed to enter Japan for issues ranging from questionable business activities to repeated tourist visas or frequent trips to Japan within the same year. In any case Tricor can help communicate with the immigration office to have things resolved. Our Tricor Gyoseishoshi office holds the necessary license to provide visa and immigration support, enabling us to help our clients navigate the nuances of Japanese Immigration law.

If you have an urgent immigration issue and need immediate help, please reach out to us here. One of the most common issues is staying in Japan for more than 180 days a year without a proper visa. While this isn’t an immigration law or rule and more of an unwritten guideline, immigration control will refuse anyone entrance to the country if they feel they are within their right to do so.


Visa classification is determined by what activities an individual will be performing in Japan and their background and requires proof of employment or invitation letter with a Japanese person or company. A person can get only one visa at a time, so the most appropriate visa classification should be determined ahead of time.

Visas are divided into three main groups:

  • Working Visa
  • Non-working Visa
  • Family-Related Visa

Work Visa

Working visas only cover activities that require a high level of professional knowledge, skills or education. Performing simple jobs would not be appropriate under this kind of visa. Types of working visas include:

  • Business manager
  • Specialist in the humanities
  • Intracompany transferee
  • Engineer
  • International services
  • Skilled labor
  • Highly skilled professional
  • Diplomat/official
  • Professor
  • Instructor
  • Artist
  • Religious Activities
  • Journalist
  • Legal/accounting services
  • Medical services
  • Researcher
  • Entertainer

Non-Working Visa

These types of visas are generally for individuals living in Japan but who are not working. It is possible to work limited hours under a non-working visa if given the appropriate approval from the immigration office. Types of non-working visas include:

  • Student
  • Trainee
  • Technical internship
  • Dependent
  • Cultural activities
  • Temporary visitor
  • Designated activities

Family-Related Visa

Family-related visas generally do not limit the scope of activities allowed, so it is possible to work in any field of choice under these kinds of visas. There are limitations on how many hours can be worked, but changing jobs does not require a change in visa status given the appropriate requirements are met. Family-related visas include:

  • Spouse or child
  • Long-term resident
  • Permanent resident

Tricor is the only company in Japan that holds all the necessary licenses to completely support a company’s back office without outsourcing work to third party firms. The Tricor Administrative Documentation Lawyer Office deals with immigration, visa and business license matters. If you would like to know what kind of visa is required for your particular situation, please reach out to us here.

Business Licenses

An administrative documentation lawyer is called a “Gyoseishoshi” in Japanese and generally handles the application of business licenses and immigration issues including visas. To become a Gyoseishoshi, it is necessary for a person to pass the Gyoseishoshi examination and obtain certification through the Gyoseishoshi Association in each prefecture of the Japan Federation of Gyoseishoshi Associations.

The National Gyoseishoshi Licensing Examinations are held by a Prefectural Governor as designated by the Minister of Internal Affairs and Communications. The Prefectural Governor may entrust test administration to a person designated by the Minister of Internal Affairs and Communications. Examinations are held once a year by the General Incorporated Foundation Gyoseishoshi Examination Research Center as a designated examining body.

Tricor is the only company in Japan that holds all the necessary licenses and certifications to completely support a company’s back office without outsourcing work to third party firms. If you would like to know if your business requires a license to operate in Japan, please reach out to us here.