Company Establishment for Foreigners
(Company Formation,Company Start-up)

Company Establishment for Foreigners
FULL SCALE SUPPORT IN ACQUIRING [ BUSINESS MANAGEMENT VISA ]

About Company Formation for Foreigners

First, we would like to explain about establishing a company. (Company Formation, Company Start-up, Company Set up)

Do you think it is difficult for foreigners to Incorporation of the company?

The procedures for foreigners to establish a company in Japan are the same as those for Japanese.
It is important to obtain the necessary visa status to become a company president.
We will explain regarding visa later.


1. Business Type

There are 2 types: Personal and Corporate Business. (Here we will explain about Corporate Business)


2. Types of Corporate Business

Corporate Business can be divided into two broad categories. One is PROFIT CORPORATION and the other is NON-PROFIT CORPORATION. There are Incorporated Non-Profit Organization (NPO ), General Incorporated Association and General Incorporated Foundation.


3. Types of Company and Forms

There are 4 types of corporations: Limited company, Limited Liability Company(LLC), General Partnership, Limited Partnership.
If there are no special circumstances, we would recommend Limited Company; however, general pertnership is becoming popular these days. Please refer to the table comparing Limited company, Limited Liability Company(LLC) and General Partnership for further details.

Company Forms Comparison Table

  KK (Limited, Incorporated Company) LLC (Limited Liability Company) LLP (Limited Liability Partnership・General Pertnership)
Type Company with shares Company without shares Company without shares (Limited Liability Partnership、General Partnership)
Investor 1 or more shareholder(s) 1 or more member(s) 1 or more partner(s)
Legal Person yes yes no
Setting up the Structure Shareholders' meeting,
Rules about setting up board of directors
Can be set up freely by Articles of Incorporation Can be set up freely by Articles of Incorporation
Internal Regulations 1 General Director,(Company Law) 1 Auditor General members' meeting, no restrictions
(Decision is made with majority of the members)
Partner's general meeting
Directors Term of Office Longest 10 years
(reelection is required)
None None
Public Sales of Shares Allowed Not Allowed Not Allowed
Announcement of Financial Statement Required Not required Not required
Initial Articles of Incorporation Certification Certification by a Notary public is required Certification by a Notary public is not required Certification by a Notary public is not required
Initial Articles of Incorporation Certification  Fees AoI Certification / ¥50,000- 0 0
Revenue Stamp fee / ¥40,000- ¥40,000- ¥40,000-
Registration (Registration Certificate Tax) ¥150,000- ¥60,000- ¥60,000-
Indirect limited liability and limited liability employees Limited liability employees will be liable only within the amount of shares invested All members are limited liability members (indirect limited liability members) and  will be liable only within the amount   invested All members will be liable to a debtor without limitation.
Profit and Authority Distribution
or Taxation System
Profit, authority will be proportionated with invested amount Profit, authority can be freely distributed Profit, authority can be freely distributed
The capital (investor) from investors invested within limited scope of liability and the management (manager) are separated. Profit gained from the management will be distributed to the investors Members are  both investor (shareholder) and director (executive).
*1. Can change into a company with shares in the future
*2. US system options (pass-through business) to choose profits flow through the business (orgatization tax) or through investors (individual tax) is not available. Only legal person (organization tax) is allowed.
*1. Not subject to corporate tax, but will be subject to individual tax of each member/partner (pass-through).
*2. Can not change into company with shares.
Aggregation of Profit and Loss /Deferred deduction of Losses Allowed Allowed Not allowed, however, profit and loss from a member's business can be summed up.
It is same for deferred deduction for losses.
Performing Business 1 person or more member(s) member(s)
Social Insurance Allowed, required in some cases Allowed, required in some cases
However, in case of one-man company, public health insurance+public pension enrollment is allowed
Allowed

4. Comparison Table of Cases of Foreign Corporations coming to Japan

  Representative Office Branch in Japan Japanese company (subsidiary company)
Name no restriction same as the head company no restriction
Legal Person status no yes yes
Registration no yes yes
Articles of Incorporation no
(employees business activites will be in accordance with that of head company)
no
(branch business activites will be in accordance with that of head company)
yes
(as its own Articles of Incorporation)
Capital no no from 1 yen
Rights and Duties the representative will bear responsibility, if a contract is concluded in his/her name the head company in originated
country will bear responsibility
the Japanese company
will bear responsibility
Business Activities not allowed, except: data collection, advertisement, market research, purchase and storage of goods allowed allowed
Decision Making Conform with the head company in the originated country Conform with the head company in the originated country Decided by the Japanese company (subsidiary company)
Lawsuit In general, office representative will be responsible, but there are exception depends on details. The head company in originated
country will be responsible
In general, the head company in originated
country will not be responsible
Representative's visa Intra-company transferee
*Business manager visa in some cases
Intra-company transferee
*Business manager visa in some cases
Business manager visa
Corporate
Bank Account
Not allowed; however, opening an individual account adding trade name might be able in some banks.
*trade name means company name or office name. Opening an account as [trade name+representative] is possible, but please be aware as there are some cases that are not allowed.
Allowed Allowed
Remittance to the Originated Country No problem Profits remitted to the originated country, in general, will not be taxed. Profits of the Japanese company remitted to the originated country will be subjected to 20% tax, but the rate could be lowered depends on taxation agreement.
Fiscal Year Conform with the head
company in the originated country
Conform with the head
company in the originated country
Decided by the Japanese
company (subsidiary company)
Tax Declaration
and Financial Statement
Since expenses are included in the head company's account book, journalization will be carried out under accounting regulations of the originated country. Subject to corporate tax, resident tax and business tax
*1.However, there is an exceptional system that allows paid Japanese corporate tax to be deducted from corporate tax of the originated country (foreign tax deduction)
*2.Foreign corporate's (Japan branch) international tax duty is very complicated. Please consult with a specialist for details.
Income from everywhere will be taxed. Japanese company (subsidiary company)'s statement will be included in the overseas company(head company)'s account settlement book.
*With exceptional cases
Aggregation of Profit and Loss /Deferred Deduction for Losses Allowed in principle (the loss can be offsetted with the profit of the head company) Allowed (Profit and loss can be managed with the income of the head office) Not allowed (Accounting process is completed at the Japanese company, therefore, setoff with the head foregn company is not allowed)
It is same for deferred deduction of losses.
Social
Insurance
Optional, but must enroll, in case of 5 or more employees Must Must
Worker's Accident
Insuarance
Must Must
The representative can not
Must
The representative can not
Employment
Insurance
Must Must
The representative can not
Must
The representative can not

5. Benefits of setting up Limited Company (Company Formation, Company Set up)

① You gain high public credibility , earn trust with a financial institutions and business partners. Advantageous when recruiting employees.
② There are various income deductions permitted such as expenditures, financial loss etc. compared to individual proprietorship
For example: Retirement allowance, life insurance (there is a limit on the amount), term insurance
③ You can also enroll in government-managed health insurance and welfare pension.
④ The effective statutory tax rate can be reduced.
⑤ A corporation has a longer carry over and refund carryback of tax losses.
⑥ It is relatively easy for foreign empoyees to acquire a business manager visa status.
⑦ As general rule, company officer's remuneration can be considered as expenses.
⑧ The representative can be changed, and the stocks can be splitted and transferred according to circumstances.

For more infomation

Telephone Consultation03-5453-6931
From Overseas +81-3-5453-6931
(weekday : 10:00 - 18:00)
(Saturdays : 11:00 - 17:00)
E-mail Formclick here
We can provide you an efficient guidance,
if you tell us that you read this page.

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