Starting Your Own Company - Selecting the Right Structure

Starting Your Own Company - Selecting the Right Structure

If you can't get the job you really want, there's always the opportunity to start your own company. Luckily Japan is very kind to foreigners wanting to try their hand at commerce, and so long as you follow the rules, foreigners can get licenses, loans, government help, etc., just as easily as Japanese can.

The kind of company you should start largely depends on your ambitions and needs. If you're a consultant looking for an easy way to structure your taxes, then you can simply have a "Kojin Jigyo" where you simply work as an independent contractor, use a proper tax accountant, and make sure that you get your filings in on time. The nice thing about having this kind of operation is that you can claim tax deductions for your home office, client meetings and entertainment, travel for work purposes, etc.

However, if you're planning to do business on a more significant scale, then you really have two choices: a Yugen Kaisha (YK) - or limited liability company, or a Kabushiki Kaisha (KK) - which is a joint stock company. Of the two, the YK is easiest to set up and administer, but larger clients may doubt the credibility of your firm, since the YK structure is often used for mom-and-pop operations. There are about 2 million YK's in Japan.

By commercial law, the KK is a much more professionally run and operated firm, and thus most Japanese clients will feel more comfortable dealing with this kind of entity. The problem is that while the paid in capital for the YK is at least JPY3 million, the KK requires a capitalization of at least JPY10 million. For most people this is a lot of money to find up front.

Happily then, from February 1st this year, the Ministry of Economy, Trade and Industry allowed budding entrepreneurs to form a special variation of the YK and KK, with just one yen (yes, you read that right) of capital. Then, after five years, you will have to upgrade the capital to the proper amount or shut down the company. If this sounds like a dream opportunity, unfortunately, it's not - I've been told that the paperwork needed to get the capital exemption is horrendous. Still, if you've got a Japanese business partner, it may be worth taking a look at.

The registration procedure for a YK is relatively straight forward, and indeed you can buy a packet of forms and a "How To" book at almost any book store. All up, you should allow a week or so chasing around, submitting the various forms and paying for the registration documents. The procedure for a KK is much more involved, and most people use a lawyer or judicial scrivener to do it. You should normally allow at least 4-6 weeks for the registration of a KK.

The cost of paying for the various duties and registration fees is approximately JPY400,000 for a YK, and JPY550,000 for a KK. On top of that, you need to add your legal costs - with a judicial scrivener (cheaper than a lawyer but just as good) charging about JPY250-300,000, as well as translation and similar costs.

Several good web sites giving more about company structures and set up procedures in Japan include:

As always, my contact details are simply:

Looking forward to getting some enquiries...