#business setup
Setting up a Subsidiary in Japan
The key distinction between a subsidiary and a branch office lies in accountability and debts, attributed to the parent company for a branch office but separated for a subsidiary.
Menu
- By Saki Nakahara, Gyoseishoshi Lawyer
- Last Updated:
When foreign companies decide to expand their business into the Japanese market, they primarily have three options.
The first option involves establishing a representative office, limiting activities to non-commercial pursuits, suitable for companies conducting market research to assess their interest in pursuing projects in Japan. For companies committed to starting business operations, the remaining two alternatives allow engaging in commercial activities: setting up a branch office or a subsidiary.
*The information provided in this article is a general guide and not tailored to individual circumstances. For personalized advice and assistance with your specific business set-up process/visa application, it is recommended to consult a specialist.
Table of Contents
A subsidiary is an independent entity governed by Japanese law and owned by a foreign parent company.
Structured typically as either a Kabushiki Kaisha (KK), a joint-stock firm, or a Godo Kaisha (GK), a limited liability company, the subsidiary operates independently while under the legal umbrella of a company in another country.
Setting up a branch in Japan is simpler and more cost-effective, but it has limitations compared to having a subsidiary. The key distinction lies in accountability and debts, attributed to the parent company for a branch office and separated for a subsidiary company.
📚 Quick Read📚
Setting up a Branch Office | Overview
A Representative Office does not require registration and thus lacks legal entity status, unlike a subsidiary. While convenient for those unsure about officially embarking on their journey in Japan, a Representative Office cannot use its name for a corporate bank account, sign an office lease contract, or engage in sales activities.
📚 Quick Read📚
Setting up a Representative Office | Overview
In the context of Japan, a subsidiary can function independently from their foreign-based parent companies, with increased legal authority for autonomous actions.
A subsidiary has the freedom to establish themselves as distinct entities with ongoing connections to the parent company, allowing them to make independent decisions. Importantly, this also means responsibilities and liabilities of subsidiaries in Japan are separated from their parent companies.
As a subsidiary, you can choose mainly from the two different company structures – Godo Kaisha Godo Kaisha (G.K.) and Kabushiki Kaisha (K.K.) . These are two distinct corporate structures in Japan, each with its own characteristics and implications.
- Godo Kaisha: “Japanese LLC” Offers limited liability, making it an appealing option for entrepreneurs looking to mitigate personal risk. Setup process for a G.K. is more straightforward and quicker than that of a K.K., resulting in lower initial and ongoing costs. The flexibility in management is also a key feature.
- Kabushiki Kaisha: Joint-stock Company. Often preferred by larger Japanese corporations due to its perceived higher credibility. While it also provides limited liability, the K.K. structure grants the ability to go public—an option not available to a G.K.
Step 1: Choose a representative
Company representatives can be appointed from non-residents in Japan, and nationality does not matter. In the past, at least one of the representative directors had to have an address in Japan, but now, it is possible to establish a company even if all representative directors reside overseas.
Step 2: Choose an office address
Some foreigner friendly agency for rental offices:
Step 3: Draft articles of incorporation
Decide on key items like company name, business activities, registered address, capital, etc.
Step 4: Prepare an affidavit
Prepare Affidavit detailing information about the foreign company. This affidavit is prepared based on the Certificate of Registered Matters from the foreign parent company.
Step 5: Get Articles of Incorporation notarized (for KK only)
Attach the Affidavit and have the Articles of Incorporation notarized by a notary public.
Step 6: Deposit initial capital
The founders and initial directors contribute the capital to their individual accounts. If a founder is a foreign resident lacking a Japanese bank account, it is crucial to involve a founder with a Japanese bank account, whether a foreign national holding a medium to long-term residence status or a Japanese citizen.
Step 7: Register the company at the Registry Office
Submit required documents such as the notarized Articles of Incorporation, proof of capital deposit, registered seal of the company’s representative to get the company registered.
Step 8: Obtain certificates
Upon completion of registration, you can obtain a Registry Certificate and Seal Certificate. These documents are essential for opening a bank account and proceeding with tax and social security-related procedures.
Step 9: Open a corporate bank account
With corporate registration complete, you can apply to open a corporate bank account. However, opening a corporate bank account, in general, is getting more difficult in Japan, so we highly recommend you consult with the bank prior to the business incorporation process.
Step 10: Submit notifications
Report to tax office, pension office, labor standards inspection office, etc.
The list will be finalized after our consultation, but here are some of the documents that you will need:
Registration application form
Certificate of Capital Contribution
Appointment letters and acceptance letters for the directors of the subsidiary
Certificate of Seals for executive officers (For foreign nationals assuming officer roles without a registered seal in Japan, a signature certificate will be required), etc.
Notarized Articles of Incorporation
Business Manager Visa is a work visa designed for foreigners intending to either establish a business in Japan or oversee the management and operation of an existing business. If you want to start a company in Japan, you will need to get this visa.
Small Seasons & Co. is a bilingual legal office in Tokyo led by a Gyoseishoshi Lawyer. Whether you’re establishing your business or navigating visa applications, we’re delighted to be your guide through the process. Let’s ensure your venture in Japan is both smooth and successful.
- By Saki Nakahara, Immigration Lawyer
- Last Updated:
Topics Covered
- admin @ smallseasons.com
- 1-3-40 Mita, Minato-ku, Tokyo
- Follow us on LinkedIn!