#business

Business Operations for a Foreign Company

For a foreign company seeking international business expansion into Japan, there are primarily three types of operations to choose from.

Three Types of Business Operations

For a foreign company seeking international business expansion into Japan, there are primarily three types of operations to choose from:

Representative Office
Branch Office
Subsidiary (Godo Kaisha or Kabushiki Kaisha)

	Representative Office	Branch Office	Subsidiary
Definition	Preliminary step for non-domestic companies planning expansion into Japan	A direct extension of a foreign company	An independent company established by a foreign parent company
Business Activity	Limited to non-commercial activities like market research, PR, etc.	Not limited to commercial activities	Not limited to commercial activities
Registration	Unnecessary	Necessary	Necessary
Accounting	-	Need to be consolidated with the head office’s accounting	Independent from the parent company's accounting
Representative	-	Representative should be a mid/long-term resident in Japan	Representative can be a foreign national but in reality, if they are not a resident opening a bank account would be challenging
Renting an office in the name of the office/company	Impossible	Possible	Possible

Option 1:

Representative Office

A Representative Office serves as a preliminary step for non-domestic companies planning expansion into Japan. Its primary focus is on non-sales functions, such as local market research, information gathering, and public relations within the Japanese market.
Unlike branch offices or subsidiaries, setting up a Representative Office doesn’t require formal registration.

Nevertheless, this also means that as a non-legal entity, activities such as opening a bank account or signing a lease agreement cannot be done unless under the representative’s name in Japan.

📚 Quick Read📚
Setting up a Representative Office | Overview

Option 2:

Branch Office

A branch office is set up by a foreign company to offer services in Japan as directed by the foreign parent company. It doesn’t have its own legal status and can’t make independent decisions, operating directly under the foreign head office.

Foreign head office is ultimately responsible for all financial commitments arising from the branch office’s activities. The branch acts as an extension of the head office, carrying out commercial activities funded by the head office’s capital. Expenses are covered by the head office, and any profits made by the branch are collected but merged into the head office’s yearly accounts.

📚 Quick Read📚
Setting up a Branch Office | Overview

Option 3:

Subsidiary

A subsidiary refers to a separate legal entity established by a foreign company to conduct business operations within the country. Unlike a branch office, a subsidiary has its own legal identity and is treated as a distinct entity from its foreign parent company.

Functioning as an independent entity, a subsidiary is subject to Japanese legal regulations and is owned by a foreign parent company. Typically structured as either a Kabushiki Kaisha (KK), a joint-stock firm, or a Godo Kaisha (GK), a limited liability company.

📚 Quick Read📚
Setting up a Subsidiary | Overview