Start Your Business in Japan 1
Yoneyama, June 2022
This week and thereafter, I would like to talk about procedures of starting up a business in Japan.
In general, there are two ways of starting up your business, namely, incorporation and individual business ownership.
The following are rough comparisons between the two:
Individual business Incorporation
Registration Notification of opening business Legal person registration to
to be submitted to Tax Office Ministry of Justice
Cost of starting up No cost Stock company: 250,000 yen or higher
LLC: 100,000 yen or higher
Tax Income tax Corporate tax
Individual residential tax Corporate inhabitant tax
Consumption tax Consumption tax
Enterprise tax on individual Enterprise tax on corporation
Progressive tax rate increases are larger for individual business.
Corporate inhabitant tax has to be paid even if bottom line is
negative (deficit).
Cost recognition Most of the cost of doing business Most of cost of doing business
can be recognized as deductible can be recognized as deductible
except for owner’s salary, life including founder’s salary and
insurance premium etc. retirement fee etc.
Carry-over of deficit Maximum 3 years Maximum 10 years
I would like to talk about procedures of founding a corporation in Japan.
Japan’s Corporate Law defines two categories of corporation, stock companies（株式会社） and limited liability companies（合同会社）.
The following are rough comparisons between the two:
Stock Company Limited Liability Company
Cost of starting up 250,000 yen or higher 100,000 yen or higher
Institutional finance Relatively easy Not so easy
Scale-up like IPO Yes No
Social recognition Relatively high Relatively low
Public notice Mandatory No need
Term of directors 2 years No limit
Distribution of profit Dividend based on share Free arrangement
Next, I would like to talk about the concrete steps that you, the founder of your stock company has to follow in Japan.
First, you need to make your corporate bylaws, which should consist of the following definitions:
1. Official name
It is not allowed to establish a corporation with the same name and same H.Q. address of any preexisting company.
2. Purpose/Mission
If your business requires a license or permission from the central and or any local government, you’d better check the prospect beforehand if your new corporation would be granted such a license or permission.
3. Address of the headquarters
4. Stock
Maximum number of stocks that can be issued is defined as well as an initial stock price and whether or not actual paper stocks are issued are defined.
Also, conditions and constraints of transferring or succeeding stocks between the original shareholders and between an original shareholder and an outside individual are defined.
5. Shareholders meeting
How to call the meeting and how to chair and operate and how key decisions be made are defined.
6. Directors, auditors, representative directors, board of directors meeting
Individual institutions’ responsibility and power are defined.
7. Fiscal year, dividend and so forth
For details, please visit the following link: