Company Types

If you need to have some people in Japan but you don’t intend to actively sell you can set up a Representative Office or a Branch Office.

A Representative Office may conduct preparatory and supplemental tasks. This could be surveys or research.

A Branch Office may be used for technical support etc. But is does not have a legal corporate status, can’t open a bank account and not even lease real estate (on it’s own). It depends on the foreign (mother) company which is ultimately responsible for all debts and credits of the Branch Office.

Whenever you want to engage in real business you need to set up a proper company. There is no benefit in trying to save money by operating from a branch office. It is not only cumbersome and gives a bad impression to your business partners but you also run danger to get caught and fined by the Japanese Authorities.

Like anywhere there are several company types to choose from.

  • Kabushiki Kaisha (KK)  – (stock corporation)
  • Godo Kaisha (GK) – (LLC)
  • Gomei Kaisha (GMK)  – (general partnership)
  • Goshi Kaisha (GSK) – (partnership)
  • Yugen Sekinin Jigyo Kumiai – (limited liability partnership)

Kabushiki Kaisha (株式会社)

This is a joint stock corporation which comes in several flavors:

  1. closed company (Joto Seigen KK)
  2. open company (Kokai KK)

Both types are subdivided into

  1. small and medium companies (up to 500 million Yen capital and up to 20 billion yen liabilities)
  2. large companies (over 500 million yen capital or more than 20 billion yen liabilities)

The legal requirements for small/medium and large companies don’t differ very much. For large companies some of the optional provisions are mandatory. For practical purposes we only compare closed and open companies.

Closed Stock Corporation (株式譲渡制限会社)

A closed stock corporation (Joto Seigen KK) may be set up by 1 person and the transfer of registered shares is restricted. It doesn’t require a board of directors and regular board meetings. A “closed” KK is suitable for a company with few shareholders who wish to keep the “structural overhead” low.
Points to note:

  • annual balance sheet must be published
  • liability is limited to the allocated share capital
  • corparation is taxed by its profits. Shareholders have to pay taxes on dividends

Open Stock Corporation (株式公開会社)

A open stock corporation (Koukai KK)  is the standard company type in Japan. To set it up you require at least 1 investor and then 3 or more directors making up the board of directors. One representative director and 1 auditor must be appointed.
Points to note:

  • representative director must be resident in Japan
  • board meetings every 3 months
  • annual balance sheet must be published
  • liability is limited to the  allocated share capital
  • Corparation is taxed by its profits. Shareholders have to pay taxes on dividends

Godo Kaisha (合同会社) – LLC

This company type was introduced in 2005 as a replacement for the Yugen Gaisha (YK). It can be set up by one or more investors. Capital may be provided in the form of money or property. This means that service contributions or credit are not allowed. In case of several investors must agree to changes of the articles of incorporation, transfer of ownership and all investors may represent the company.
Points to note:

  • all investors are representatives (unless a manager has been elected)
  • liability is limited to the company capital
  • corparation is taxed by its profits. Shareholders have to pay taxes on dividends

Gomei Kaisha (合名会社) – (GMK)

The GMK is a general partnership consisting of one or more partners. Liability is not limited. As a result it is little used.
Points to note:

  • one or more partners
  • unlimited liability

Goshi Kaisha (合資会社) – (GSK)

The GSK is a partnership with at least one general partner who bears unlimited liability. Additional partners may have limited liability. This company type is also little used.
Points to note:

  • 2 or more investors required
  • one partner with unlimited liability
  • the liability of other partners may be limited
  • partnership is not taxed but partners have to pay taxes on profits allocated

Yugen Sekinin Jigyo Kumiai (有限責任事業組合) – (LLP)

A limited liability partnership consisting of several partners. Partners are expected to take an active role in the business. This makes it suitable for joint ventures.  It also enjoys pass-through tax treatment i.e. the partnership itself is not taxed.
Points to note:

  • 2 or more partners
  • limited liability of partners
  • partnership is not taxed but partners have to pay taxes on profits allocated

In addition there are a number of company types for professionals like auditors, tax accountants and attorneys, non-profit organizations, special companies like mutual insurers, medial corporations, credit unions and banks.
We don’t discuss these types as they are of little interest to foreign companies.