How to Choose the Right Business Structure in Japan

Running a business can be challenging. It is of utmost importance to be aware which type of business to choose in Japan for tax reasons and just in case things do not go as planned.

 

In this article, our company formation consultants in Japan briefly compare the different business structures in Japan and their pros and cons.

 

 

First things first. When considering which type of company to open in Japan, it is important to know which form they can have. 

 

Generally, there are four types of business structures in Japan:

 

1. The representative office;

2. The branch: according to the Japanese legislation, there are two types of branches:

      • The ones with a business office in the country;

      • Branches with do not have a business office in Japan;

3. The Japanese corporate company: Kabushiki Kaisha (KK) or Godo Kaisha (LLC);

4. The limited liability partnership (LLP).

 

Our company registration advisors in Japan can provide detailed information on each of these types of business entities in the country.

 

 

A Kabushiki Kaisha is usually the most popular business structure in the country. A lot of Japanese corporations are structured as Kabushiki Kaisha. 

 

However, a Kabushiki Kaisha requires a minimum amount of the registration taxation of JPY 150,000 (USD 1,327), which is more than that of other types of business entities. 

 

When it comes to the Godo Kaisha, its main advantages compared to the Kabushiki Kaisha are:

 

• The payment for capital investment into a bank account is not necessary;

• The minimum amount of the registration taxation for the establishment of the business is JPY 60,000 (USD 531).

 

Among the cons of a Godo Kaisha, our Japan company formation professionals mention that it is not so popular among the locals and, unlike the LLCs in the U.S., the Godo Kaisha is required to pay the corporate income tax.

 

As about the limited liability partnership, one of its main advantages is that the distribution amount may be established freely between the partners. 

 

One of the disadvantages of such a business structure in Japan is that it cannot be converted to a corporate entity. 

 

If you would like to know more about the business structures in the country, or if you have decided to open a company in Japan, please contact us.