The limited liability company (LLC), also knowns as the “Godo Kaisha”, is one of the preferred Japanese business forms where the shareholders have limited liability based on their contribution to the capital.
The LLC’s participants are called ‘’members’’ unlike the investors of a joint stock company, called “shareholders”.
The Japanese Companies Law does not impose any share capital requirements to set up an LLC, however, the members can only contribute to the capital in cash or kind, and not in services.
The members choose a manager to act in the name of the company and their interests. This manager may be a natural person or a corporate body. If a corporate body is elected as a manager, it must appoint a functional manager to act in the name of the company.
Being the most sought type of company in Japan, the limited liability company benefits from reduced company formation requirements in Japan. Those who want to open a LLC in Japan must take into account the following:
- the Company Law only requires one shareholder who can be a resident or non-resident natural person or company;
- the company also needs to have a bank account and a legal address in Japan;
- another requirement is for the company to have a unique name which must be reserved prior to starting the registration procedure.
Our company registration consultants in Japan can offer detailed information on the requirements related to starting an LLC in this country.
What is the incorporation procedure for an LLC in Japan?
The procedure of incorporation of a limited liability company in Japan starts with making a company seal. Also, the representative manager must register for the personal seal, then receive a certificate of seal registration for it.
After that, the company must register the Articles of Association at the Japan Legal Affairs Bureau, along with a standard application. The Articles must state:
⁻ the company’s name, which must be reserved with the Trade Register and must be unique;
⁻ the reason why the company is incorporated and the object or objects of activity of the company;
⁻ the name and address of the incorporator (their identification papers must also be filed with the Companies Register);
⁻ information about the authorized capital and details regarding the distribution of the shares.
Also, a list of all the members which made contributions in non-cash and the value of it must be provided by the Articles.
If the above documents are accepted, the certificate of seal registration must be then delivered to the Legal Affairs Bureau in order to register the newly formed company.
The next steps are submitting the following notification to the National Tax Agency: the notification of the company registration (no longer than two months since the incorporation), the notification of opening a payroll office (no longer than a month from opening it) and the request for approval of blue tax returns (no longer than three months from registration).
If the limited liability company opened in Japan will hire personnel, it must register at the Labor Standards Bureau for the labor insurance. Also, a notification must be sent to the Social Insurance Office, so the company is registered for health insurance and public welfare pension.
The last step in establishing a limited liability company in Japan is submitting an application to the Public Employment Security Office no longer than 10 days from beginning to employ personnel.
Our experts in company formation in Japancan give you further details on this tax and the needed registration process forlimited liability companies.
The Japanese Accounting Standards (Japanese GAAP) are used for all accounting, filing and auditing purposes. The tax year in Japan is the same as the calendar year and penalties apply to those taxpayers who fail to comply with the requirements for submitting the tax payments and tax returns.
We invite you to watch the following video about the Japanese LLC:
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Uses of the limited liability company in Japan
The LLC can be employed for various activities in Japan. Among the uses of the Japanese limited liability company we remind the following:
it can be used for offering services and selling goods in Japan;
it can also be used for trading activities outside Japan – as an offshore company;
the LLC can also be used as a free zone company in one of Japan’s free economic zones;
the LLC can also be used as a ready-made company for those seeking to buy shelf companies in Japan.
We can help foreign clients interested in buying shelf companies registered as limited liability companies in Japan.
How long does it take to register an LLC in Japan?
The company formation process of a Japanese limited liability company can be broken down in several procedures. These procedures imply the trade name reservation which does not take more than 1 day. Then, the preparation of the company’s incorporation documents takes approximately 2 days. The time between the filing of the company’s statutory documents and the issuance of the certificate of registration by the Japanese Companies Registrar takes approximately 3 days.
The procedure related to opening the LLC will also imply opening the corporate bank account which takes 1 day and making a company seal which takes around 3 days to complete. The registration for taxation and employment purposes will also take 2 days.
Our company registration representatives in Japan can explain the cost of each operation related to setting up an LLC.
Taxation of an LLC in Japan
An LLC in Japan has to file yearly financial statements and tax-returns just like a joint stock company in this country. Also, this type of legal entity in this jurisdiction has to pay the same taxes for income, expenses and paid-in capital. Other taxes include the Japan consumption tax.
Similarly to a joint-stock company, the profits which are derived from doing business on the local markets can only come back to the parent company under the form of post-tax dividends.
These dividends are subject to a 20% (20.42% including surtax) withholding tax in Japan, unless there is a tax treaty relief. Our company registration consultants in Japan can provide more details on this matter, as Japan has signed more than 70 tax treaties that cover matters such as double taxation as well as one treaty concerning inheritance or estate tax.
For LLC subsidiaries of U.S. companies, this is not a tax burden, since the U.S.- Japan tax agreement takes out the withholding tax for dividends paid to a U.S. parent which owns at least 50% of the units in the LLC in Japan.
We list some of the most important taxes for companies below:
- Corporate income tax: with a rate of 23.3% (effectively between 30 and 34% including local taxes) for locally registered companies as well as branches in Japan;
- Dividends tax: 20% in most cases (see below) or 15% for dividends paid by a listed company to a non-resident;
- Consumption tax: this is the Japanese equivalent of the European value-added tax and it has a standard rate of 10% (where a 7.8% national tax and a 2.2% local tax are combined) and two reduced rates of 0% and 8% (the national tax of 6.24% and the local tax of 1.76%);
- Other taxes: real property tax (municipal fixed assts levy at 1.4%), stamp duty (between 100 JPY and 600,000 JPY for contracts executed in Japan); social security with the highest rate at approximately 16.24% for the employer (a separate rate applies to the employee).
A LLC company in Japan is to register for the consumption tax if it provides taxable goods or services. New companies with a share capital of no more than 10 million JPY will not be subject to filing consumption tax returns, unless the taxable sales exceed 10 million JPY in the base period.
As far as tax compliance for corporations in concerned (the LLC, branch or joint-stock company, for example), legal entities in Japan are expected to observe a tax year of no more than 12 months (a period that is selected when the company is registered). The final tax returns and the final payment of the taxed takes place within two months after the closure of the said company’s fiscal year. Taxes are prepaid within two months from the end of the sixth month of the elected fiscal year and the amount in which they are paid can be either 50% of the tax that was paid in the previous year or the actual tax liability incurred for the first six months of the tax year.
Our team of company formation experts assist you in starting a business in Japan, including providing you with updated information about the current tax regime in 2021, as well as any relevant information for your chosen business form, the LLC. Specialist tax advice and accounting assistance is requested by most investors in Japan, especially first-time investors. Requesting professional aid will allow you to avoid that penalties that apply for late or incorrect filing.
The Japanese LLC compared to other business forms
Foreign investors in Japan are permitted to open either the LLC (Godo-Kaisha) or the joint-stock company (Kabushiki-Kaisha). The defining characteristics of these business forms resemble those in other countries, for example in terms of them being suited for certain types of activities (the LLC for small or medium-sized businesses while the joint-stock is recommended for large businesses).
Our agents who specialize in company registration in Japan list the main differences between these two business forms below:
Capital: both companies can be incorporated with 1 yen or more;
Number of investors: 1 or more investors in both cases;
Investor liability: limited to the amount of capital invested in the company;
Number of executives: there is no minimum for the Godo-Kaisha; for the Kabushiki-Kaisha the number of directors depends on size and capital;
Public stock offerings: possible only for the Kabushiki-Kaisha; the Godo-Kaisha cannot offer its shares to the public;
Taxation: both companies are taxed on their Japanese-source income and the profits allocated to shareholders.
Foreign companies also have the option to open a branch or a representative office in Japan. The representative office can be used as the first step when entering the Japanese market, however, only for promotional or marketing purposes and not as an entity that can engage in trade or sales. Because it has no commercial activities, the registration of the representative office is not mandatory. The branch office allows the foreign company to engage in transactions in Japan as well as derive income (that will be taxed accordingly), however, it is still limited in terms of the activities that it can perform: it can engage only in the same business activities as the parent company and it does not have legal identity. Foreign companies that wish to do business in Japan can incorporate a joint-stock company or a limited liability company, under the conditions listed in this article.
Special permits and license are required in Japan for companies that engage in various industries. These are required irrespective of the company type and those who incorporate a Godo-Kaisha will need to obtain the proper license before starting their business activities.
Choosing the right type of company can be easier with proper counsel and assistance from our team. Do not hesitate to contact us if you need more information on the main business forms in Japan.
FAQ on LLC registration in Japan
Among the questions asked by foreign entrepreneurs who open LLC companies in Japan, our local consultants have usually met the following:
1. Does the company need a local address?
Yes, a Japanese limited liability company must have a local address. Here too we can assist with virtual office services.
2. What types of activities can I complete through an LLC in Japan?
One of the greatest advantages of the LLC is that there are no limitations on the activities foreign investors can carry out through it in Japan.
3. How long does it take to register an LLC in Japan?
The registration procedure of an LLC can take up to one month in Japan.
As you can observe, there are several steps that must be followed in order to start such a company in Japan. Our team of company registration agents in Japan is ready to help businessmen through the entire process of registering an LLC in this country.
Call us now at(+44)203-287 0408 to set up an appointment with our company formation agents in Tokyo, Japan. Alternatively you can incorporate your company without traveling to Japan.
As our client, you will benefit from the joint expertize of local and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Japan.