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Start a Sole Proprietorship in Japan

Updated on Monday 05th November 2018

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There are various types of business forms a foreign investor can choose from when opening a company in Japan. Among these, the sole proprietorship is the simplest structure which can be employed by both local and foreign entrepreneurs as it can be established by one member.

A sole proprietorship in Japan can be a good choice for a business person who has just begun a new business venture. In this country, the sole proprietor is held entirely responsible for the venture.
 
Moreover, a person can start a sole proprietorship in Japan depending on his or her visa status or the spouse’s status. Our company formation advisors in Japan can provide assistance related to opening such a business entity in this country, as well as on starting a company of any kind in Japan.
 

Characteristics of a sole proprietorship in Japan

 
When beginning a new venture in Japan, generally it is better to start it as a sole proprietorship in order to further grow it. 
 
That is because the incorporation of such a business entity in this country is simpler and less taxation is due until it reaches a certain profit. Our company registration consultants in Japan can provide further details on this subject.
 
A sole proprietorship in Japan has the following advantages:
 
  • - it is owned and managed by one person;
  • - the sole owner all the profits, losses, debts and assets of the company;
  • - it may utilize a commercial name;
  • - it does not separate the owner and the business.
 

Who can operate as a sole trader in Japan?

There are only a few categories of individuals who can open sole proprietorships in Japan. Apart from Japanese citizens, these are:

  • -          those married to a Japanese national, those who have long-term or permanent resident permits;
  • -          those to have valid working holiday permits which have no restrictions attached;
  • -          those who have dependent or student visas and those who have cultural visas and who can work maximum 28 hours per week;
  • -          specialists and work permit holders who have signed contracts with Japanese companies.

Freelancers with labor permits are also allowed to offer their services as sole proprietors in Japan.

Requirements for opening a sole proprietorship in Japan

Operating as a sole trader in Japan is simpler than opening a new company. Even so, the sole trader must still register with the Japanese Companies Registrar and obtain a tax number in order to be able to perform economic activities.

The sole trader can reserve a business name or can use his or her own name as a trading name. He or she will also need a valid address in Japan. For foreign citizens, the residential address will suffice.

In order to become a sole trader in Japan, an application must be filed with the Trade Register in Japan. The application can be filed online or sent through the post office.

The business owner will also need to set up a bank account and register for tax purposes.

Our Japan company formation consultants can help foreign investors who want to open sole proprietorships here.

Permits necessary to open a sole proprietorship in Japan

 
Subject to the kind of entity which is about to be set up, one or more permits will be required. Because the most common entities opened by foreign entrepreneurs in Japan are language schools, restaurants, and import-export businesses, they require licenses such as:
 
language school: a permit from the Ministry of Education is needed to open a private school, but there are no permit requirements for after-school classes;
restaurant: a restaurant has to obtain a permit from the Local Public Health Center and one from the Public Safety Commission in case it will be served after 10 p.m. or offer alcoholic drinks;
exporting and importing: this type of entity is not required to obtain a license, however, the business owner has to acquit the customs tariffs for Japan. Our Japan company formation specialists can provide further information on this matter.
 

Taxation of sole proprietorships in Japan

From a taxation point of view, a Japanese sole trader will be imposed the income tax and the sole proprietor tax, as this type of business is not considered a legal entity. The sole proprietorship will also be subject to the residential tax in Japan.

It is advisable to hire a local accountant to handle the finances and the relations with the tax authorities.

Advantages of the sole trader in Japan

The sole proprietorship can be set up as a small business, therefore the risks of bankruptcy are rather low. Once the business expands, the sole trader can be changed into a limited liability company very easy.

 
If you need to know more about starting a sole proprietorship in Japan, we invite you to get in touch with our friendly company registration consultants in Japan.
 

Meet us in Tokyo

Call us now at +81-3-6264-8446 to set up an appointment with our company formation agents in Tokyo, Japan. Alternatively you can incorporate your company without traveling to Japan.

As a Nippashi Office 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.

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