Things to be Considered upon Launching a Business in Japan

Jason BallByJason Ball

When a foreign company and/or a foreign entrepreneur consider of launching a business in Japan there should be several factors to take into account in order to draw up an appropriate plan and get well prepared for business startup. I have published a comprehensive report in the website of EU-Japan Centre for Industrial Cooperation describing such factors in respect to legal matters concerned such as types of corporate entity (i.e. LLC, stock company etc.), visa applications and business licenses & permissions upon necessity so that I would recommend you to refer that report up there if you are interested in. Accordingly, I would herewith describe other factors to be taken into account, which are not of very legal things as such but things indirectly relevant to legal matters and also in view of actual business operations in the future such as initial capital amounts, bank accounts, office space, personnel, organization of company and others.

1.Amounts of Initial Capital

When a foreign company and/or a foreign entrepreneur establishes a company in Japan the incorporator(s) needs to invest some capital (generally in cash) into the company as an initial capital. The Companies Act of Japan stipulates that a company, either a Goudou-Kaisya (LLC) and Kabushiki-Kaisya (stock company), can be established with an initial capital of only JPY 1 or above no matter the investor(s) is a Japanese national or foreigners. However, I have recommended my clients to invest some reasonable and sufficient amounts of capital money into their companies from the beginning due to the following reasons.

  • Once a company is set up there shall be some expenses generated upon actual business operations such as ones for computers, phones, travels, office rents and others. If the capital was too small such as JPY one or even 10,000 it can hardly cover such actual expenses but the company cannot help relying on loans from the beginning.
  • If director(s) was a foreigner the one needs to newly obtain or change visa to investor & business management visa (investor visa) unless having a spousal visa or permanent residency in principle. The conditions to be eligible for an investor visa the company needs to have employed fulltime workers 2 or above, or the foreign director otherwise needs to invest JPY 5 mio. or above into the business in person. In case of the latter the foreign director should had better invested JPY 5 mio. or above as the initial capital when establishing the company for a sake of the investor visa application.
  • In case the type of business operated by the company shall be in need to obtain relevant business license & permission there may be some restrictions upon minimum amounts of the assets of the company such as license & permission for human resource agent business, real estate business etc. for example. Therefore, it is highly recommended to check in advance whether the business concerned is in need for business license & permission and there are such financial conditions as mandatory, or not.
  • Last but not least, when commencing new B-to-B business relations in Japan the parties involved would generally check corporate profile of the counter party by commercial registrations. If you saw only JPY 1 capital in the registry file do you feel safe to make business transactions with such a poor company?

2. Bank Accounts

When establishing a company in Japan its each incorporator concerned need to remit investment moneys into a personal bank account of either of those incorporators in order to verify the total amount of the initial capital has been invested ready to get the company registered. Meanwhile, banks in Japan would not let those non-residents in Japan open a personal bank account due to security reasons. As far as foreigners are concerned holders of Japanese visa (except a temporary visitor visa and permanent resident (PR) can be deemed as residents. In other words, at least one of incorporators need to be a Japanese or a foreigner who has a Japanese visa or PR.
Once a company has been established it can open its corporate bank account having transferred the capital money from the incorporator’s bank account to the corporate bank account. Besides, banks in Japan may not let a company open a corporate bank account at other blanches but at a blanch in the same area of the company’s address.

3. Office Space

When registering a company in Japan, whichever GK (Goudou-Kaisya) or KK (Kabushiki-Kaisya), its corporate address can be freely determined by the incorporator(s) concerned such as an address of a whole building, a unit office room in a building, a residence, an apartment room or using a virtual office service provider, etc. Also, a company can freely set its facilities for actual business operations such as blanches, shops, restaurants, factories etc., too, other than its registered corporate address.
However, there are some factors an incorporator(s) should take into accounts upon determining corporate address as follows.

  • As previously mentioned, if director(s) was a foreigner the one needs to newly obtain or change visa to an investor visa unless having a spousal visa or PR in principle. One of those eligibility conditions is, that the office space must be clearly separated from the applicant’s residential space such as buildings in different locations or a clearly separated room for office and residence even in a same apartment. In other words, you cannot make your bed room as your company’s office in case you need to obtain an investor visa.
  • In case the type of business operated by the company shall be in need to obtain relevant business license & permission there may be some restrictions upon its office space and/or facilities such as room size, layouts and equipment, etc., such as license & permission for human resource agent business, forwarding agents etc., for example. Therefore, it is highly recommended to check in advance whether the business concerned is in need for business license & permission and there are such conditions for office space and/or facility as mandatory, or not.

Needless to say, there should be other factors to consider about office space in terms of corporate image and convenience to customers & other stakeholders, costs and other factors upon actual business operations.

Conclusion

As described in these articles from the item 1 through the item 5, upon considering of a business start-up plan in Japan there are several factors to be considered in advance in regard to requirements by those Japanese laws & statutes concerned as mandatory in addition to ones from actual needs and strategic points of view for smooth and successful business stat-up and operations. Such factors as legal mandatory upon business stat-up should be considered upon structures of the company such as an amount of initial capital, bank accounts, office space, personnel and others.
However, upon my experiences so far in helping foreign companies and/or entrepreneurs to launch businesses in Japan meeting all legal mandatory and needs of actual business operations may be sort of complicated as to be carefully considered upon drawing up and optimizing a business-start-up plan. Accordingly, I would recommend those foreign companies and/or entrepreneurs to consult with competent and experienced Japanese lawyers in order to draw up a good business startup plan and to take appropriate actions to start a business in Japan.

This Post was written by Michio Matsuzaki: Administrative Lawyer of Japan / Legal Expert at The EU-Japan Centre for Industrial Cooperation