【Case Study】Procedure for a foreigner to start a business in Japan (incorporation of a company)

1. Introduction

When applying for a business manager visa, many people incorporate a company. Nevertheless, most people do not know where to start when actually trying to incorporate a company. Therefore, in this article, we would like to focus on how a foreigner establishes a company in Japan.

2. Type of companies

Many of you may think that a company is the same as a stock company. In fact, there are four types of companies: stock company, limited liability company, general partnership company, and limited partnership company.

As for general partnership companies and limited partnership companies, however, only few companies have been newly established as these companies are not so beneficial to the incorporators.

Therefore, in the following section, we will explain the differences between a stock company and a limited liability company, which are often selected as companies to be incorporated at the time of application for business manager visas.

3. Differences between a stock company and a limited liability company

A stock company is suitable for cases where incorporators wish to grow their business by receiving investment from many investors. On the other hand, a limited liability company is suitable for cases where relatively few incorporators wish to invest for and manage their business on their own.

We recommend you to establish a limited liability company if you would like to reduce the cost of incorporation and maintenance of your company.

The registration and license tax required to be paid at the time of incorporation of a limited liability company is 60,000 yen at the minimum, which is inexpensive, compared to that of a stock company (150,000 yen). In addition, at the time of incorporation of a limited liability company, the certification of the articles of incorporation by a notary public is not required (, which costs 50,000 yen). Furthermore, limited liability companies are not obliged to publish any public notice of financial results, so any fees for public notices will not incurred after incorporation. On the other hand, limited liability companies were newly created in 2006, and thus they are less known and less socially recognized than stock companies, which is one of its downsides.

Both stock companies and limited liability companies do not have any restriction on nature of business, and concerning corporate tax, consumption tax, social insurance, etc., there are no difference between such 2 types of companies.

4. Flow of procedure for incorporation

What steps do you need to take to incorporate a company? We will explain the general flow of the incorporation procedure.

1) Decision on basic matters and preparation of articles of incorporation

A person who is to incorporate a company is called an incorporator. There can be one or more incorporators for each company to be incorporated. Incorporators decide the basic matters of the company to be incorporated, such as the form of the company, the trade name of the company, the location of the head office, the purpose of the business, and the amount of stated capital. Then, based on the matters decided by the incorporators, the articles of incorporation (i.e. the fundamental rules of the company) will be prepared.

2) Certification of the articles of incorporation by a notary public

When establishing a stock company, it is necessary to have a notary public certify the articles of incorporation created in 1) above. When establishing a limited liability company, on the other hand, such certification is not required.

3) Payment of the amount to be contributed

Money is essential to run a company. Each contributor pays the amount to be contributed to the transfer account for contribution payment as specified in the articles of incorporation.

However, many foreigners face a problem here.

Transfer accounts for contribution payment are limited to Japanese accounts created in the name of an incorporator (including not only Japanese financial institutions but also branches of overseas financial institutions located in Japan). Many of financial institutions require an address in Japan for a person to open an account. To have an address in Japan, foreigners must have been granted a period of stay for more than 3 months, and so-called tourist visas are not applicable. In other words, even if foreigners come to Japan with a tourist visa, they cannot open a bank account, so most of such foreigners do not have any bank account in Japan, except for those who have been living or have lived in Japan before.

Then, what should foreigners do when they wish to incorporate a company in Japan?

One way is to find a cooperator who can become an incorporator with the foreigner and has an account in Japan, into which the foreigner will pay contribution into. Each incorporator must bear a part of the contribution under Japanese rule, so in this case, at least one share must be subscribed by the cooperator.

Then, if a foreigner does not have any account in Japan and knows no one who can cooperate as an incorporator, does he/she have to give up incorporation of a company?

The answer is NO. Under the current system, it is possible to pay in capital by the following methods.

a) If the director at incorporation or the representative director at incorporation has a Japanese bank account, payment can be made to the bank account.
b) If all of the incorporators, directors at incorporation, and representative directors at incorporation (in the case of a limited liability company, partners) live overseas, payment can be made to the account of a third party who has been delegated.

In addition, for foreigners who wish to come to Japan to prepare for business before incorporation, Japan offers a business manager visa with a period of stay for 4 months. In this case, foreigners apply at the immigration office, indicating what kind of business they are planning, and then come to Japan with a business manager visa and obtain an address in Japan to open a bank account, which will be used as a transfer account for contribution payment.

4) Registration

With all the necessary documents, an incorporator must go to the Regional Legal Affairs Bureau that has jurisdiction over the location of the head office (i.e. the address of the company) to apply for registration of the incorporation of his/her company. It takes about 1 week to 10 days to complete the registration. Upon such registration, the incorporation of the company is completed.

5. Summary

In order to decide which kind of company to form, from various options, you will need to consider what kind of business you would like to engage in, what you need for such business, and pros and cons of each options.

Mr. A, in the aforementioned case, wanted to incorporate a company in Japan as a purchasing base for his import and sales company operated in China. Mr. A did not have much desire to expand his business or to go public in Japan in the future.

On the other hand, Mr. A wanted to reduce the initial costs and the maintenance costs after the incorporation as much as possible, which is why we recommended him to incorporate a limited liability company. In addition, his friend who lives in Japan as a permanent resident was going to cooperate with him for the incorporation, so he used that person’s account as the transfer account for contribution payment.

Mr. A collected and prepared the necessary documents to incorporate a company, and then managed to obtain a business manager visa and started working as a business manager in Japan. Now, he’s been very busy every day, traveling between Japan and China.

To obtain a business manager visa, you must start by incorporating a company. Please start preparation with correct knowledge so that you will not get stuck at the starting point.