Business Start-up

Today, more and more foreign companies are seeking to establish business bases of operation in Japan. However, the procedures for starting a business in Japan are often complicated and extremely time consuming for those who are not accustomed to Japanese laws and regulations. To establish a legitimate business base, professional services from experienced specialists are necessary.

Hoshino's professional team, specialized in corporate legal affairs, offers strong support for foreign companies entering Japan. We also provide other services in addition to corporate registration, including the application for residential status of company officers or employees and opening corporate bank accounts. If you are seeking professional assistance with your business start-up procedures in Japan, just contact Hoshino.

Consultation in English is available.

Type of Business Base in Japan

Mainly there are three types of business base that foreign companies can set up for their business start-up in Japan.

The Representative Office is typically created as a preliminary to a Branch Office or Subsidiary to perform market research and business feasibility studies in Japan.

A Representative Office is not permitted to engage in sales activities.

The Representative Office does not require any registration paperwork and as such can be established quickly and at low cost, however as is it prohibited from engaging in business activities, if sales activities are being considered, it is necessary to setup either a Branch Office or Subsidiary.

Finally, since bank accounts cannot be opened under the name of a Representative Office, only a personal account under the name of a representative is permitted.

• 1．Representative office

The Branch Office is one type of business entity that is available as an option for foreign companies seeking to engage in business activities in Japan.

Through the establishment of a base of operation, a representative for the Japanese branch, and official registration of company matters, sales activities become possible.

In comparison with the other type of business entity permitting sales activities, the subsididary company, there is no requirement for a Branch office to hold an annual shareholders meeting or publically disclose financial statements, and there is the advantage that startup losses can be offset with the parent company's profits and there is no taxation on repatriated funds.

On the other hand however, interest on amounts borrowed from the parent company cannot be included in expenses and the financial statements of the parent company must also be submitted at time of tax filing.

• 2．Branch

The Subsidiary is the other form of business entity permitting sales activities for foreign companies in Japan. This option is the most appropriate for companies seeking to establish a serious business presence in Japan.

Compared to the Branch Office, the Subsidiary offers the advantage that interest on amounts borrowed from the parent company can be included in expenses and that there is no need to submit the financial statements of the parent company at time of income tax filing.

The disadvantages include the inability to offset startup losses with the parent company's profits, that repatriated dividends are taxed at source, the requirement to convene an annual shareholders meeting, and the requirement under Corporate Law to make company financial statements available for public viewing.

• 3．Subsidiary (Japanese corporation)

1．Representative Office

Japanese Corporate Law does not treat representative offices as legitimate business establishments. As a general rule, you can freely set up a representative office without registration.
However, depending on the business type, you may be requested to make a notification of establishing a representative office to the administrative authorities. For example, if a foreign bank tries to have a representative office in Japan, it must make a notification to the Prime Minister. (Banking Law Article 52)

2．Branch

For a foreign company, having a Japanese branch means having a business office in Japan. Unlike establishing a Japanese corporation, setting up a branch is relatively simple and low cost.

Procedures for Setting up a Branch

1. Examination of the overseas company	Required to follow the registration procedures of the closest equivalent Japanese business type to your business. To determine the closest equivalent Japanese business type, your company's documents including articles of incorporation, establishment certificate and registration certificate are examined.
2. Make an outline of the branch	Decide representative in Japan (branch representative), office location, publication method, etc. At least one representative must be a resident of Japan.
3．Confirm if prior notification is required by Foreign Exchange Law	When a foreign company establishes a branch in Japan, under the Foreign Exchange Law prior notification and/or reporting to the Minister of Finance through the Bank of Japan is required. If prior reporting is needed, this will need to be completed before branch establishment.
4. Make an affidavit for setting the branch	Need to submit some documents to prove the registered matters. The authorities in your home country must certify the documents. You can use an affidavit certified by the consulate general at the embassy of your country in Japan.
5. Set up an office	Set up a business office. Actual business may not be conducted until registration is completed.
6. Apply for registration	Registration takes about 1 to 2 weeks to complete.
7. Completion of the branch setting procedure	When performed properly, it takes approximately one month from the start to the completion.

Necessary Documents for Setting up a Branch

Generally, the following documents are required when setting up a branch in Japan. Hoshino prepares all the documents except those that need to be prepared by the client.

• A) Decision to set up a branch in Japan, such as minutes made by the operating officers of your company (overseas).
• B) Articles of incorporation, establishment certificate and business registration certificate of your company (overseas).
• C) An affidavit regarding the outline of your company (overseas) and branch in Japan.
• D) Letter of proxy for registration

* Necessary documents described above may vary depending on the laws and regulations of the home country where foreign companies exist. Please contact us for details.

3. Establishment of a Subsidiary (a Japanese corporation)

There are two types of companies that can be incorporated, a joint stock company or a limited liability company. The procedures for establishing a subsidiary differ depending on which type you select, however in general the steps needed to set up a limited liability company are simpler than compared to those of a joint stock company.

Procedures for Incorporation

	Joint Stock Company	Limited Liability Company
1.Decide the outline of a company to be established	Decide the basic matters such as company name, business objectives, head office location, officers, accounting period, etc.	Decide the basic matters such as company name, business objectives, head office location, corporate members, accounting period, etc. Corporate members are capital investors. Only capital investors can be corporate members of limited liability companies. At least one of the corporate members who represent a limited liability company must be a resident of Japan.
2.Set up an office (company's headquarters)	Set up an office to be used as a base during the procedures and later as the company's headquarter. Actual business may not be conducted until registration is completed.	Set up an office to be used as a base during the procedures and later as the company's headquarter. Actual business may not be conducted until registration is completed.
3.Confirm if prior notification is required by Foreign Exchange Law	When a foreign company establishes a branch in Japan, under the Foreign Exchange Law prior notification and/or reporting to the Minister of Finance through the Bank of Japan is required. If prior reporting is needed, this will need to be completed before branch establishment.	Once the business outline is determined, an article of incorporation can be created. Fundamental matters regarding the company are stipulated in the article. Article contents of a limited liability company is relatively simple compared to those of a joint stock company.
4.Make an affidavit regarding the business outline of the foreign company	Documents from the foreign company (capital investor) such as establishment certificate, registration certificate and signature certificate are required. Preparation of these documents early on in the procedures is recommended. An affidavit is commonly used as a substitute for these documents.	Documents from the foreign company (capital investor) such as establishment certificate, registration certificate and signature certificate are required. Preparation of these documents early on in the procedures is recommended. An affidavit is commonly used as a substitute for these documents.
5.Make articles of incorporation	Once the business outline is determined, the articles of incorporation can be created. Fundamental matters regarding the company are stipulated in the article.	Once the business outline is determined, the articles of incorporation can be created. Fundamental matters regarding the company are stipulated in the article. The article contents of a limited liability company are relatively simple compared to those of a joint stock company.
6.Have a Japanese notary public certify the article of incorporation	Need to have the article of incorporation notarized by a notary public who has jurisdiction over the prefecture where the headquarter is located.
7.Transfer of investments to bank accounts	Transfer investment money to founder's bank account. The account must be at a Japanese bank or a Japanese branch of a foreign bank.	Transfer investment money to corporate member's bank account. The account must be at a Japanese bank or a Japanese branch of a foreign bank.
8.Elect officers	Upon confirming the capital payment, elect president, executive directors and officers in accordance with the articles. At least one of representing directors must be a resident of Japan.
9.Apply for registration	Registration takes about 1 to 2 weeks to complete.	Registration takes about 1 to 2 weeks to complete.
10.Completion of incorporation procedure	When performed properly, it takes approximately one month from the start to the completion.	When performed properly, it takes approximately one month from the start to the completion.

Necessary Documents for Incorporation

Generally, the following documents are required for the incorporation procedures. Hoshino prepares all the documents except the ones need to be prepared by clients.

* Necessary documents described above may vary depending on the laws and regulations of the home country where foreign companies exist. For detail, please contact us. Please contact us for details.

Note: The determination of the necessity of prior notification or reporting is typicaly based on the investors’ citizenship and the type business activities being contemplated. Currently, almost all direct domestic investments only require only reporting. Businesses requiring prior notification are typically limited to a certain class of activties including the manufacturing of weapons, aircraft, and parts used in conventional or weapons of mass destruction.