l Representative Office

l Branch Office (for existing businesses with an overseas head office)

l Kabushiki Kaisha / Godo Kaisha

 

The simplest form of entity is a Representative Office, but you would be restricted to marketing and research activity only – no sales activity is permitted and it is not possible to open a bank account or lease real estate in Japan in its own name. 

 

For corporations based abroad, a Branch Office enables an overseas company to establish in Japan.  There must be at least one representative who is resident (with an address) in Japan and it takes approximately one month to set up. 

A branch office does not have independent legal corporate status, and is considered to be part of the foreign company.  A Japanese branch office, however, may open bank accounts and lease real estate in its own name.  The branch office’s tax will be calculated only for the operations carried out in Japan however the entire company will be liable.

 

Creating a Japanese branch office is often more convenient and less costly than establishing an official Japanese subsidiary.  However, Japanese municipal tax depends on the capital stock of the company's head office which means that larger companies will have to pay higher municipal tax.  In such cases, it may be worthwhile creating a small-scale Japanese subsidiary to reduce such tax liability.

 

Credits or debts generated by a branch-office are payable by the company's head office. Therefore, if you wish to limit the risks surrounding your business in Japan, it is advisable to create a Japanese subsidiary (see below). By doing so, the parent company is able to watch and control the capital invested.

 

The next option would be to establish a Kabushiki Kaisha (joint-stock company – run by shareholders with limited liability) which is a separate legal entity and requires 1 to 3 directors as a minimum (one of whom must be resident in Japan) and an office address.  It projects a sense of confidence and commitment to the Japanese marketplace and tends to be looked upon favorably by lenders, investors, landlords and clients.  There are, however, more stringent compliance and regulatory issues involved.