Q. I want to set up my own company in Japan. Can you tell me what I have to do?
A. Basically, if you want to set up a company in Japan, you can choose from one of several different kinds of corporation. These include "gomei-gaisha" or partnership companies, "yugen-gaisha" or limited liability companies, and "kabushiki-gaisha" or joint-stock companies.

Gomeigaihsa - 合名会社　Partnership Company

A gomei-gaisha can be established very simply. There must be two or more partners (who must be individuals and not legal entities), and the establishment of the corporation is simply registered at the local legal affairs bureau. The fees for consultation and registration process will be around 270,000 Yen. However, be aware that this kind of company works on the basis of "unlimited liability", which means that unlimited responsibility lies with the partners involved. Hence, if something goes wrong and the company's assets are not enough to cover its liabilities, the partners will be held personally responsible for settling any debts.

Yugen-gaisha - 有限会社 - Limited Liability Company

If you are planning to start a relatively small business, a limited liability company may be the best option. The capital required for the establishment of a yugen-gaisha has an exemption period of five years, after which 3 million Yen in capital is required. The number of employees or capital subscribers cannot exceed 50. Procedures for setting up the company are relatively simple, and the legal requirements regarding the number of directors and auditors are not so strict, which makes this kind of company a suitable option for most small and medium sized business operations. The fees for consultation and registration process will be around 400,000 Yen.

 
Kabushiki-gaisha - 株式会社 - Joint-stock Company

If you wish to involve more people in your business, you can set up a joint-stock company. This kind of company limits the liability for investors and allows the participation of larger numbers of people, who buy stocks in the corporation. The capital required for the establishment for this type of company has an exemption period of five years, after which 10 million Yen in capital is required. The procedures for setting up are somewhat more lengthy and complicated than those described for the other kinds of company listed above. Before you can start business, the incorporation must be registered by the company's director (or a proxy) with the legal affairs bureau.

To establish such a company, sponsors must prepare articles of incorporation for the company, which should then be authorized by a public notary. The sponsors then should transfer their paid-up stock money to a subscription handling bank, and, if they plan to involve other people in the venture, they should start soliciting other stockholders at this stage. Sponsors must be resident in Japan, and as the procedures are quite complicated, it might be a good idea to ask a lawyer or an accountant to assume this role. In the early stages, the sponsors must themselves be shareholders in the company, but their shares can be transferred after the incorporation process has been completed.

What kind of visa do I need?
To establish a business in Japan you will need to obtain an "Investor/Business Manager" visa (toshi-keiei) or hold, permanent residents status (eijusha), long term resident status (teigusha), a "Spouse or Child of Japanese National" visa (haigusha) or a "Spouse or Child of Permanent Resident" visa (eijusha no haigusha).

For detailed information about these visas, please consult the Ministry of Foreign Affairs (MOFA) website at www.mofa.go.jp/j_info/visit/visa/

Do I need a special permit?
Depending on the type of business you decide to establish you will require one or several permits. Since the most common businesses foreigners decide to establish are restaurants, language schools and export-import trading companies, only permits relating to them are shown below.

Restaurant - Will require a permit from your local public health center (hoken-jo) and also from the Public Safety Commission (koan-inkai) managed by the police if you intend to operate after 22:00 or serve alcohol.
Language School - No permit required.
Exporting & Importing - Although you require no permit for this type of business you will need to pay the necessary customs tariffs for Japan and perhaps the country you are exporting to. Some countries have very strict customs and may not allow some items to be brought in or sold in their country. Make sure you thoroughly check with the appropriate authorities in all countries involved before commencing this type of business.

Can I do the paperwork myself?

Yes, although paperwork can be very complicated and you may prefer to hire a public notary (gyosei-shoshi) to do the paperwork for you. They will also submit the necessary documents to the appropriate authorities on your behalf.

What kind of taxes will I be required to pay?

Individuals who start their own business are required to file a "Notification of Commencement of Business" (kojin kigyo no kaigyo todokeidesho or kojin jigyo kaishi shinkokusho) to their national tax office (zeimusho) within one month of the business' initiation and also to their local tax office (chiho zeimusho) within 15 days.

You will be required to pay income tax (shotoku-zei), sole proprietor tax (kojin jigyo-zei) and residential tax (jumin-zei). Be sure to keep records of revenues and expenses as well as bills and receipts issued or received in relation to your business. If you decide to set up your own company you will be required to submit an annual tax return to your local tax office.

Things to consider when employing staff.

When employing full-time staff there are a number of things to consider. As well as the usual contracts you may need to provide benefits such as health insurance. In Japan it is compulsory for all workers to be covered by health insurance and to be paying into their pension insurance fund. Generally the worker pays for half of their health insurance and pension insurance while the company substitutes the remaining half. Please see the list below for who to contact for more information.
Please note that the criteria and information in this article is for foreigners wishing to establish a business in Japan. If you are looking to establish a business with a Japanese person the criteria will differ. These notes are just a rough guide for those who are considering starting their own company, but if you plan to go ahead with the venture, please be sure to get more detailed information from the appropriate authorities.