Background Information
Starting a business in Japan can be an overwhelming task and a daunting concept, as the economy is one of the most rigidly regulated in the world. As such, foreign investors must thoroughly understand the specifics of doing business in Japan, beginning with the country’s corporate and tax laws in relation to establishing a business.
The best way to begin is to research the types of companies that are available and determine the structure of the business. This will determine the licenses that are required, the amount of capital required, as well as the types of government approvals and certificates needed.
Forming a company
For foreign investors, the two most common entities for setting up a business in Japan are: (1) a branch office and (2) a Japanese corporation. Forming either of these two structures can be a complex and time-consuming process, so the investor should consider engaging a local accountant, lawyer, or consultant to advise on the process.
A branch office is a foreign company’s presence within Japan. A branch office is usually set up to carry out certain business activities, such as engaging in sales activities, marketing, and making deals. The foreign company must have a minimum of two shareholders and the appointed representative director of the branch office should be a resident of Japan.
On the other hand, the Japanese corporation is a common structure for domestic and foreign investors. It consists of a board of directors, a representative director, and a variety of administrative staff. It is important to note that establishing a corporation in Japan carries certain requirements, such as the base capital and minimum staff requirement.
Alternative Business Structures
In addition to the branch office and Japanese corporation, there are other alternative business structures. These include: (1) a corporation with a foreign headquarters, (2) a representative office, and (3) a subsidiary.
A corporation with a foreign headquarters requires a minimum of two shareholders and involves both a foreign headquarters and a Japanese office. The company is registered in Japan, although the headquarters remains in the country of origin.
A representative office is limited in its activities and can only be used to conduct research and surveys, facilitate business negotiations, and provide basic administrative support.
A subsidiary is a distinct corporation with its own capital and board of directors. It is owned by the parent company, which holds a majority of the company’s shares. Although a subsidiary provides more operational control than a branch office, it also requires a significant amount of capital to establish.
Taxes and Laws
Foreign investors must also be aware of the complexity of tax and legal requirements in Japan. Companies are subject to both national and local taxes, and there are different categories of taxes depending on the type of business.
Companies must also comply with a wide range of Japanese laws and regulations, including environmental, labour, accounting, and anti-trust laws. Foreign companies must monitor and comply with these regulations, which can be difficult due to the unique cultural and legal context of Japan.
Knowledgeable Advisors
Engaging a knowledgeable advisor or firm can make navigating Japan’s regulations, laws, and taxes less overwhelming. Looking for a local accountant, lawyer, or consultant experienced with the process and regulations can help businesses setting up successfully, as they can provide invaluable insight and expertise into the process and provide access to government services.
Work Visas and Immigration
Securing the required visas and permits can be a difficult process for foreign business owners. Obtaining a work visa for the owner is required and can be obtained from their embassy in Japan. The visa needs to be renewed if the foreigner’s stay exceeds 90 days, and a work permit must be acquired as well. The work permit also needs to be renewed, and the fees will vary depending on the type of permit.
Banking and Funding
Foreign investors will also need to have funding secured in order to establish a business in Japan. Opening a bank account, obtaining the appropriate banking account type, and understanding the foreign exchange laws are all important steps in the process. Additionally, it is important to familiarize oneself with the laws, regulations, and requirements regarding attracting additional funding and investments.
Business Plans
Creating a business plan is an essential step in the process of establishing a business. It should include a market analysis of the industry, competitor analysis, strategy recommendations, financial plans, and other related details. The plan should also include a detailed breakdown of the owners’ roles and responsibilities.
Cultural Considerations
Finally, an understanding of Japan’s culture and etiquette should be taken into consideration. Japanese culture places a great emphasis on respect, responsibility, and relationships. As such, the use of appropriate language and formal attire is important. Additionally, it is important to take the time to build relationships with people in order to success in the long term.
