< practical guide for foreign managers > How Do You Start a Business in Japan?

The financial market in Japan is large and stable, yet, it has potential for further expansion and there are many business opportunities in the asset management world. Thankfully, the earliest series of Investment Japan “Guide to Japanese Asset Management Market for Foreign Managers” is still one of the most frequently read articles on our site. This leads us to start a new series.
In this first article of the new series, we would like to introduce some tips on how to actually start a business in Japan by answering some expected questions for foreign asset managers.

Q.	What is the most appropriate way to start up a business in Japan?
A.	Generally, there are three possible ways: - Establish a subsidiary company - Open a branch office - Open a representative office

What is the most appropriate way to start up a business in Japan?

Generally, there are three possible ways:

- Establish a subsidiary company

- Open a branch office

- Open a representative office

Q.	What are the features of subsidiary companies?
A.	Establishing a subsidiary company is the most common way for foreign companies to start a business in Japan. Be it a joint-stock company (‘kabushiki-gaisha’) or a limited liability company (‘godo-gaisha’) or other, you will need to register the company in accordance with the law. Joint-stock companies and limited liability companies are the two most common corporate forms in Japan. There is no difference between the two in that the equity holders owe liability due to the amount of their contribution. Establishing a joint-stock corporation costs more but because joint-stock companies are more orthodox, thus perceived to be more credible, it could help you carry your business smoothly. On the other hand, limited liability companies generally have a more flexible articles of association. There is no regulation of law related to annual financial statement finalization. So, they can stipulate necessary procedures such as what documents they need to prepare and how to get their financial reports approved. They don’t have to publicize their financial statements either. These subsidiaries in Japan are separate entities from their corporation in the primary country of operation. So, the head office will only owe investor liability to debts and credits raised by their Japanese subsidiary under Japanese law.

What are the features of subsidiary companies?

Establishing a subsidiary company is the most common way for foreign companies to start a business in Japan. Be it a joint-stock company (‘kabushiki-gaisha’) or a limited liability company (‘godo-gaisha’) or other, you will need to register the company in accordance with the law.

Joint-stock companies and limited liability companies are the two most common corporate forms in Japan. There is no difference between the two in that the equity holders owe liability due to the amount of their contribution. Establishing a joint-stock corporation costs more but because joint-stock companies are more orthodox, thus perceived to be more credible, it could help you carry your business smoothly.

On the other hand, limited liability companies generally have a more flexible articles of association. There is no regulation of law related to annual financial statement finalization. So, they can stipulate necessary procedures such as what documents they need to prepare and how to get their financial reports approved. They don’t have to publicize their financial statements either.

These subsidiaries in Japan are separate entities from their corporation in the primary country of operation. So, the head office will only owe investor liability to debts and credits raised by their Japanese subsidiary under Japanese law.

Q.	What are the features of branch offices?
A.	Establishing a branch office in Japan is the simplest way for a foreign company to do business in Japan. You can open bank accounts, you can rent real estate, so all you need to do to start a business is to choose a representative and get registered. But branch offices are regarded merely as a foothold of foreign corporations. They are not a legal entity, so, they are not expected to make any decisions of their own. Which means all liability within the branch’s business activity ultimately belongs to its corporate headquarter in whichever country they are based.

What are the features of branch offices?

Establishing a branch office in Japan is the simplest way for a foreign company to do business in Japan.

You can open bank accounts, you can rent real estate, so all you need to do to start a business is to choose a representative and get registered.

But branch offices are regarded merely as a foothold of foreign corporations. They are not a legal entity, so, they are not expected to make any decisions of their own. Which means all liability within the branch’s business activity ultimately belongs to its corporate headquarter in whichever country they are based.

Q.	What are the features of representative offices?
A.	Foreign corporations can open a representative office as an operation base or as a preparatory step before they start full-scale sales activities in Japan. A representative can carry out preparatory and supplemental tasks such as collecting information, market research, advertising, but direct sales activities are not allowed. They can not open bank accounts nor rent real estate, which means that either their head office or the representative himself/herself must act as an agent if they want to do so.

What are the features of representative offices?

Foreign corporations can open a representative office as an operation base or as a preparatory step before they start full-scale sales activities in Japan. A representative can carry out preparatory and supplemental tasks such as collecting information, market research, advertising, but direct sales activities are not allowed.

They can not open bank accounts nor rent real estate, which means that either their head office or the representative himself/herself must act as an agent if they want to do so.

Q.	How long does it take to start a business in Japan?
A.	The time required varies depending on condition, but normally it takes about one to two months for the basic office information to be confirmed and registration completed. It takes more time to establish a subsidiary company than to just open a branch office as you will need to prepare capital and official documents such as a seal registration certificate. No registration is required to open a representative office.

How long does it take to start a business in Japan?

The time required varies depending on condition, but normally it takes about one to two months for the basic office information to be confirmed and registration completed. It takes more time to establish a subsidiary company than to just open a branch office as you will need to prepare capital and official documents such as a seal registration certificate.

No registration is required to open a representative office.

Q.	Where can you get support when starting up business in Japan?
A.	You can seek support from various public administrations in Japan. Here are some services that are highly helpful. Tokyo One-Stop Business Establishment Center (TOSBEC) https://www.tosbec.com/english TOSBEC is a consultation service co-run by Government of Japan and Tokyo Metropolitan Government. You can establish a corporation and complete administrative procedures at “one-stop”. All consultation service is provided free of charge and in multiple language.　There are three offices in Tokyo. Business Development Center Tokyo https://www.senryaku.metro.tokyo.lg.jp/bdc_tokyo/english/ This is a consultation center located inside TOSBEC, run by the Tokyo Metropolitan Government. They provide not only business support but also useful daily information for foreigners living in Tokyo. Japan External Trade Organization (JETRO) - Invest Japan Promotion Division https://www.jetro.go.jp/en/invest/ JETRO is a government-related organization and their Invest Japan campaign started in 2003. They have many branch offices worldwide for easy access. There are six offices in the US.

Where can you get support when starting up business in Japan?

You can seek support from various public administrations in Japan. Here are some services that are highly helpful.

Tokyo One-Stop Business Establishment Center (TOSBEC)

https://www.tosbec.com/english

TOSBEC is a consultation service co-run by Government of Japan and Tokyo Metropolitan Government. You can establish a corporation and complete administrative procedures at “one-stop”. All consultation service is provided free of charge and in multiple language.　There are three offices in Tokyo.

Business Development Center Tokyo

https://www.senryaku.metro.tokyo.lg.jp/bdc_tokyo/english/

This is a consultation center located inside TOSBEC, run by the Tokyo Metropolitan Government. They provide not only business support but also useful daily information for foreigners living in Tokyo.

Japan External Trade Organization (JETRO) - Invest Japan Promotion Division

https://www.jetro.go.jp/en/invest/

JETRO is a government-related organization and their Invest Japan campaign started in 2003. They have many branch offices worldwide for easy access. There are six offices in the US.

< Ryo Fukao >