10 Tips to Create a Corporation in Japan Without Failure

‍“Please tell me how to create a corporation in Japan”

This is a common question from overseas entrepreneurs interested in expanding into Japan. We've been waiting for an expert to answer this question, and finally, ZIPANG has brought in an expert to explain how to set up a corporation in Japan.

In order to do business in Japan, the first thing you need to do is to create a corporation. Partners in Japan often ask us if the foreign founders establish a corporation in Japan. However, when it comes to incorporating a business in Japan, you need to apply for a management and administrative visa, and go through various related organizations. It takes a lot of time to rent an office, open a corporate account. This process is complicated, so it's difficult to find out on your own.

In this article, I'm going to share with you a roadmap of how to start a corporation in Japan and how other founders actually went about it through a real-life example. Kim Sung-hyun, the engineer at KAERU LLC, will explain it in a simple interview format.

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Q. Hi, Sunghyun. First, could you introduce yourself to our readers?

- Hello, I'm Sunghyun Kim, a software engineer (developer) and data architect working full-time in Japan.

Recently, I established a corporation with Japanese business strategists, doctors, and lawyers I met in Japan, and we are researching and developing preventive healthcare business models and relevant AI solutions. I have experience in establishing a corporation in Korea and then failing after doing business :)

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Q. Incorporated in Korea and Japan. You've done business in Korea and Japan in various ways. When did you first start working in Japan?

- I joined SoftBank in 2019 at the Japan Job Fair at COEX, after my business in Korea failed and I was looking for a different direction. I worked as a software engineer and PMO for a project to migrate data-related systems to the cloud in the Data Warehouse department across SoftBank.

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Q. So you joined SoftBank in 2019. How did you come to build your recently established Japanese office?

- Apart from my full-time job, I often participate in open innovation events in Japan on weekends and other free time. I wanted to create a meaningful business with Japanese people I met during these activities, so I started discussing and preparing for it around the end of 2023, and in January 2024, I established KAERU LLC (かえる合同会社).

However, it is not registered yet. I plan to coordinate registration separately after I obtain permanent residency in Japan.

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Q. So, Mr. Sunghyun. Based on the Korean (foreign) business owners who want to set up a corporation in Japan, what kind of preparation should they do first?

-I suggest that an overview of the types of corporations (joint stock company, limited company, etc.) and a clear understanding of the distinction between legal and tax matters (such as the difference between the circumstances under which a full certificate of incorporation and a business license are required in Korea) will be of great help in speeding up the process of incorporation.

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Q. Is it important to network with local contacts for questions about incorporation?

-Of course. It is recommended that you make connections or recruit individuals, corporations, or permanent residents with Japanese nationality who can serve as officers of a Japanese corporation in advance.

In order to establish a corporation or business entity composed entirely of foreigners, the person who will serve as an executive officer must obtain a business management visa. To obtain a business management visa, you must meet the requirements of the Immigration Bureau of Japan, including :

(1) securing an office or having a business in Japan

(2) capital or recruitment requirements

(3) proving the manager's business history and managerial compensation.

▶️ [See Immigration Bureau of Japan requirements]

However, if you are a Japanese individual, corporation, or permanent resident, you can skip the visa issue and focus on the initial incorporation and business.

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Q. There are a lot of accelerating programs for entering Japan these days, but it's tough to find information that really matters.

-Recently, there are a lot of contents on various aspects such as Japan's startup promotion policies and initiatives, various business model speech contests, accelerator conferences, and local government startup support organizations, but it is becoming difficult to determine which contents are essential.

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Q. So, how can we reduce the risk when setting up a Japanese corporation?

-I guess one of the ways to minimize risks and costs is to learn the essential concepts of legal and tax administration in Korea, compare them to the Japanese case, and fill in the gaps.

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Q. While studying the market, it seems that you will be referring to materials released by the Japanese government, and most of them are in Japanese. I think you should study Japanese as well.

-I suppose a rough blueprint of the Japanese cabinet and Japanese language are also necessary elements. The establishment of a Japanese corporation by foreign capital is mostly related to guidelines or measures from the Ministry of Internal Affairs and Communications, Ministry of Justice, Ministry of Foreign Affairs, and Ministry of Health, Labor and Welfare, but it is not easy to clearly recognize which methods are good or bad if you only look at consulting company blogs or sites.

Also, even if you skim through the relevant search results, there are many sites or posts that write high-level articles and invite consultations using SEO for potential clients. There are also differences in the quantity and quality of disclosures, with more information in Japanese than in English on government sites. 

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Q. Can I use the translation function on Japanese government sites?

-Unfortunately, many government sites are image-based and cannot be translated using browser translation functions. Therefore, you will have to read the image materials on the government site to get the facts, dig through the posts, and call the department in charge for any unclear details, which is often difficult if you do not speak Japanese.

In other words, I believe that the most cost and time-effective way to prepare is to follow the facts and guidelines on the government's official Japanese-language website, and outline the process and To Do's for incorporation based on your current business situation.

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Q. Is there any way to save time?

-Of course, if you have a legal budget in the hundreds of thousands to millions of yen, you can hire a consulting firm or a judicial scrivener (a Japanese lawyer) to expedite the process. My case was not a particularly funded and aggressive startup, so I spent 70,000 yen in taxes alone (excluding capital) over two months preparing slowly with my colleagues.

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Q. What specific preparations can be done to further assist incorporation?

-I highly encourage using 'MoneyFoward' or 'freee' company incorporation service and fill in the blanks. 

This is a complimentary company incorporation guide service aimed primarily at domestic residents in Japan that simplifies and standardizes the process of incorporation. Advice from semi-professionals (in Japanese) is also available via remote meeting. As you enter the information as guided by the service, the formatting of the required legal documents is automatically completed and printed out.

You can also submit the documents to the branch office of the Legal Affairs Bureau in the area where the head office is planned to be located for registration.

*MoneyFoward, freee is an ERP SaaS for accounting and small / medium-sized businesses in Japan. It is optional to pay for accounting services after company establishment.

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Q. Thanks for the detailed information! It sounds like I have a clear roadmap for incorporating in Japan!

-With the services I mentioned, you should be able to get a structured understanding of what else you need to prepare during the incorporation process: 

• what kind of company you are going to set up (eg : joint stock company)
• whether the mission of the corporation will not overlap with an already established corporation
• how to secure an address for the head office
• selecting representatives (registered officers) without visa problems
• seal certificates for representatives (registered officers), shareholders (contributors)
• copies of passbooks for capital and transfer history of the company's capital before incorporation
• articles of incorporation and signatures of promoters, etc.

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Q. Mr. Sunghyun, you must have done everything yourself. Was it difficult?

-I used 'freee'  based on my experience of incorporating in Korea. Overall, it was no problem, but there was a lot of trial and error in the coordination of investments and Japanese-specific details (articles of incorporation signed by the promoter or electronically signed by an administrative scrivener).

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Q. Is there an easier way to set up an office in Japan?

-In addition to the types of legal entities based on decision-making and shareholding structure, I understand that there is a general Japanese corporation, a Japanese branch of a foreign corporation, and a Japanese branch office. I am presuming that this may be a simpler way for group-sized companies outside of Japan to operate a legal entity.

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Q. What are the main differences between a Japanese corporation, a Japanese branch of an overseas corporation, and a Japanese branch office that you mentioned?

-The biggest difference between the types of legal entities seems to be the tax authorities and tax handling, administrative handling in actual operations, and whether or not they are registered (related material).

If you establish a corporation in the form of a branch office, it appears that you will need to adjust/report taxes in Korea. However, considering the tax consulting fees, it would be fine to file taxes in Japan as a general Japanese corporation.

Branch offices do not seem to be subject to registration, so they are not suitable as a form of entry into Japan unless it is a case of vertical integration.

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Q. Thank you, Mr. Sunghyun, for answering various questions about incorporation based on your real-life experience! 

-It seems that Korea and Japan are similar in terms of incorporation, account opening, administrative jurisdiction, tax preparation, hiring developers, etc.

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Q. Thank you so much for your valuable words today! I think I understood your answers better because they came from your real-life experience. We wish you all the best in your future endeavors in both Korea and Japan!

-I also encountered various difficulties while establishing a Japanese corporation, so I don't want you to have to go through the same difficulties as I did. I wish you all the best in your Japanese business.

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‍Written by ZIPANG (Link)

※Original Source : 일본에서 실패 없이 법인 만드는 10가지 비법  

※This article was not reviewed for English translation by the original author‍