How to Set Up a Business in Japan - Legal Structures, Incorporation Process & Taxes

Why Japan Is the Right Choice for Your Business

Japan is one of the most developed and economically strong countries in the world, and it provides a variety of entry modes for businesses internationally. Japan is the 5^th largest economy, with a GDP of $4.19 trillion and has one of the highest GDP per capita. With high consumer purchasing power, the country also ranks 2^nd globally for R&D expenditure, 4^th for manufacturing competitiveness, and 13^th for innovation.

Skilled and Disciplined Workforce

Japan has one of the world’s most highly educated workforces, with 66% of young adults having tertiary education and 79% of the labour force holding advanced qualifications. Employees are known for their productivity and work ethic.

Modern Infrastructure and Connectivity

Japan offers world-class infrastructure having over 20 ports and 5 major international airports. It is also well connected to more than 20 nations via advanced trade routes. Japan participates in free trade agreements with major economies including the EU, ASEAN, and the US, offering business owners tariff reductions, market access, and streamlined customs processes.

Step-by-Step Process of Setting Up a Company in Japan

Starting a business in Japan requires careful planning and strict compliance with local laws to ensure smooth operations. The international businesses can form a limited liability company (Godo Kaisha), a joint-stock company (Kabushiki Kaisha), a sole proprietorship, or another type of business and these are the important steps to follow during the registration process.

1) Choose Business Structure

• Decide the legal form of the company based on liability, size, governance, and taxation needs (such as KK, GK, Sole Proprietorship, Partnership, Branch, etc.).
• Timeline: 1-3 days

2) Select Company Name

• Ensure the name is unique and has not been registered by any other entity.
• The name can be in Japanese or English but some company forms require including specific terms like “Kabushiki Kaisha” or “Godo Kaisha”.
• Timeline: 1-2 days

3) Find Registered Office Address

• Secure a physical or virtual office address in Japan.
• The registered address is mandatory for company registration, except for sole proprietorship.
• Timeline: 1-7 days (depending on lease or availability)

4) Prepare Founding Documents

• Draft the Articles of Incorporation which includes the company’s objectives, capital, governance, director(s), and shareholder details.
• Timeline: 3-7 days

5) Deposit Capital

• Open a company bank account for business transactions and deposit initial capital into a bank account to obtain a capital deposit certificate.
• Minimum capital requirement is usually legally 1 Yen.
• Timeline: 1-3 days

6) Register Company

• Submit registration application and required documents to the Legal Affairs Bureau including articles, capital deposit proof, director/member consents and company seal registration certificate.
• Timeline: 10-15 business days

7) Obtain Corporate Seal (Hanko)

• Create and register a corporate seal, mandatory for official documents and contracts.
• Timeline: 3-5 days

8) Register for Taxes

• Register with local tax office for corporate tax, consumption tax and social insurance obligations.
• Timeline: 1-3 days

The total time can vary on factors like the type of company, complexity of documents, founder nationality and the need for specific business permits. The broad steps usually take about 4 to 8 weeks to reach operational readiness in Japan.

Business Structures in Japan — Finding the Right Fit

To guarantee seamless commercial operations and conformity with local laws, establishing a corporation in Japan necessitates meticulous planning and adherence to legal procedures. Establishing a limited liability company (Godo Kaisha), joint-stock company (Kabushiki Kaisha), sole proprietorship, or any other kind of business entity requires several crucial procedures in the registration process.

Type of Entity	Capital Requirement	Liability	Governance Requirements	Suitability
Joint-Stock Company (Kabushiki Kaisha)	Minimum ¥1; setup around ¥250,000+	Limited to shareholders’ investment	At least one representative directorName must include ‘Kabushiki Kaisha’Annual shareholders’ meeting required	Medium to large businesses and foreign subsidiaries
Limited Liability Company (Godo Kaisha)	Minimum ¥1; setup costs ¥160,000–¥260,000	Limited to capital contribution	At least one representative member; name must include ‘Godo Kaisha’	Small to medium businesses and startups
Sole Proprietorship (Kojin Jigyo)	No minimum capital	Unlimited personal liability	Owner responsible for operations and tax filings	Individual entrepreneurs and freelancers
Branch Office of Foreign Company	No specific minimum	Parent company fully liable	Must have a Japan-resident representative and a registered office	Foreign companies establishing a local presence
Representative Office	No capital requirement	Parent company fully liable	Japan-resident representative required	Market research and promotional activities
General Partnership (Gomei Kaisha)	No minimum capital	All partners have unlimited liability	Must register with Legal Affairs Bureau	Small businesses and professional practices
Limited Partnership (Goshi Kaisha)	No fixed minimum	General partners: unlimited; Limited partners: limited to investment	Registration required; defined by partnership agreement	Investment funds and joint ventures
Limited Liability Partnership (LLP)	No fixed minimum	Limited to capital contributions	At least one resident or domestic partner required	Professional service firms
Investment Limited Partnership	No prescribed minimum	General partners: unlimited; Limited partners: limited	Must register and maintain audited financials	Private equity and venture capital funds

Few Important Points to Consider

Here are some specific steps and potential advantages useful when setting up or operating a business in Japan in 2025:

Startup Visa Route

The Japan Startup Visa allows foreign entrepreneurs to stay up to two years to develop their business. During this period, entrepreneurs can prepare their business and later convert to Business Manager Visa, which requires at least ¥30 million investment and one full-time resident employee.

Acquisition of Shelf Companies

A shelf company in Japan is a pre-registered currently inactive legal entity but ready for immediate use, allowing investors to speed up the incorporation process. Shelf companies are often operational within 1-2 weeks, but come at a higher cost and require thorough due diligence to avoid hidden liabilities like debts or unpaid taxes

Key Regulations and Compliances

Foreign investors must appoint at least one resident director in Japan to meet the legal requirements. Having a registered office address is mandatory for Business Manager Visa eligibility and company registration. The government requires detailed proof of ownership or lease, limiting the use of virtual offices except in rare cases.

How Our Firm Can Help You

With extensive experience in helping international businesses establish a presence around the globe, our firm is well-equipped to support your expansion plans in Japan. We can help you with:

• Market Study & Feasibility: Assess opportunities and viability for your business in the Japan and help you build a tailored market entry roadmap.
• Partner & Investor Search: Identify local partners, distributors, or collaborators to accelerate growth.
• Incorporation & Compliance: Assistance with setting up a subsidiary or branch, opening bank accounts, providing registered office and resident director services, VAT registration, bookkeeping, and statutory filings.
• Tax & Regulatory Strategy: Choose the best jurisdiction, plan cross-border taxes efficiently, and obtain sector-specific regulatory approvals.
• Ongoing Legal Support: From corporate governance, contracts, and dispute resolution to intellectual property protection, employment law, and immigration support, we ensure your business operates smoothly.

Japan offers a strategic location, highly qualified workforce, and strong business ecosystem for international companies. Let’s explore how your company can succeed in Japan!