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Japanese Company Formation


Japan has long held the interest of foreign investors, and offers a wide variety of advantages specifically for the nonresident business owner. And Japan's own Japan External Trade Organization (JETRO) recently reported that 83% of foreign owned companies in Japan experienced 'fair' to 'booming' business. For entrepreneurs considering Japan as a company formation destination, the minimum capital requirement for corporate ownership can be as low as 1 Yen. Also, minimal requirements exist regarding directorship or shareholders for the nonresident business investor.

Japan also offers the 2nd most competitive Asian economy as well as the 9th most competitive in the world, according to World Economic Forum's Global Competitiveness Index of 2011 to 2012. And according to the 2011 Doing Business Survey released annually by the World Bank, Japan is the 18th easiest country in the world in which to do business. This important annual survey by such a respected global financial giant takes into account start up time, initial cost, ease of filing, and minimal capital requirements to start a business. And Japan also ranks as the world's 14th least corrupt country, this information coming from the 2011 Corruption Perceptions Index, which measures global corruption among politicians and public officials.

The different types of company registrations in Japan are a Company Limited by Shares (KK), a Limited Liability Company, a Family Company and a Partnership. A KK is one of the more common types of company formations globally, and this is one of the more common corporate entities chosen by foreign investors when registering a Japanese company. This is most similar to the registration of most corporations in the United States. A Limited Liability Company is just that. The liability of company directors, owners and managers is limited regarding their level of capital share investment and other strict guidelines.

A family company is so named because of its similarity in ownership to family-run firms. A family company is that Japanese corporation which has more than 50% of the shares managed and owned by a total of three or fewer shareholders. With a family company, any undistributed profits earned by that company receive a 10% to 20% tax rate, according to a sliding scale as regards annual income. Partnerships can either present liability limitation, or unlimited liability to their owners. The partnership itself is considered a separate unit for tax purposes, and profits are charged to partners according to their share possession.

When filing for Japanese corporate registration, the National Tax Office and the local tax authorities require certain reports. A notice of incorporation including any relevant documents must also be made within 60 days of the date of incorporation and delivered promptly to the National Tax Office. Also, a report on the commencement of business activity must be filed with the local authorities, and this must be made within 30 days of the start of any business, and within 15 days in Tokyo. These and other particular cultural and corporate regulatory requirements are best handled by local Japanese attorneys and accountants.