Are you looking to start a business in Japan as a foreigner? here is a complete guide to starting a profitable business in Japan without money.
Well, by providing an in-depth analysis of the 50 Best Small Business Opportunities in Japan and a series of sample industry specific business plan templates; Now we will analyze in detail the legal requirements, market feasibility and everything needed to start a business in Japan. So put on your entrepreneur hat and let’s move on.
What will probably come to your mind when you hear about Japan is technology. Japan is indeed one of the most attractive companies and technologies in the world. Japan is the third largest auto-manufacturing country in the world, has the largest electronics manufacturing industry, and is often among the most innovative countries in the world, leading in several global patent filings.
Why start a business in Japan as a foreigner?
Due to increasing competition from China and South Korea, manufacturing in Japan is currently focused primarily on high-tech and precision products such as optical instruments, hybrid vehicles, and robotics. Besides the Kantu region, the Kansai region is one of the major industrial groups and manufacturing centers of the Japanese economy.
There is no doubt that the economy of Japan is very developed and that it is indeed a market economy. It is the third in the world in terms of nominal GDP and the fourth in purchasing power parity (PPP). In fact, Japan is the second developed economy in the world and a member of the G7.
A report released by the International Monetary Fund shows that Japan’s GDP per capita (PPP) was $ 38,937 (2016). Due to the volatility of exchange rates, Japanese GDP measured in dollars fluctuates widely. Taking into account these fluctuations using the Atlas method, Japan’s GDP per capita is estimated to be around $ 38,490.
The Japanese economy is projected as a result of the Bank of Japan’s quarterly Tankan Business Sentiment survey, Nikkei 225 reports monthly on major blue chip (stock) stocks on the Japanese stock exchange.
Japan is ranked 39th out of 200 global economies for ease of doing business, according to the World Bank’s latest annual ranking. This suggests that Japan is a great place to start a business, especially a business in the tech industry.
If you want to start a business from scratch in Japan or if you want to open a branch of an international business in Japan, you need to follow the proper procedure, and here are the steps;
Building a Profitable Business in Japan as a Foreigner
Step one: find the industry that interests you
If you are planning to start a business in Japan, you should do a thorough research on the industry that interests you in order to start a business first. This is very important, especially if you are from the United States. States or Europe.
The truth is, Japan has new rules and regulations governing new business, and you won’t want to settle for an industry where you are not allowed to do business as a foreigner.
This is because a number of businesses are not open to foreigners, so it is necessary to visit government business registration offices in Japan to ask your questions before starting the business registration process. a new business.
Step two: choose a name for your business
The next step you need to take to start a business in Japan after choosing an industry is to choose a name for your business. The truth is, when it comes to choosing a name for your business, you have to be creative, because whatever name you choose for your business will go a long way in creating an idea of what it is. the company.
Before choosing a name for your business, you can go online and check the names of the major brands in the industry in which you are going to start a business so that you are well targeted when choosing your own name.
Please note that whatever name you choose to register your business does not need to be the operating name or the business advertising name. We suggest that you choose a name that is not assigned to any company in Japan.
Step three: find the office address
In Japan, you cannot register your business if you do not have an address from which you will be working. It’s as easy as getting an address, it can cut off your dreams of starting a business in Japan. Usually, if you don’t know where to work, you can just hire a serviced office address just to handle your registration.
Step 4: Choose your structure / business entity
Before choosing a business structure in Japan, it is important to make sure that you have researched the registration requirements and associated costs of available Japanese businesses. Study the current administrative requirements and associated costs of the organizations available, and study the characteristics of Japanese business taxation for the companies available.
It will also be useful to conduct research on how the tax administration of your home country company treats available Japanese legal entity income. In addition, it will also pay you to estimate the overhead costs that each organization will incur to support your expected sales revenue.
First, compare the financial performance of each of the available Japanese companies, measured as a percentage of gross revenue. turnover achieved by your company (parent company) during the first 5 years of activity in Japan.
In fact, the three Japanese companies that companies use most often to start new businesses are TMK tokutei mokuteki kaisha and TK tokumei kumiai, and kabushiki kaisha, often abbreviated as “KK”, which is analogous to C corporation in the United States. or Company Limited in the UK.
- Godo-kaisha, often abbreviated as “GK”, is called a Japanese LLC, which is similar (except for the tax regime) to US LLC or UK Ltd.
- Tokutei mokuteki kaisha, often referred to as “TMK”, is a similar special purpose company in the United States. REIT (Real Estate Investment Fund), but more flexible.
- Tokumei kumiai, often referred to as “TK”, is a general partnership or limited liability company.
- The yugen sekinin jigyo kumiai, often referred to as a Japanese LLP, is similar to an American LLP.
These are affordable business structures or organizations that you can set up your business in Japan. Just make sure you choose the right business structure or organization that best suits the type of business you want to run.
Fifth step: hiring / partnership with the resident director
Japanese law does not allow a foreigner to set up a business in Japan without the participation of a resident director on the board of your new business or, in some cases, a third-party business advisor to a Japanese investor. which will help you provide a bank account to deposit the expected capital from a foreigner. wishing to register a business in Japan. One of the main reasons you need a resident representative is that they can easily provide you with an account.
Sixth step: prepare the charter (Teikan)
The next step that you should take if you are successful in partnering with a permanent representative director is to start preparing the articles of association, known in Japanese as Teikan.
Articles Constituent documents are documents that determine the procedure for running a business and other matters. Your articles of association must clearly define the roles and expectations of shareholders / investors and, above all, their relationship with the directors of the company.
Seventh step: the notarization of the charter
The next step after preparing your articles is to authenticate the document.In Japan, your articles of incorporation are meaningless unless the document is notarized. The notarization of the articles of association can be done at the notary’s office / koshonin yakuba. This can only be done for KK and is not mandatory for Godo Kaisha (GK).
Please note that the notarization fee for the articles is JPY 50,000 (yen). Income stamps (also required for Godot Kaisha GC): 40,000 yen (Note). It is expected that when requesting notarization of your constituting documents, you will have to provide the required supporting documents.
Step eight: deposit the required capital
if you In the event of successful certification of your constitutive documents, you will be allowed to deposit the necessary capital to the business into the account. The fact that a company’s bank account cannot be opened until the registration is complete makes it necessary to use the personal bank account of one of the investors to deposit the initial capital.
In the case of a subsidiary of a foreign company, the representative’s personal bank account can be used for this purpose. That is why it is important to sort out partnerships with Japanese before starting the process of registering companies in Japan.
Ninth step: prepare the necessary documents for registering a business
In addition to filling out the application form when registering a business in Japan, it is necessary to prepare various documents such as a notice of the company seal (incan), which must also be registered, and a letter of consent to the entry into office of directors.
As soon as the documents are ready, you can start filling out the company registration application at the Civil Status / Homukyoku office. After that, you will need to pay a registration fee of at least 150,000 yen (yen) for KK and 60,000 yen (yen) for one year of kaishu (GK).
After completing your registration with the registry, you can now get a registry certificate and a company seal certificate, which are required in various business situations, such as opening a company bank account or signing commercial or employment contracts on behalf of the company.
Step Ten: Tax Filing Problems
Taxation is an important factor when starting a business in Japan, and as a foreigner wishing to start a business in Japan, you should know that tax efficiency is always taken into account when deciding whether to start a business. Japanese company or branch is the best way to establish yourself in Japan.
Interestingly, effective tax rates in Japan are relatively low – 30.86% or 34.1% depending on whether paid-in capital is less than or greater than one million Japanese yen, but careful structuring including moving parts of your business operations, such as marketing and R&D, in Japan, could result in effective tax rates below 10 percent.
When starting a new business in Japan, the organization used, as well as the structure of agreements and ownership between it and your business, can have a significant impact on its Japanese corporate tax and tax liability. Consider several factors, including: The effective corporate tax rates in Japan are 30.86% or 34.1%, with the amount less than or more than one million Japanese yen.
Step 11: Open a corporate bank account, apply for and obtain social security and required business licenses and permits, etc.
The next and almost final step you will need to take when starting a new business in Japan is opening a business bank account. under the business name, apply for social security and obtain the business licenses and permits necessary for your business.
Opening a bank account under the company name, visa application and residency status for non-Japanese directors and employees, business license application if the type of business requires a business license , etc. are the procedures that take 2-4 weeks in total, although it may take longer if some investors live overseas. You are expected to pay 40,000 yen (yen) for the fiscal marks.
Please note that if the nature of the business you want to start requires some sort of professional license, you will need to wait 2-3 months before you can fully run the business. This is to make sure you are on the right side of the law.
Step 12: Open your doors and start meeting clients
If you’ve made it through Steps 1-11, you’ve really come a long way and it shows that you are truly up for business. You cannot generate sales from your products or services unless you open your doors to business. Basically, the last step on your quest to start a business in Japan is to give yourself access to the business.