Japan Company Formation Explained: LLC, KK & More

Japan is the world’s third-largest economy, with a stable political environment, advanced infrastructure, and a strong rule of law—making it an attractive location for foreign investors and entrepreneurs. If you're considering starting a business in Japan, understanding the legal structures and incorporation process is essential.

In this guide, we break down the major company types available in Japan, namely the Kabushiki Kaisha (KK) and Godo Kaisha (GK), often compared to corporations and LLCs respectively. Whether you're looking to establish a branch, representative office, or local subsidiary, this article provides everything you need to navigate the Japan company formation process.

Why Start a Business in Japan?

Japan offers numerous advantages for entrepreneurs and corporations, including:

• Access to a large, high-tech consumer market

• Transparent legal and regulatory systems

• Robust IP protection

• Skilled and educated workforce

• Government incentives for foreign direct investment

However, Japan is also known for its bureaucratic complexity, which is why understanding the right company structure is a critical first step.

Common Types of Business Entities in Japan

When setting up a business in Japan, the two most common corporate structures are:

1. Kabushiki Kaisha (KK) – Joint Stock Company

This is the most traditional and recognized company structure in Japan, equivalent to a corporation or public company.

Features:

• Suitable for businesses of all sizes

• Can have one or more shareholders

• Minimum capital requirement: 1 yen

• Can issue shares and go public

• Strong reputation with clients, partners, and banks

Advantages:

• High credibility among Japanese consumers and institutions

• Easy to transfer ownership through shares

• Required structure for IPO or large-scale business

Disadvantages:

• More costly and time-consuming to set up

• Requires board of directors or representative director

• More compliance obligations (e.g., annual shareholders’ meeting)

2. Godo Kaisha (GK) – Limited Liability Company

Introduced in 2006, the GK is a more flexible and simplified business structure, similar to an LLC in the United States.

Features:

• Suitable for small to medium businesses

• Minimum capital: 1 yen

• Can be established by one person

• Members can act as managers

Advantages:

• Cheaper and quicker to set up than a KK

• Fewer corporate governance requirements

• Profits and losses can be distributed freely among members

Disadvantages:

• Less recognized and respected in traditional Japanese business circles

• Not suitable for businesses planning to go public

• Ownership transfer is more complicated

The GK structure is ideal for foreign startups and tech companies that prioritize speed and simplicity. The KK is often chosen for more established businesses or those seeking a strong local presence.

Other Business Structures

Besides KK and GK, Japan offers other business entity options:

3. Branch Office

• An extension of a foreign parent company

• Not a separate legal entity

• Liabilities and obligations rest with the foreign company

Best for: Companies wanting to enter the Japanese market without setting up a new entity.

4. Representative Office

• Can conduct market research, liaison work, or promotion

• Cannot conduct commercial transactions

• Not a legal entity and not subject to local tax

Best for: Early-stage market exploration or pre-investment research.

Japan Company Formation Process

Here is an overview of the steps involved in forming a KK or GK:

Step 1: Choose a Company Name and Structure

The name must be unique and include the correct suffix—“Kabushiki Kaisha” or “Godo Kaisha.” Names can be in Japanese or a foreign language using Katakana characters.

Step 2: Prepare the Articles of Incorporation

This document outlines the company’s:

• Name and location

• Business purpose

• Capital

• Founders and directors

For KK, the Articles must be notarized. For GK, notarization is not required.

Step 3: Deposit Capital

Open a temporary bank account and deposit the capital. If you’re not yet in Japan, capital can be transferred to the personal bank account of one of the incorporators.

Step 4: Register with the Legal Affairs Bureau

Submit the registration documents, including:

• Articles of Incorporation

• Proof of capital deposit

• Seal registration

• Identity documents of founders and directors

Once approved, the company will receive a certificate of registration and a company seal certificate.

Step 5: Tax and Social Insurance Registration

Register your company with:

• Tax Office (for corporate tax, consumption tax, etc.)

• Local government for business commencement

• Social insurance and labor office (if you plan to hire employees)

Required Documents

The specific documentation can vary slightly depending on the structure and whether the founders are individuals or corporate entities. Typically, you’ll need:

• Articles of Incorporation

• Affidavits (for foreign founders)

• Proof of capital deposit

• Seal registration form

• Identification of directors and shareholders

• Office lease agreement (physical address is required)

Foreign documents must be translated into Japanese and sometimes notarized or apostilled, depending on origin.

Costs of Company Formation in Japan

The cost of company registration in Japan depends on the structure and whether you use a service provider.

Estimated Costs:

Note: You must have a registered office address in Japan. Virtual office services can be used if you do not have a physical location initially.

Taxes and Compliance

Companies in Japan are subject to several taxes:

Corporate Income Tax:

• National and local taxes combined range from approximately 30–34% depending on income and location.

Consumption Tax (VAT):

• 10% standard rate (with some exceptions)

Other Taxes:

• Business office tax (in some municipalities)

• Fixed asset tax

• Social insurance and employment insurance for employees

Annual Obligations:

• File corporate tax returns

• Hold an annual general meeting (KK only)

• Submit annual reports

• Keep proper accounting records

Residency and Visas

While foreign nationals can own and operate Japanese companies, opening a company alone does not grant residency. If you intend to move to Japan, you’ll likely need to apply for a Business Manager Visa.

Requirements include:

• Office lease agreement

• Minimum capital of ¥5 million

• Proof of ongoing business activity

Having a local representative director or trusted partner in Japan can ease visa and administrative procedures.

Final Thoughts

Choosing between a KK and a GK depends largely on your business objectives, future growth plans, and how you want to be perceived in the Japanese market. While a Godo Kaisha is simpler and cheaper to set up, a Kabushiki Kaisha may offer long-term advantages in terms of credibility and flexibility.

Company registration in Japan requires careful planning and precise execution. Given the language barrier and legal complexity, it is advisable to work with a local administrative scrivener or legal advisor experienced in helping foreign clients.