What are the options for establishing a partnership in Japan?

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A Gomei Kaisha is the Japanese equivalent of a general partnership. The partners represent the company and therefore any transfers of equity are subject to unanimous approval by all partners. Unlike general partnerships in other countries, Gomei Kaisha are incorporated, rather than contracted into. Hence, “pass‐through taxation” is unavailable, and partners cannot escape double taxation via profits and dividends.

A Goshi Kaisha is the Japanese equivalent of a “limited partnership.” Partners with unlimited liability represent the company, and those partners are held jointly and severally liable to the partnership’s creditors. Partners with limited liability are liable to creditors only for their contributions in capital. Transfers in equity must be approved unanimously by all partners, and “pass‐through” taxation is unavailable.

A Godo Kaisha is the Japanese equivalent of a “limited liability company.” Members of the partnership represent the company, and any transfers of equity are subject to unanimous approval by all members. The liability of each partner is limited to his or her contributions of capital. Although “pass‐through” taxation is unavailable in Japan, the IRS will treat Godo Kaisha as pass-through entities via “Check-the-Box” status. Unlike a “Kabushiki Kaisha,” there are almost no statutory requirements for the management structure, or for the rights and obligations of Godo Kaisha members. However, this system is still relatively new in Japan and the law regarding Godo Kaisha is likely to continue to evolve.

If you have any questions about setting up a business in Japan, please contact our office for a legal consultation.