Doing Business in Japan Has Never Been Easier
The Ohara Law Office has helped businesses and individuals to break ground in Japan, to establish long term business enterprises in Japan, to form partnerships with Japanese companies and has helped lients to maintain their business presence in Japan post formation. Whether you’re looking to merely extend a parent company into the Japanese market, or incorporate a new business in Japan, our law office is ready to assist you in every step of the process.
Thinking of Expanding into Japan?
Whether your are interested in opening an office, establishing a subsidiary, or entering into a partnership in Japan, our law office can support you and ensure that the process goes smoothly.
Make doing business easier with a Representative or Branch Office
Establishing a representative office or a branch office requires a smaller initial investment than full-fledged subsidiaries. Both are appropriate for a parent company wishing to establish an initial physical presence in Japan. Since such offices are merely extensions of the parent company, and not legally distinct entities, all forms of liability incurred by the office will be directly imputable to the parent company.
A Representative or Branch office is usually established for marketing, to purchase goods and assets, to perform research, and other supplemental tasks for a parent company with ongoing business in Japan. Since these entities are merely extensions of the parent company, these offices cannot make unilateral decisions separate from the parent company. There are also restrictions on sales activities, both domestic and international.
Remove the need to micromanage with a subsidiary
Although incorporating a subsidiary is more costly and demanding, subsidiaries are a much more common form of foreign direct investment for two reasons. First, because a subsidiary has its own directors, the parent company does not need to micromanage the subsidiary in the way a branch office would require. Second, a subsidiary is a separate legal entity so the parent company’s exposure to liability may be limited to direct investments in the entity. However, it should be noted that the liability of the parent company often will depend on which of the following types of subsidiaries is incorporated.
A “Gomei Kaisha” (合名会社) is the Japanese equivalent of a general partnership. As such, the members of the partnership represent the company, and any transfers of equity are subject to unanimous approval by other members. Most notably, each member of the partnership is jointly and severally liable to the company’s creditors. 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. Given these downsides, it is very rare for foreign corporations or entrepreneurs to establish a Gomei Kaisha in Japan.
A “Goshi Kaisha” (合資会社) is the Japanese equivalent of a limited partnership. As such, only members with unlimited liability represent the company, and those members are held jointly and severally liable to the partnership’s creditors. Members with limited liability are liable to creditors only for their contributions in capital. As with Gomei Kaisha, transfers of equity must be approved by other partners. Unlike general partnerships in other countries, Goshi Kaisha are incorporated, rather than contracted into. Hence, “pass-through taxation” is unavailable, and partners cannot escape double taxation via profits and dividends. Therefore, like Gomei Kaisha, it is very rare to have a foreign entity establish a Goshi Kaisha in Japan.
A “Godo Kaisha” (合同会社) 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. However, 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 generally 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 and it may be an attractive option for foreign entrepreneurs expanding their existing small business in Japan. However, it should be noted that Godo Kaisha are still relatively rare in Japan and many Japanese companies and individuals may be unwilling or reluctant to do business with a Godo Kaisha.
A “Kabushiki Kaisha” (株式会社) is the Japanese equivalent of a stock corporation and the standard corporate form for most Japanese companies. If a Kabushiki Kaisha’s stock is owned by a foreign corporation, it can act as a wholly owned subsidiary. Since a Kabushiki Kaisha is a corporate entity and not a partnership, it is classified as a separate legal entity and the liability of members is limited to their contributions of capital. Furthermore, as a separate legal entity, a Kabushiki Kaisha my open its own bank account and own property in its own name. Unlike a partnership, transfers of shares in a Kabushiki Kaisha may be made freely, notwithstanding restrictions in the articles of incorporation.
Establishing a Kabushiki Kaisha is the recommended route for foreign corporations expanding into Japan or foreign entrepreneurs establishing a new business in Japan. The limited liability afforded by the corporate structure provides a large advantage over opening a branch office and the ability to open a bank account or own property in the corporation’s name is also convenient. The vast majority of Japanese companies are established as Kabushiki Kaisha and Japanese businesses tend to be more familiar with doing business with them.
Before you establish a Kabushiki Kaisha, your company will need the following:
- Decide on the Company Name.
Our office can perform a corporate name sure to make sure that your chosen name is not too similar to a currently existing company.
- Define the Company Purpose
The Company Purpose must be written into the Articles of Incorporation. Our office can work with you to ensure that the Purpose is expansive enough to encompass potential expansion of your business.
- Have an address in Japan for the office
- The founder’s name and address
- The amount of capital
Our office can help determine what a reasonable initial capital might be depending on your industry or type of business. The amount of initial capital can have a large effect on matters such as employment visas or future business deals.
- The number of authorized shares and the number of shares granted to the founder
- Dates for the start and end of the company’s fiscal year
- Number and names of directors and the term for the board of directors
- Representative director’s name and address
Our office provides full service support for establishing a corporate entity in Japan. We will also draft the new company’s Articles of Incorporation in both English and Japanese and have them notarized as necessary. Additionally, we will draft all supplementary documentation in both English and Japanese. Such additional documents include the minutes of the first board meeting, affidavit showing payment of the initial capital and written consent for appointment of officers. We will also help create an official company seal, bank seal and private seal for use on government and company documents and register these seals as necessary.
The entire process can be completed in a matter of 2 to 3 weeks depending on how quickly the above information can be provided.
We’re here for your company every step of the way
Helping you establish your business in Japan is the just the start of what our firm can offer your company. Once your business has been established, our experienced commercial lawyers are with you every step of the way to provide help and guidance regarding employment contracts, hiring and firing employees, obtaining working visas and ensuring compliance with local and national laws and regulations.
As your company grows our firm can further provide assistance with local and international business contracts, as well as registering and defending intellectual property. Furthermore, the Ohara Law Office’s long history in Osaka and the Kansai area means that our firm has extensive experience with the local business community and a strong background in working with companies of various sizes and business sectors.
In Japan, employees are usually hired either as contract workers, who provide labor for a specific term or project, and lifetime employees, who are hired without a fixed end date. As these two systems provide very different rights and responsibilities for both the employer and the employee, it is important to discuss the advantages and disadvantages of both systems with an attorney and clarify the type of employment under each employee’s contract. There is also a list of mandated items that must be included in all employment contracts that includes such things as expected duties, work hours, vacation and benefits, among other things.
Our office can help draft employment agreements in both English and Japanese that fit your company’s circumstances and needs.
Companies with 10 or more employees are required under Japanese law to draft work rules and provide them to all employees but it is generally considered good practice for all companies to have these rules on hand. Work rules should include such basic information as work start and finish times, breaks, days off, how wages are calculated and how resignation and dismissals are handled. Additional matters should also be included depending on the size and type of company.
Our firm can help you draft work rules tailored to your company’s needs. As necessary, work rules can be drafted in both English and Japanese so they can be clearly understood by employees from Japan or overseas.
As the laws regarding overtime in Japan are relatively more complicated than overtime laws in other countries, our office can provide support regarding how to interpret and work within the Japanese overtime system.
Generally, Japanese companies work on an 8 hour per day schedule for a total of 40 hours per week and overtime should be paid for any work in excess of these amounts. The calculation for overtime pay differs depending on the time the work was performed and how many hours the employee has already worked in that day and/or week.
However, the law does allow for different variations on these requirements, such as extended hours on one week and reduced hours the next. This type of flexibility can be very important for companies that have seasonal business models where employees may be very busy during certain parts of the year but find themselves with little work in the off-season. If you think this type of flexibility would be a benefit for your company, please contact our firm to discuss your options.
We provide assistance to regional clients in Osaka, Japan and international clients from all over the globe on commercial transactions. Our team of skilled international lawyers has experience working in both America and Japan and is knowledgeable in the variety of legal issues that can arise in contracts between international companies.
The Ohara Law Office has extensive experience with Intellectual Property law in Japan and internationally. We stand ready to support you in every aspect of registering, protecting and monetizing your Intellectual Property in Japan or around the world.
Please let us help you in growing your business into Japan. If you would like help opening a Branch/Representative office or subsidiary or have questions about doing business in Japan, please don’t hesitate to contact our office.