Introduction Procedures for starting up a business Cost simulations of business establishment PDF File (J,E,C,K)

Establishment of a branch of a foreign company in Japan (referred to as a “business office in Japan” in the Company Law of Japan) When a foreign company intends to engage in business on a continuous basis in Japan, it is necessary to appoint a representative in Japan and to have such a person registered, as specified in Article 817 of the Company Law. Many foreign companies intending to conduct business with Japanese companies establish a business office in Japan, which is generally registered as a branch in Japan. This registration enables the applicant to obtain a commercial register certificate from the Legal Affairs Bureau, which is evidence of existence as a corporate entity in Japan and makes it possible to open a corporate bank account at a commercial bank. To apply for registration of a branch, the following documents must be submitted, as specified in Article 129 of the Commercial Registration Law. 1) Document evidencing the existence of the applicant’s head office (such as a certified copy of the commercial register in the home country) 2) Document certifying the competency of the representative in Japan 3) Articles of incorporation of the applicant or such documents as are sufficient to show the business objectives of the applicant 4) Document certifying the method of public notice as a foreign company, if such a method exists The above documents must be attested to by the competent authorities, such as the consul residing in Japan or a notary public of the applicant’s home country, etc. It is also possible to apply for registration with such document attested to by the competent authorities, as an affidavit or the like describing the information required in “1)” to “4)” above. A general flow of procedure for registering establishment of a branch 01 Appointment of the representative in Japan and determination of the business location (At least one of the representatives in Japan must be a resident of Japan.) 02 Preparation of documents required for registration of a branch (e.g.: attestation of an affidavit by the consul residing in Japan) 03 Application for establishment of a branch with the Legal Affairs Bureau 04 Acquisition of a Certified Copy of the Commercial Register, etc. 05 Report on the establishment of the branch to the competent ministers through the Bank of Japan 06 Opening of a corporate account at a commercial bank 07 Report on the establishment of the corporation to the Taxation Authorities and the relevant local government Incorporation of a company It is necessary to acquire independent corporate status in Japan and establish the legally required officers (institution) or representatives when incorporating. There are two corporate structures that a foreign investor can take while assuming limited liabilities; a joint stock company (Kabushiki Kaisha) and a limited liability company (Godo Kaisha: LLC). The other structures specified in the Company Law are a general partnership (Gomei Kaisha) and a limited partnership (Goshi Kaisha), designed for small-scale companies. However, since Gomei Kaisha and Goshi Kaisha require members with unlimited liabilities, they seem to be seldom utilized by foreign companies for investments in Japan. A general flow of procedure for registering incorporation of a joint stock company (Kabushiki Kaisha) (in the case a foreign company invests in Japan and incorporates through the “Hokki-Setsuritsu”, Incorporation by subscription of all shares by the promoters.) 01 Preparation of the articles of incorporation 02 If the promoter is a foreign company, the articles of incorporation shall be signed by the representative of the foreign company. It is also necessary to prepare certification of the qualification of the representative (e.g.: a certificate of signature attested to by the competent authorities in the applicant’s home country). 03 Notarization of the articles of incorporation by a Japanese notary public 04 Payment of the capital subscription into a bank, etc., specified by the promoter 05 Election of the initial directors and initial officers, etc. by the promoter 06 Election of the initial representative director by the initial directors (At least one of the initial directors must be a resident of Japan.) 07 Examination of incorporation by the initial directors, etc., and determination of the date of incorporation 08 Application for establishment of a joint stock company with the Legal Affairs Bureau 09 Acquisition of a Certified Copy of the Commercial Register, etc. 10 Report on the establishment of the corporation to the competent ministers through the Bank of Japan 11 Opening of a corporate account at a commercial bank 12 Report on the establishment of the corporation to the Tax Authorities and the relevant local government A general flow of procedure for incorporation of a limited liability company: LLC (Godo Kaisha) 01 Preparation of the articles of incorporation 02 If the member is a foreign company, the articles of incorporation shall be signed by the representative of the foreign company. It is also necessary to prepare certification of the qualification of the representative (e.g.: a certificate of signature attested to by the competent authorities in the applicant’s home country). 03 Payment of capital subscriptions by members (The members may include a foreign company.) 04 Determination of executive members and representative members (At least one of the representative members must be a resident of Japan.) 05 Application for establishment of a limited liability company with the Legal Affairs Bureau 06 Acquisition of a Certified Copy of the Commercial Register, etc. 07 Report on the establishment of the limited liability company to the competent ministers through the Bank of Japan 08 Opening of a corporate account at a commercial bank 09 Report on the establishment of the corporation to the Tax Authorities and the relevant local government Limited Liability Partnership: LLP (Yugen Sekinin Jigyo Kumiai) The Civil Law of Japan allows partnerships and partnership agreements, but since the liabilities of partners are unlimited, this format has not been used very much as a system except in certain cases. In August 2005, the new “Law Concerning Limited Liability Partnership Contracts” was enacted to allow a partnership system of limited liability, wherein the equity participants, or partners, take on business liabilities limited only to the value of their equity participation. The features of this system include free determination through contracts of the management of the internal organization and the distribution of the profits and losses of the business, and also that taxes are levied on equity participants, as these are not companies but partnerships. Registration is made according to the location of the main office in accordance with certain prescribed rules. However, care needs to be taken, as an LLP cannot be reorganized into a company such as a joint stock company. A general flow of procedures for establishment of a limited liability partnership: LLP (Yugen Sekinin Jigyo Kumiai) 01 Conclusion of the contract for a limited liability partnership 02 If a partner is a foreign company, the articles of incorporation shall be signed by the representative of the foreign company. It is also necessary to prepare certification of the qualification of the representative (e.g.: a certificate of signature attested to by the competent authorities in the applicant’s home country). 03 Payment of capital subscriptions by partners 04 Application for establishment of a limited liability partnership with the Legal Affairs Bureau 05 Acquisition of a Certified Copy of the Commercial Register, etc. 06 Report on the establishment of the limited liability partnership to the competent ministers through the Bank of Japan 07 Opening of a partnership account at a commercial bank 08 Report on the establishment of the partnership to the Tax Authorities and the relevant local government Comparison of the joint stock company, limited liability company (LLC) and limited liability partnership (LLP) Structure Joint Stock Company Limited Liability Company (LLC) Limited Liability Partnership (LLP) Corporate status Yes Yes No Capital contribution Stockholders Members with limited liabilities Partners with limited liabilities Legally required organization(s) General meeting of stockholders, directors (Consensus of members) (Consensus of partners) Executive officer Representative director, etc. Executive member Executive partner Capital No restriction on monetary amounts No restriction on monetary amounts No restriction on monetary amounts Equity transfers Generally free Approval of members Approval of partners Modification of articles of incorporation Special resolution at a general meeting of stockholders Agreement of all members Agreement of all partners Registration Yes Yes Yes Taxes levied on member(s) No No Yes Existence with a single member Possible Possible Not possible Reorganization into different corporate structures Possible Possible Not possible Merger with another joint stock company Possible Possible Not possible a joint stock company (Kabushiki Kaisha); a limited liability company: LLC (Godo Kaisha:); limited liability partnership: LLP (Yugen Sekinin Jigyo Kumiai)