How to Create a Company in Japan as a Non-Resident: Step-by-Step Guide

Non-resident foreign entrepreneurs consider Japan a coveted destination for establishing a business or starting a company there. The fourth-largest economy in the world, Japan has excelled as a manufacturing and export-oriented economy, welcoming non-resident entrepreneurs to start a company in Japan. 

With technological advancements, a strong economy, supportive government policies, and other advantages, opening a business in Japan should not be a big deal for business people. To create a company in Japan as non-resident, it is mandatory to understand the local business landscape and legal requirements well. 

This is a comprehensive, step-by-step guide to starting a business in Japan.

Introduction

Are you a non-resident intending to start a business in Japan? It is a great move, as Japan offers a streamlined incorporation process thanks to its supportive ecosystem and commitment to globalization. 

The government has taken initiatives to smoothen the Japanese company incorporation process for foreign entrepreneurs and investors. Japan seeks to improve its foreign direct investments (FDIs). 

Company incorporation in Japan might initially seem slightly overwhelming. However, understanding the legal and official requirements and the local business landscape will make things easy. With proper guidance, it is possible to overcome the challenges and successfully create a company in Japan as a non-resident.

Why Start a Business in Japan?

Before we discuss how to start a business in Japan, let's understand the various advantages of doing so. 

• Diverse high-growth industries

With the rapidly evolving business landscape, many industries in Japan are experiencing exponential growth. 

Some of the fastest-growing industries in Japan that are attracting the attention of foreign investors and entrepreneurs include gaming and digital entertainment, personal finance and FinTech, the Internet of Things (IoT) and Robotics, E-commerce, other digital platforms, and many more. 

• Robust Economy with High Market and Growth Potential

One of the greatest benefits of creating a company in Japan is the country’s robust economy. The fourth-largest economy in the world, Japan has a nominal GDP of $4.26 trillion. 

Moreover, the country offers a substantial market and growth potential for foreign businesses. 

Despite economic challenges, Japan has maintained low inflation and fiscal discipline, partly due to the accommodative policies of the Bank of Japan. 

• Strategic Geographical Location

Because of Japan’s strategic location, businesses can gain a competitive edge over their rivals. Located in the Asia-Pacific region, Japan acts as an excellent gateway to the Asian markets and is a global hub for trade and investment. 

Moreover, Japan is near South Korea, China, and other trade routes, minimizing lead times and transportation expenses. 

• Skilled Workforce

Japan's education system takes a practical approach, prioritizing higher education and vocational training. Almost 35% of tertiary education students enroll in various short-cycle programs. Japan is a leader in technology, engineering, and manufacturing. 

Strong productivity and work ethics mark the Japanese workforce. The country has a culture of company loyalty and long-term employment. Japanese workers are skilled, efficient, reliable, and loyal. 

• Excellent Government Support and Incentives

Foreign investors and entrepreneurs receive robust government support in Japan in various ways. 

The government offers various supportive policies with simplified regulatory procedures. Tax incentives like R&D tax credits, reduced corporate tax rates, and operating special economic zones need special mention. 

The Japanese government offers attractive financial grants and subsidies for foreign business investors. JETRO (Japan External Trade Organization) Support must also be mentioned. 

• Technological Advancements and High-Quality Infrastructure 

The world knows about Japan’s technological advancements and high-quality infrastructure. 

From an extensive transportation network to a robust digital infrastructure and high-end utilities, Japan has everything a foreign entrepreneur looks for in a country before launching a company or business.

Business Opportunities in Japan

Candidates looking to create a company in Japan as non-residents can explore these sectors. Regarded as an innovation hub, the country provides all the ingredients for successful business development. Here are some areas for lucrative business opportunities in Japan. 

• Green Technology, Sustainability, and Energy

The trend of green technology is rapidly growing in Japan, and the country is committed to achieving carbon neutrality by 2050. 

Many business startups target Japan’s green tech sector. Moreover, Japan's supply of renewable energy has increased every year, creating a growth market. 

• Tech-related and IT Startups, including Digital Technology

Japan excels in technology and tech-related industries. For its robust infrastructure, it ranks 8th in IMD’s 2023 Digital Competitiveness Ranking in the Asia Pacific region. 

Innumerable tech-related and IT startups have emerged in the country in the last few years. Technological advancements in fields like Artificial Intelligence (AI), Machine Learning (ML), Robotics, etc. are fueling the growth in these sectors. 

These sectors get excellent government funding, making them a favorable choice for foreign investors and entrepreneurs. 

• Manufacturing

The manufacturing industry is one of the largest globally. Japan ranks third in the world in value added in this industry, after China and the USA. 

The growing industry in Japan attracts many foreign entrepreneurs and investors, making it a global manufacturing hub. 

• Biotechnology and Healthcare

The biotechnology sector in Japan is highly developed. In 2021, the biotechnology market size in the country was about $44.1 billion. The market is expected to grow at a CAGR of 6.7% within 2022-2030. Research and development are top priorities in Japan. 

Because of Japan’s increasingly aging population, there is a great demand for innovative biotechnological solutions and advanced healthcare services. This sector is a great place to do business in Japan. 

• Consulting Services

Consulting services have become imperative with the increasing number of businesses and startups in Japan. New businesses seek expert guidance on technology integration, market entry, and business strategies. 

Generative artificial Intelligence has enhanced the services of consulting firms in Japan. The technology improves strategy development and data analysis, enabling the firms to offer better solutions to clients.

Benefits of Company Incorporation in Japan

Japan company incorporation comes with its set of benefits. Some prominent benefits are as follows:

• No Double Taxation

When trading with other countries, Japan has different double taxation agreements with more than 90 countries. With the double taxation treaties, there is no chance of being taxed twice. This minimizes the amount of withholding tax. 

• Strong Regulatory Environment

One of the biggest benefits of company incorporation in Japan is the strong regulatory environment. Japan is a signatory to various international conventions protecting various intellectual property rights. 

• Diverse Funding Options

The Japanese government offers non-resident entrepreneurs and investors diverse funding options through financial grants, tax credits, incentives, and other regulatory policies. The country also has special economic zones for investors and business people. 

• Political and Economic Stability

When entrepreneurs look to start a company in a foreign country, they must check its political and economic stability. Japan’s political and economic stability is a governing factor that induces interest in investing. With a low risk of corruptive activities, investors gain confidence in Japan’s political and economic stability. 

• Scope of Local Hiring

If you create a company in Japan as a non-resident, you can hire local resources. Businesses can hire local resources according to their requirements. This is a cost-efficient option and an easy part of the business’s administrative process.

Types of Business Structures in Japan

Before you learn how to start a business in Japan, you must have a clear idea about the different business structures in the country for non-residents. Let us discuss these below:

• Godo Kaisha (Limited Liability Company)

Godo Kaisha, abbreviated as GK, is a limited liability company in Japanese. It is owned by people who have invested capital in the business. This flexible company structure has affordable registration costs, so smaller businesses favor it. 

• Kabushiki Kaisha (Stock Company)

Kabushiki Kaisha (KK) or Corporation is often referred to as a stock company and is Japan's most common business structure. These companies have a board of directors and are owned by shareholders. 

• Branch Offices

Companies with overseas businesses that want to expand in Japan can open branch offices there. These offices can conduct business, open bank accounts, and lease properties independently. 

• Representative Offices

These offices are mainly for networking and market research. They do not need official registration and are not considered legal entities in Japan.

Requirements for Starting a Business in Japan

Needless to say, the most important step in starting a business is preparation. 

If you want to create a company in Japan as non-resident, you have to meet certain requirements and make necessary preparations for the same. 

You will need a proper and suitable work pass or visa. You must follow certain guidelines and conventions when naming a business in Japan. The company must have a registered address. Lastly, the business must meet the director and shareholder requirements. 

Understanding these points is crucial for a successful company incorporation in Japan. Below, we will discuss each point in detail. 

• Visa and Work Pass Options

Obtaining a visa or work pass is the top priority when starting a company in Japan. Below are the visa options for non-residents intending to launch a company in Japan. 

• Business Manager Visa

The 4-month Business Manager Visa was introduced by Japan a few years back. This visa is for foreigners intending to launch or expand an existing business in Japan. With a Business Manager Visa, a candidate can:

• Manage an existing business in Japan
• Start and manage a business in Japan
• Manage a business on behalf of people
• Obtain a residence card
• Register the business
• Open a bank account in Japan

A candidate without a Japanese visa can apply for a 4-month Business Manager Visa. If the application is successful, the candidate will receive a resident card.

However, if the candidate has any other Japanese visa, it must be changed to a Business Manager visa after completing corporate registration. The visa can be extended for one year after the business is established. 

• Startup Visa

The Startup Visa Japan is an excellent initiative to attract foreign investors and entrepreneurs to Japan. This visa is valid for six months and does not apply to all Japanese cities. It is a temporary residence permit that helps entrepreneurs with limited resources start a business in Japan. 

Not many documents are required to apply for a Startup visa. However, candidates must submit the business plan to get a recommendation letter from the local government office. 

Once the documents are ready, candidates must apply at the immigration bureau. This visa can be extended to one year and provides rights similar to those of a Business Manager Visa. 

• Investor Visa

Candidates can apply for an Investor Visa to create a company in Japan as non-residents. Depending on the business's profitability and other performance metrics, this visa is granted for 1, 3, or 5 years. 

Documents needed for this visa depend upon the type of business and the financial situation. Some of them include:

• Investment information
• Elaborate business plan
• Business License
• Company registration documents
• Professional background proof
• Office Rental Agreement document
• Employee documents

The process for applying for the Investor Visa is simple:

• Establish the business company
• Apply for an investor visa Certificate of Eligibility (COE)
• Upon receiving the COE, exchange it for investor residence status at the company’s embassy or consulate in Japan. 

• Company Name Registration

Choosing the right name is important for company incorporation in Japan. When selecting a Japanese business name, consider cultural sensitivities. 

Japanese culture emphasizes respect, tradition, and harmony. The business name should not misinterpret or offend these values. Ensure the company name is unique and no business is registered under it. Do not infringe on trademarks or keep difficult names. 

• Director and Shareholder Requirements

Whether you want to set up a Kabushiki Kaisa (KK) or Godo Kaisha (GK) in Japan, you must have at least one director or a board of directors. The KK business structure has shareholders, but their liability is limited to their investment. 

Interestingly, even a non-resident can be the company director or shareholder in the business. The names of directors/board of directors and shareholders are required during company formation in Japan. 

• Registered Address

One of the main prerequisites for starting a company in Japan is having a registered office address. You need a secure office space in Japan. Virtual office spaces, houses, or temporary structures are not accepted as registered addresses. Though exceptions exist, using a residence address is also not usually accepted. 

Investors and entrepreneurs can choose from various short-term office rentals for a registered address. These office rentals offer various benefits like management options, flexible lease terms, start-up rates, and office and IT equipment and furniture access.

Step-By-Step Company Registration Process 

If you are a non-resident planning to start a business in Japan, here is a step-by-step company registration process. 

• Choosing an appropriate company name: Ensure the company name is unique and not already registered. It is a good idea to prepare the name using Japanese characters. 
• Preparing the Articles of Incorporation: Create drafts of the Articles of Incorporation, including the company name, objectives, and details of directors and shareholders.

• Depositing the required capital value: Deposit the initial capital amount by opening a temporary bank account. There is no minimum value of capital required. 

• Registering the company: Submit the certificate of capital deposit, Articles of Incorporation, and other required documents to the Legal Affairs Bureau for registration. Registration takes around two weeks. 

• Creating a company seal: Make sure you design a unique company seal and get that registered. This seal will be used for all official documents. 

• Opening a permanent bank account: Once the registration is complete, open a permanent one for all business transactions. 

• Notifying the tax office: File notifications with the tax office and other authorities for taxation.

The next sections contain more details about the company registration process in Japan for non-residents. 

• Pre-Registration Steps

As previously mentioned, the most important step in starting a business is preparation. Before starting a new venture, it is recommended to conduct thorough market research about the product or service you plan to launch. Try to understand the target audience and plan accordingly. 

Business planning is also crucial so you know the goals and objectives and how to achieve them. Another important part of business planning is having a plan B ready in case plan A fails. Understanding the required capital is also important. 

Company registration involves a lot of paperwork and documents. Ensure you have complete and detailed information about the documents you need. If the documents are not ready, try to secure them as soon as possible for smooth registration. 

• Documentation Required

When you want to create a company in Japan as non-resident, you will need some essential documents for the registration process. Here is a list of the documents:

• Application for registration: This document describes the company's main objectives and basic matters. Make sure that a Japanese translation of the document is submitted.

• Articles of Incorporation: Articles of Incorporation outline the company's various rules and regulations. 

• Certificate of paid-in capital: This document certifies that the company has paid the capital amount. 

• Letter of Acceptance of Assumption of Office: This document certifies that a company director has been appointed. 

• Certificate of Seal Registration of Director/Founder: Non-residents who do not have a certificate of seal registration must provide a certificate of signature. 

• Seal Registration Certificate: This certificate registers the company's official seal with the Legal Affairs Bureau. 

• Filing the Registration

Once all the pre-registration steps are complete and all documents are in place, the entrepreneur can apply for business registration at the Legal Affairs Bureau. 

The registration process takes approximately 2 weeks. 

There are registration fees that entrepreneurs have to pay for company registration in Japan. The amount of the registration fees varies depending upon the business structure that the entrepreneur chooses. 

• For Kabushiki Kaisha - the registration fee is 150,000 Yen
• For Godo Kaisha - the registration fee is 60,000 Yen

• Post-Registration Steps

Once the company's incorporation into Japan is complete, the entrepreneur must concentrate on some post-registration activities. Some such important activities include:

• Opening a permanent corporate bank account - After company registration, the entrepreneur must open a permanent bank account for further business transactions. 

• Obtaining necessary business licenses: The entrepreneur must have the required licenses and permissions to conduct business in Japan. These can be obtained after the company registration is complete. 
• ‍Informing the tax office - It is important to notify the tax office regarding the company registration so that there are no further issues with taxation.

Costs Involved in Incorporation

An entrepreneur has to spend quite a lot for company incorporation in Japan. Here is an approximate breakup of the expenses depending on the business structure:

1. Kabushiki Kaisha (KK)

The fees might change depending on the capital. 

Entity Setup

• Attestation of Articles of Incorporation - 52,000 Yen
• Registration Fee - 150,000 Yen
• Creating company stamp/transportation/copies/postage - 20,000 Yen
• Revenue stamp for Articles of Incorporation (optional) - 40,000 Yen

2. Godo Kaisha (GK)

Entity Setup

• Registration Fee - 60,000 Yen
• Creating company stamp/transportation/copies/postage - 20,000 Yen
• Revenue stamp for Articles of Incorporation (optional) (free if digital) - 40,000 Yen

Apart from the legal and registration fees, the company has operational costs. Here is an estimate of such expenses.

3. Office Costs

You must show an office space to set up a company in Japan. Choose the space as per your budget. Here is an estimate:

• Private office - from 60,000 Yen
• Shared office - around 20,000 - 70,000 Yen
• Virtual office - around 1,000 - 10,000 Yen

4. Residence and work permit costs

Visa and work permits are mandatory for working in Japan.

• Single-entry work visa - 3,000 Yen‍
• Multiple-entry work visa - 6,000 Yen

Government Assistance for Foreign Businesses

Entrepreneurs looking to create a company in Japan as non-residents get abundant assistance from the Japanese government. Various kinds of grants and incentives are offered to interested investors and entrepreneurs:

• JETRO Support

The Japan External Trade Organization (JETRO) offers financial assistance and advisory services customized for foreign businesses. Financial assistance includes subsidies for employee salaries and office rent, which can help entrepreneurs meet initial setup costs. 

• Local Government Grants

Many regional governments in Japan offer attractive grants, including subsidies, tax breaks, and other financial incentives, to foreign entrepreneurs and investors.

• Subsidies for Innovative Projects

Financial aid and subsidies are given to innovative projects or companies involved in research or cutting-edge technologies. 

• Industry-Specific Government Schemes

There are various industry-specific government schemes for foreign investors. There are startup support programs that provide rebates on setup costs. 

• Special Economic Zones

Companies operating in special economic zones get tax breaks, financial incentives, and simplified regulatory processes.

Common Challenges and How to Overcome Them

Conducting business in Japan might be challenging initially for foreign investors and entrepreneurs. However, there are ways to overcome these hurdles and establish a successful business venture in the country. Here are some common challenges and the ways of overcoming them:

• Cultural Differences

Japanese business culture is very different from Western business style. Rooted in tradition, it has complex business protocols and social etiquette. The culture emphasizes group harmony and hierarchy and believes in a consensus-based decision-making process.

Hence, understanding the intricacies of Japanese business culture is important, along with proper cultural training. 

• Language Issues

This is a major problem for most foreign entrepreneurs and investors. The only way to overcome the language barrier is to use trusted translation services or hire bilingual staff. 

• Intense Local Competition

Starting a business in Japan is challenging for the excellent Japanese market offering high-quality domestic products and services. The competition to excel is fierce. The new business must offer value propositions to stand out in the market. 

• Regulatory Complexity

Foreign businesses often find Japan’s regulatory environment complex and difficult to navigate. The country has intricate permit and license processes and constantly changing industry-specific regulations. Contacting industry associations or local legal experts might help.

Tools and Resources for Company Incorporation

An entrepreneur does not need to be in Japan for Japanese company incorporation, at least initially. Some various tools and resources can help with company incorporation in Japan.

Some agencies help non-resident entrepreneurs set up a company in Japan by handling everything from paperwork to document submission. Many agencies offer legal assistance for company incorporation, and there are many nitty-gritty. 

You will also find virtual office providers for your office setup in Japan. Browsing through the internet helps get many such resources and tools for company incorporation in Japan.

Best Practices for Successful Incorporation

To create a company in Japan as a non-resident, you must follow some practices for successful incorporation. Some of them are:

• Prepare for the business in Japan thoroughly

If you are considering launching a new venture in Japan, you must prepare properly. Before taking the plunge, you should research, understand market trends and demands, and study the business environment in Japan. 

• Leverage local networks

Knowing the local Japanese work culture, ethics, and traditions is important because they differ from the rest of the world. Leverage local networks and gather as much information as possible about Japanese work culture and traditions.

• Understand regulations and compliance parameters

For a successful business incorporation in Japan, you must understand the rules and regulations well. There should be no compliance breaches in any aspect. Prepare a handbook of the rules for an error-free business journey.

How Skuad Can Help

If you want to create a company in Japan as non-resident, this guide will help you. It covers details regarding all the aspects that are needed for starting a company in Japan. 

Go through the step-by-step processes to make your business journey in Japan smooth and easy. You can also hire services from agencies that help set up a business in Japan. 

Skuad can be of help to you. Skuad’s global HR solutions and Employer of Record Platform help businesses hire, pay, and manage employees globally across 160+ countries. Interested in knowing how Skuad works? 

Book a demo right away!

FAQs

1. Can a foreigner set up a company in Japan?

Yes, a foreigner or non-resident can set up a company in Japan. The Japanese government encourages foreign investors and entrepreneurs to come to the country. For instance, after setting up US US-based company in Japan and getting a Japan business registration number, employees can work in the Japanese branch of American company in Japan.

2. How much does it cost to set up a business in Japan?

Japan residents or people with permanent residence visas do not have a minimum capital requirement for starting a business in Japan. However, entrepreneurs applying for a Business Manager Working visa or Investor visa must invest a minimum of 5 million Yen in capital. 

3. Is it difficult to start a business in Japan?

Yes, starting a business in Japan can be slightly uphill because of various factors like language barrier, visa and work permit, bureaucracy, banking, etc. Taking proper preparation is mandatory for company incorporation Japan. 

4. Can Americans own a business in Japan?

Yes, Americans can own a business in Japan. However, they must obtain a visa and legally reside in Japan. 

5. How much is corporate tax in Japan?

The corporate tax rate in Japan is 30.62%. From 1993 to 2024, it averaged 39.87%.