Why Register a Company in Japan?

Japan is unusually open on paper and unusually demanding in practice. Since the Foreign Exchange and Foreign Trade Act (FEFTA) was amended in 1998, inward direct investment has been broadly free, and in most sectors the only formality is a report to the authorities after the investment is made. JETRO backs that openness with English-language guidance on registration, visas, tax and labour rules, which matters because almost every form, contract and tax notice you will actually handle is in Japanese.

The difficulty sits in execution rather than eligibility. Registration is document-heavy, foreign-language attachments have to be translated, and advisers report that banks are cautious with new foreign-owned companies, so the account you need to pay staff and suppliers can take weeks longer than the registration itself. Costs have also been moving up, and several of the changes described later in this guide took effect in late 2025 or 2026.

That combination suits companies that arrive with a defined operating plan, some Japanese-language capacity and a timetable measured in months rather than weeks. A company that only wants to test demand can start with a representative office, or place its first hires through an employer of record, and register a subsidiary once revenue justifies the fixed costs.

Choosing the Right Business Structure

The choice that matters most is between a KK and a GK. Both give limited liability and both can be wholly foreign-owned, so the real difference is formality and perception. A KK carries the credibility that banks, customers and investors expect and can issue shares and options, while a GK is cheaper and quicker to set up and needs less governance. The Companies Act places no nationality restriction on founders, and the main sector-based limit is FEFTA’s prior notification requirement for designated industries, which is explained in the regulatory section.

Stock Company (KK)

The Kabushiki Kaisha is the classic joint-stock company. It can issue transferable shares and stock options, which is why businesses that expect to raise outside funding or reward staff with equity usually choose it, and its governance is formal. That formality shows up in set-up costs.

The articles of incorporation (teikan) must be notarised at a public notary office (koshoyakuba) for a fee of JPY 30,000 to JPY 50,000 depending on capital, paper articles attract JPY 40,000 in stamp duty that electronic articles avoid, and registration and licence tax is 0.7% of capital with a floor of JPY 150,000. A KK also publishes its financial results, so its numbers are visible to competitors and customers.

Limited Liability Company (GK)

The Godo Kaisha is Japan’s version of the LLC and the usual choice for a wholly owned subsidiary that values speed and low cost. Its articles need no notarisation, its registration tax floor is JPY 60,000 and it does not have to publish its financial results. The trade-offs are that it cannot issue shares, so it is a poor fit for outside investors or share-based incentives, and its members are generally expected to run the business themselves unless the articles appoint managing members. Advisers also note that some Japanese counterparties are less familiar with the form, which can matter when a new customer or landlord runs a credit check.

Branch of a Foreign Company

A branch has no legal personality of its own, so the foreign parent is ultimately liable for its obligations. It is registered with the Legal Affairs Bureau under the Japanese corporate form closest to the parent, and at least one representative in Japan must actually live in Japan, which is a stricter residence rule than the one that applies to a KK or GK. Once registered it can open bank accounts and lease premises in its own name. JETRO puts the timeline at about two months and the cost at around JPY 700,000, against two to three months and about JPY 1 million for a subsidiary, so a branch saves little time or money. It makes sense mainly when the parent wants to trade under its own name and accepts the liability that comes with it.

Representative Office

A representative office is a preparatory presence rather than a legal form. It may carry out market research, collect information, buy goods and publicise the parent, but it cannot sell anything. It needs no registration, and because it cannot ordinarily open a bank account or lease property in its own name, contracts are signed by the head office or by the representative personally. Treat it as a way to test the market for a limited period, not as a base to operate from.

Comparison of Common Business Structures in Japan

Three of these four structures can contract, employ staff, bank and lease in their own right, and the representative office cannot, which is why it sits at the exploratory end. Among the other three, the differences come down to liability, since only the branch leaves the parent exposed, formality, where the KK is the heaviest, and what the structure lets you offer to investors.

Structure Best suited to What it gives you What it costs you
Stock company (KK) Subsidiaries that will use investors, share incentives or a reputation for formality Can issue shares and options; the form banks, customers and investors know best Notarised articles; higher registration tax floor; financial results are published
Limited liability company (GK) Wholly owned subsidiaries where cost and speed matter most No notarisation; lower registration tax floor; no publication of financial results Cannot issue shares; less familiar to some counterparties
Branch A foreign company that wants to trade in its own name No new legal entity; can bank and lease in its own name Parent is liable; at least one representative must live in Japan; similar time and cost to a subsidiary
Representative office Testing a market for a limited period No registration needed No sales; cannot ordinarily bank or lease in its own name

For most foreign groups the decision reduces to one question, which is whether shares or outside investors will ever matter. If they might, choose a KK. If the goal is a wholly owned operating subsidiary and nothing more, a GK does the same job for less cost and paperwork. If the immediate need is a handful of hires rather than a trading company, an Employer of Record in Japan can employ them under Japanese law while you decide, and you can register a company later once volume justifies it.

Japan's Legal and Regulatory Requirements for Companies

Japanese company law works in three layers, and the third is the one that catches foreign founders out. Registration decides when the company exists, and the Legal Affairs Bureau under the Ministry of Justice records it after a notary office has notarised a KK’s articles. The tax offices, the Japan Pension Service, the Labor Standards Inspection Office and Hello Work, the public employment office, then decide when the company can operate as an employer. Above both sit sector permits and, for designated industries, FEFTA notification through the Bank of Japan and the Ministry of Finance. These decide whether the activity can start at all, they vary by industry, and registration does not trigger them.

Key Business Regulations in Japan

  • Registration under the Companies Act. A foreign company that carries on business in Japan on a continuing basis must register and appoint a representative in Japan, whether it forms a separate company or operates through a branch. Registration is public, so the business purposes, head office and representative directors you file are visible to anyone who requests a registry certificate.
  • FEFTA investment rules. Investment in a designated sector requires prior notification through the Bank of Japan before the investment is made, and other investments are reported afterwards, with advisers pointing to a 45-day window. Non-resident investors usually appoint a resident agent to file. A missed prior notification is much harder to repair than a filing made on time.
  • Rules on directors and signatures. Under a Ministry of Justice notice of 16 March 2015, none of a company’s representative directors needs a Japanese address, so a company can be formed with every representative director living abroad. Foreign nationals who cannot affix a registered seal may sign instead. A branch still needs a resident representative.
  • Industry permits. Many activities need a licence, registration or permit before they can start, for example financial instruments businesses, worker dispatch and paid job placement. These are granted by the relevant ministry or local government and are separate from company registration, so confirm the position for your sector before the business purposes are fixed.
  • Social insurance and labour law. Every corporation must enrol in health and pension insurance, and directors count as employees for this purpose, so a company whose only staff are its directors still has obligations. Once you hire, the Labor Standards Act sets working hours, leave and dismissal rules, which are covered in the hiring section.

Tips for Staying Compliant with Japanese Laws

  • Translate early. Foreign-language documents attached to a registration application normally need a Japanese translation. Corporate shareholders’ constitutional documents and board resolutions are usually the longest items, so start them before the notary appointment rather than after.
  • Check permits and FEFTA before drafting the articles. The business purposes are fixed in the articles, and a sector that needs a permit or prior notification can hold up everything that follows. Catching this at the start costs a conversation. Catching it later can mean amending the articles and re-timing the whole set-up.
  • Divide the work between the right professionals. Judicial scriveners typically handle registration, tax accountants handle tax notifications and returns, and labour and social security attorneys handle employment and insurance filings. A single adviser rarely covers all three, so agree who owns each filing at the outset.
  • Track deadlines by their trigger. The tax notice runs from establishment, the social insurance notice from the first hire and the blue return window from incorporation or the first year end. A company that hires on day one and one that hires in month four therefore face different calendars, and a single “post-incorporation checklist” copied from another company can be wrong for yours.

Step-by-Step Process to Set Up a Company in Japan

Steps one to five create the company, and steps six and seven make it lawful to operate, with deadlines that start counting from incorporation. Most foreign companies work with a judicial scrivener or law firm for the registration, a tax accountant for the tax notifications and a labour and social security attorney for employment filings. JETRO puts a subsidiary at two to three months from the point where the company particulars are fixed.

1

Decide the Structure, the Name and the Particulars

Choose a KK or a GK and settle the company name, head office address, business purposes, capital, fiscal year end and officers. List every activity you expect to carry out, including future ones, because an activity missing from the registered purposes needs an amendment later. The fiscal year end deserves more thought than it usually gets, since it sets the date of every tax filing.

Capital has no legal minimum, but it affects visa eligibility for foreign managers, consumption tax status and access to the reduced small-company tax rate. Those effects pull in different directions, so read the hiring and financial sections before fixing a figure rather than defaulting to a token amount.

2

Check Foreign Investment Notification and Permits

Confirm whether your sector is designated under FEFTA, which would require prior notification through the Bank of Japan, and whether the activity needs a licence from a ministry or local government. A non-resident investor usually appoints a resident agent to make the filing. Permit-based businesses can add months to the timeline, so run these checks in parallel with the registration work rather than after it.

3

Prepare and Notarise the Articles of Incorporation

The articles set out the company name, business purposes, head office, capital, fiscal year and officers. For a KK they are notarised at a public notary office, which typically takes a few business days, and using electronic articles avoids the stamp duty mentioned earlier. A GK skips notarisation, which is a large part of why it is quicker. Later amendments to the articles do not need to be notarised again.

4

Pay in the Capital and Keep the Evidence

The capital must be paid in before registration. Because the company has no bank account yet, founders commonly deposit it into a founding director’s personal account and keep a copy of the passbook or statement showing the transfer, which becomes the evidence filed with the registration. Because opening a Japanese bank account can depend on residence status, foreign founders often rely on a resident officer or a professional to help with this step.

5

Register at the Legal Affairs Bureau

The application goes to the Legal Affairs Bureau (homukyoku) with the articles, the evidence of capital, officer acceptance documents and payment of the registration and licence tax. Electronic filing is available. One adviser reports that Ministry of Justice changes from 2 February 2026 let a company choose a weekend or holiday as its official establishment date, which is worth confirming if the date matters to you. After registration you can obtain a certificate of registered matters, and the corporate number arrives by post.

6

Complete the Tax and Local Notifications

File the notification of incorporation with the tax office within two months of establishment, and the notification of an office paying salaries within one month. Submit incorporation notices to the prefectural and municipal authorities where local tax is payable, which in Tokyo means within 15 days of starting business. Apply for blue return status before the earlier of three months after incorporation and the end of the first fiscal year. The blue return is the tax status that allows losses to be carried forward, and a missed window generally costs a year of benefits.

7

Register for Social Insurance and Labour Insurance

File the new-coverage notification for health and employees’ pension insurance within five days of the first hire. Register employment insurance at Hello Work and workers’ accident insurance at the Labor Standards Inspection Office, each generally within ten days of the first hire. Alongside these, open the operating bank account, start any visa applications for foreign staff and file the FEFTA report if one applies.

Hiring and Managing Employees

Japanese employment law is protective of employees, and its rules on working hours, leave and dismissal shape how contracts and work rules should be drafted. Employers must give new staff written notice of their working conditions, and an employer with ten or more regular employees must draw up work rules (shugyo kisoku) and submit them to the local Labor Standards Inspection Office. The statutory working week is 40 hours and eight hours a day. Overtime carries a 25% premium, rising to 50% beyond 60 hours a month, and new employees are entitled to ten days of paid annual leave after six months, with employers obliged to make sure staff who receive ten or more days take at least five.

Dismissal is where employers most need to plan. Thirty days’ notice or pay in lieu is required, but notice alone is not enough, because the doctrine against abuse of the right to dismiss means courts also expect an objectively reasonable cause. There is no statutory severance formula, although work rules or individual contracts often provide something, so it is worth deciding your approach in advance and writing it into the work rules.

Pay is set against prefectural minimum wages. The national weighted average is JPY 1,121 an hour and Tokyo is JPY 1,226. The labour ministry announced on 3 September 2026 that new rates will average about JPY 1,177 when they take effect between October and December, with Tokyo recommended at JPY 1,280. On top of wages, a Tokyo employer using the default health insurer pays half of a 9.85% health premium and half of the fixed 18.3% employees’ pension premium, which is capped at a standard monthly remuneration of JPY 650,000. Employment insurance adds 0.85% for the employer, workers’ accident insurance is charged at an industry-based rate, and a child and child-rearing support contribution of 0.23% in total, split between employer and employee, started in April 2026. Advisers put the employer total at roughly 15% to 16% of pay for staff under 40.

For foreign staff, the everyday route is the Engineer, Specialist in Humanities or International Services status. It generally needs a relevant degree or about ten years of experience, an employer in Japan and pay comparable with Japanese staff, and it starts with a Certificate of Eligibility that the employer applies for, which advisers put at one to three months. Group staff moving within a company can use the intra-company transferee status, and the Highly Skilled Professional points scheme, at 70 points and above, brings faster access to permanent residence.

The Business Manager status, which is the route for a foreign founder or manager running the company, was tightened on 16 October 2025. It now requires at least JPY 30 million in capital or investment, one full-time employee who is Japanese, a permanent resident or holds another status without work restrictions, Japanese ability at B2 level held by either the applicant or that employee, relevant education or three years of experience, and expert review of the business plan. Holders who applied under the old rules have until 15 October 2028 to meet the new standard at renewal.

Tips for Recruiting and Retaining Local Talent

  • Plan for a tight market. Unemployment was 2.4% in July 2026, there were roughly 1.2 job openings for every applicant earlier in the year, and Teikoku Databank found 50.6% of companies short of full-time staff in April 2026. In practice candidates with the skills you want are usually employed, so plan for a longer search and a more competitive offer than the headline unemployment rate suggests.
  • Include international candidates in the search. Employers reported a record 2,571,037 foreign workers at 31 October 2025, up 11.7% in a year, so hiring foreign nationals who already live in Japan is a normal part of the market. It also avoids waiting for a Certificate of Eligibility from overseas.
  • Screen for language as well as skill. Business Japanese decides how quickly a hire becomes productive, particularly in customer-facing roles. A recruitment agency in Japan that tests Japanese ability up front can save weeks of interviewing candidates who cannot do the job in the language it is done in.
  • Prepare contracts and work rules in Japanese and English. The work rules go to the Labor Standards Inspection Office, and an English version helps foreign employees understand what they are agreeing to, particularly around overtime, leave and the dismissal approach you have chosen.

Financial Management and Reporting

Japan’s tax bill is best read as a stack. National corporate tax is 23.2%, and local taxes bring the effective total to roughly 31% to 35% depending on capital size and location. For fiscal years starting on or after 1 April 2026 a defence special corporate tax adds 4% of the corporate tax amount after a JPY 5 million basic deduction, which raises the effective rate by about 0.9 points. A calendar-year company first feels this in the year starting 1 January 2027. Companies with capital of JPY 100 million or less can pay 15% on the first JPY 8 million of income, but that reduced rate is not available to a subsidiary wholly owned by a corporation with capital of JPY 500 million or more, which can catch subsidiaries of large foreign groups. A per capita levy on corporate inhabitant tax is set by capital and headcount, and groups within the global minimum tax rules face Japan’s qualified domestic top-up tax for accounting periods starting on or after 1 April 2026.

The corporate tax and consumption tax returns are due two months after the fiscal year ends. An extension of the filing date can be requested when the shareholders’ meeting or the accounts cannot be finished in time, and companies with fiscal years longer than six months also file an interim return. Employers remit withheld income tax by the 10th of the following month. Dividends paid to non-residents face a default 20.42% withholding tax, subject to treaty rates.

Consumption tax is 10%, with 8% on food and some other goods. Input tax credits depend on invoices from suppliers registered in the qualified invoice system, whose registration number begins with the letter T followed by the corporate number, so your own suppliers’ registration status affects how much tax you can recover.

Common Pitfalls to Avoid

  • Budgeting on the headline rate. A business case built on the 23.2% national rate understates the burden by roughly eight to twelve points once local taxes and the defence surtax are added.
  • Choosing the fiscal year end by default. The year end sets the two-month filing deadline, the interim return for long periods and the timing of the blue return window, so a year end that lands in your busiest month makes every filing harder.
  • Treating a filing extension as payment relief. An extension moves the date for filing the return, but the payment date does not move, so the tax has to be paid on time even when the return is late.
  • Paying the first dividend before the paperwork is ready. Treaty rates generally need documentation in place before payment, and without it the default withholding rate applies.

Tips for Operating Successfully in Japan

Start the bank account while registration is still under way. Banks and landlords often expect a resident representative even though the law does not require one, so line up a Japan-resident officer or a local advisory firm as a reference, and prepare the ownership and business-plan documents a bank will ask for before you apply.

Use JETRO as your reference point. Its English guides and checklists are the closest thing to an official sequence of filings for a foreign company setting up, and they help you check what a local adviser is proposing against what the government itself describes.

Start visa work as soon as the company exists. A Certificate of Eligibility is applied for by an employer in Japan, so it cannot begin until registration is complete. If you plan to bring in foreign staff, start that application straight after registration rather than waiting for the bank account, since the two can run in parallel.

Common Mistakes to Avoid

  1. Setting capital on a single criterion. A figure high enough to satisfy the Business Manager rules will remove the small-company consumption tax exemption, and capital held by a large corporate parent can remove the reduced tax rate, so the right figure comes from weighing all three.
  2. Working from an outdated guide. Many articles still quote the previous JPY 5 million Business Manager requirement and predate the October 2025 change. Check the date and source of anything that quotes visa thresholds.
  3. Reusing a home-country employment contract. Statutory hours, leave and dismissal rules apply regardless of what the contract says, and a company of ten or more employees also needs work rules approved through the local inspection office.

Why Now is the Right Time to Register a Company in Japan

For a foreign company weighing Japan, the useful point about 2026 is that the rules have just been reset. The Business Manager standard is defined, the defence surtax and child-rearing levy are legislated, and the new minimum wage figures are published, so a company entering now can budget against known numbers rather than waiting for changes. The transition period for existing Business Manager holders runs to October 2028, which also suggests the authorities intend the tighter standard to stay.

The talent picture points the same way. A labour market with low unemployment and widespread shortages rewards employers that arrive organised, with a registered entity, work rules in place and a clear visa plan, over those that improvise. The record number of foreign workers already in Japan means the international candidate pool is larger than it has ever been.

Japan is not cheap or quick to enter, and it rewards companies with realistic capital, patient bank onboarding and a plan for language. For those that have those, its openness to foreign investment and its need for skilled staff make the timing reasonable.

Ready to register your company in Japan? Use RemotePeople’s company registration services to get expert support from day one, from entity setup through your first hire.

Frequently Asked Questions

Often yes for a while. A newly established corporation with capital below JPY 10 million is generally exempt from consumption tax in its first years, with JETRO describing the first year and advisers the first two fiscal years. The exemption is lost if capital is JPY 10 million or more, or if the company is set up by a group whose taxable sales exceed JPY 500 million and which holds more than half of it. An exempt company can still choose to register as a qualified invoice issuer if customers need a T number, but doing so makes it a taxable business.

Purchases from suppliers who are not registered as qualified invoice issuers can still be partly credited under a transitional rule. The credit is 80% until 30 September 2026 and falls to 50% from 1 October 2026 until 30 September 2029, so a company that buys from many small unregistered suppliers will recover less input tax from October. Check whether your key suppliers have registered and whether your pricing assumed the higher credit.

It is a labour-management agreement, filed with the Labor Standards Inspection Office, that allows work beyond statutory hours. Without one, overtime beyond eight hours a day or 40 a week is not lawful even if employees agree. The ordinary limit is 45 overtime hours a month, and a special clause for temporary surges lets a company exceed that in up to six months a year, provided a single month stays below 100 hours, the year stays below 720 hours and the average across two to six months does not exceed 80. Managers with real management authority are outside the working hours rules, apart from night work.

No, which matters for foreign owners. The commercial registry shows the company name, address, capital and representative directors, but not shareholders, for any company type. Japan has no public beneficial ownership register either. A beneficial ownership list system introduced in January 2022 can only be consulted by financial institutions during customer due diligence, and a KK's financial results are published while a GK's are not.

The employer reports foreign hires and departures to Hello Work, which is how the labour ministry compiles its yearly count of foreign workers. The employee must also report an employer change to immigration within 14 days, and the new job has to fit within their existing status. A person who loses their job and cannot find work within about three months risks having the status reviewed for lack of grounds for residence, so it is worth having the departure paperwork ready.