The main business structures generally used by foreign companies to establish a business presence in Japan are:
Representative offices are established as locations for carrying out preparatory and supplemental tasks aimed at enabling foreign companies to engage in full-scale business operations in Japan.
These offices may conduct market surveys, collect information, purchase goods and implement publicity/advertising efforts, but they are not permitted to engage in any sales activities. The establishment of representative offices does not require registration. A representative office cannot ordinarily open bank accounts or lease real estate in its own name, thus, agreements for such purposes must instead be signed by the head office of the foreign company or the representative at the representative office in its individual capacity.
The branch office can begin its business operations as soon as the office location is secured, the branch office representative is determined, and the necessary information are registered. A Japanese branch office is a business location that provides services in Japan. Such services are decided upon by an organization authorized by the foreign company, and the branch office is usually not expected to engage in independent decision making. The branch office does not have its own legal corporate status, but instead is deemed to be encompassed within the corporate status of the foreign company. Therefore, in general, the foreign company is ultimately responsible for all debts and credits generated by the activities of its Japanese branch office. The branch office, however, may open bank accounts and lease real estate in its own name.
A foreign company establishing a subsidiary company in Japan must choose to establish the subsidiary company as a joint-stock corporation (Kabushiki Kaisha or K.K.), limited liability company (Godo Kaisha or LLC), or a similar entity stipulated by Japan’s Corporate Law.
All types of subsidiary companies can be established by completing the required procedures stipulated by law and then registering the corporation. A subsidiary is a separate corporation from the foreign parent company. Thus, the subsidiary will bear the liability of an equity participant stipulated by law for all debts and credits generated by its activities.
There are other methods by which a foreign company may invest in Japan using a Japanese corporation without establishing a subsidiary. One method is a joint venture with a Japanese enterprise or investment company and another method is by equity participation in a Japanese enterprise.
It is also possible to do business in Japan by using a Yugen Sekinin Jigyo Kumiai. This type of entity, considered as the Japanese version of limited liability partnership (LLP), is not a corporation, but a partnership formed only by the equity participants having limited liability. LLPs are also distinguished by the fact that internal rules can be freely determined by agreement between the equity participants, and that taxes are levied on profits allocated to equity participants without LLPs themselves being liable for taxation.
It is also possible to do business in Japan by using a Yugen Sekinin Jigyo Kumiai. This type of entity, considered as the Japanese version of limited liability partnership (LLP), is not a corporation, but a partnership formed only by the equity participants having limited liability. LLPs are also distinguished by the fact that internal rules can be freely determined by agreement between the equity participants, and that taxes are levied on profits allocated to equity participants without LLPs themselves being liable for taxation.
Legal differences between each of the above business operation are summarized in the following table.
| Representative office |
Branch office (office of foreign company) |
Subsidiary company (Joint stock corporation) |
LLP | |
|---|---|---|---|---|
| Business Activity | Not available | Available | Available | Available |
| Registration | N/A | Necessary | Necessary | Necessary |
| Capital | N/A | N/A | No minimum capitalization requirement | |
| Representative Director | N/A | Branch representative Required | At least 1 | No legally stipulated minimum |
| Director | N/A | N/A | At least 1 | |
| Corporate Auditor | N/A | N/A | 1 or more may be appointed | |
| Accounting | N/A | Aggregation with income in home country required | Completed by accounting of Japanese partnership | |
| Representative Office | |
|---|---|
| Business Activity | Not available |
| Registration | N/A |
| Capital | N/A |
| Representative Director | N/A |
| Director | N/A |
| Corporate Auditor | N/A |
| Capital | Accounting |
| Branch office (office of foreign company) | |
|---|---|
| Business Activity | Available |
| Registration | Necessary |
| Capital | N/A |
| Representative Director | Branch representative Required |
| Director | N/A |
| Corporate Auditor | N/A |
| Capital | Aggregation with income in home country required |
| Subsidiary company (Joint stock corporation) | |
|---|---|
| Business Activity | Available |
| Registration | Necessary |
| Capital | No minimum capitalization requirement |
| Representative Director | At least 1 |
| Director | At least 1 |
| Corporate Auditor | 1 or more may be appointed |
| Capital | Completed by accounting of Japanese partnership |
| LLP | |
|---|---|
| Business Activity | Available |
| Registration | Necessary |
| Capital | No minimum capitalization requirement |
| Representative Director | No legally stipulated minimum |
| Director | No legally stipulated minimum |
| Corporate Auditor | No legally stipulated minimum |
| Capital | Completed by accounting of Japanese partnership |
A joint venture (often abbreviated “JV”) is an entity formed between two or more parties to undertake economic activity together. The parties agree to create a new entity by both contributing equity, and sharing the revenues, expenses, and control of the enterprise. In Japan, joint ventures are mainly organized for one specific purpose like construction projects in construction industry. There are no special regulations governing the establishment of joint ventures.
