If you have a great business idea or an existing company ready to grow, why not consider starting a business in Japan? Japan boasts the third-largest economy in the world, with a GDP exceeding 560,000 billion yen as of 2024, according to the Ministry of Foreign Affairs of Japan and the World Bank. This makes it an attractive destination for businesses looking to expand their customer base and foster growth. However, starting a business in Japan comes with its own set of challenges and requirements. Here are some essential tips to help you start your business in Japan.
Japan offers a lucrative market with a robust economy, providing ample opportunities for businesses to thrive. However, entering this market involves navigating through various regulations, understanding cultural nuances, and meeting specific qualifications. This guide aims to provide you with a detailed overview of what you need to know about starting a business in Japan, from understanding the different types of business entities to obtaining the necessary visas and finding the right office space.
Starting a Business in Japan: Types of Business Entities
Under the Companies Act of Japan, there are four main forms of business entities you can establish when starting a business in Japan:
Joint Stock Company: Kabushiki Kaisha (KK)
Kabushiki Kaisha are corporations that can be bought and sold by shareholders and are governed by a board of directors. This structure provides significant protection and reliability for shareholders and is the most common business vehicle in Japan. However, directors share joint and several liabilities, meaning all directors can be held accountable for the actions of one negligent director.
Limited Liability Company: Godo Kaisha
Similar to American LLCs, Godo Kaishas offer limited liability for all investors and function more like partnerships. They are ideal for small to medium-sized businesses and can be reorganised into a Kabushiki Kaisha if the company expands and all members agree.
General Partnership Company: Gomei Kaisha
In a Gomei Kaisha, all members represent the company and are jointly and severally liable for the partnership’s liabilities. A significant risk is that personal assets can be seized if the partnership cannot pay its debts.
Limited Partnership Company: Goshi Kaisha
Only members with unlimited liability represent the company in a Goshi Kaisha. These members are jointly and severally liable for the partnership’s obligations, while those with limited liability are only liable up to their contributions.
Obtaining a Visa for Starting a Business in Japan
If you are not a Japanese citizen, you will need a visa to set up your business in Japan. There are two primary visas for foreign entrepreneurs:
Business Manager Visa
This visa is initially valid for four months and can be extended for up to one year. To qualify, you need to:
- Secure office space in Japan.
- Have your business plan approved by relevant authorities.
- Demonstrate sufficient income to live independently in Japan.
- Ensure your company’s paid-up capital is at least 5,000,000 yen.
- Hire at least one full-time employee who is a Japanese national or meets specific residency criteria.
Start-up Visa
This six-month visa is ideal if you need more time and resources to set up your business. It can be extended for another six months. You must present a stable business plan and required documents, and this visa is available in specific locations like Tokyo, Kyoto, and several prefectures and cities. A letter of recommendation from the local government office is also required.
Finding Office Space in Japan
A key requirement for a business manager visa when starting a business in Japan is having an office space in Japan, which cannot be a virtual office, temporary structure, or a house. You can rent office space short-term or long-term.
- Short-term office spaces, or serviced offices, offer flexible lease terms and lower start-up costs. These spaces often include access to furniture, IT, and office equipment.
- Long-term office spaces provide stability and help establish your brand’s image. If confident in your office location, a long-term rental is beneficial.
JETRO, a government-related organisation, offers fully furnished office spaces free of charge for the first 50 days.
Registering Your Business
You must register your business and file tax statements at your business location in Japan. For instance, in Tokyo, the Tokyo One-Stop Business Establishment Center can help you obtain your Certification of Articles of Corporation, set up insurances, and file taxes. Other support organisations include JETRO, the Immigration Services Agency of Japan, and the Tokyo Labour Bureau Consultation and Support Office for Foreigners.
Additional Considerations
Combat Language Barriers
Proficiency in Japanese, especially keigo (polite language used in business settings), is beneficial. Hiring Japanese employees, translators, and interpreters can help navigate business interactions, translate documents, and create marketing content.
Understand Japanese Business Culture
Familiarise yourself with Japanese business etiquette, such as exchanging business cards with both hands. Understanding general Japanese culture alongside business practices is crucial.
Invest in Relationships
Building strong relationships with Japanese partners is vital for tapping into the local market. Japanese business culture values loyalty and trust, so forming meaningful connections can significantly benefit your business.
Know Your Competition
Conduct thorough research on your competition, their strategies, and practices. This will provide insights into Japanese cultural norms and help you develop effective marketing strategies.
Finding Business Success in Japan
Starting a business in Japan requires careful planning and a thorough understanding of local regulations, culture, and business practices. By leveraging available resources and support, you can navigate the complexities of entering the Japanese market successfully. This guide provides a comprehensive overview of the steps involved, from selecting the right business entity to securing a visa and finding office space.
Ultimately, the success of your venture will depend on your ability to adapt to the Japanese market and build strong relationships within the local business community. By understanding the nuances of Japanese business culture and effectively navigating the logistical challenges, you can position your company for success in one of the world’s most dynamic economies. Good luck with your new business venture, and feel free to reach out with any further questions!
