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Originally Posted On: https://smartstartjapan.com/how-to-start-a-business-in-japan/

How to Start A Business in Japan

Dreaming of starting your business in the Land of the Rising Sun? Japan, with its vibrant cities, innovative culture, and thriving economy, is becoming a prime destination for entrepreneurs. Whether you’re looking to launch a tech startup in Tokyo or a boutique in Kyoto, this guide will walk you through every step of the process—no guesswork required.

What Makes Japan Ideal for Entrepreneurs?

Photo from SmartStart Japan

Looking at Japan 10 years ago, startups were not perceived with the most optimistic lens. One might describe startups in Japan as “risky”, alongside the negative connotations of being self-employed with a startup as compared to working for big-name corporations. Additionally, a BBC article from about 11 years ago painted a picture of Japan’s startup landscape as “tiny” and “struggling”.

Government Support: Japan actively supports startups through incentives, grants, and programs.

Strategic Location: Situated in Asia, Japan is a gateway to some of the world’s fastest-growing markets.

Innovative Culture: With a focus on research and development, Japan is perfect for innovation-driven businesses.

Skilled Workforce: Highly educated and professional, Japan’s workforce is an asset for businesses.

Interested to start a business in Japan but don’t know what kind of business to do? Check out this article on 10 New Business Ideas in Japan for 2024!

4 Things You Need to Know Before You Start a Business in Japan

Before jumping into paperwork, there are a few key insights every aspiring entrepreneur should understand:

1. Government Support: Take advantage of Japan’s startup visas, subsidies, and guidance from organizations like JETRO (Japan External Trade Organization).

2. Business Structures in Japan: The two most common structures are Godo Kaisha (GK)—ideal for small-scale businesses—and Kabushiki Kaisha (KK), which offers more prestige and capital-raising potential.

3. Legal and Regulatory Requirements: Japan has specific steps for registering businesses, obtaining licenses, and meeting tax obligations.

4. Financial Considerations: Understanding corporate taxes, initial capital requirements, and financial management is crucial.

Step-by-Step Guide to Starting Your Business in Japan

Your first decision will shape your business operations. The two primary structures are:

Learn more about this topic through this article on A Quick Start on Japan Sole Proprietorships!

Step 1 : Check Legal Requirements for Your Business Type

Registering a business in Japan involves several steps, including choosing the appropriate business structure (GK or KK) as we have shown you earlier, preparing and notarizing the articles of incorporation, depositing capital, and registering with the Legal Affairs Bureau. This process ensures your business is legally recognized and compliant with Japanese laws.

Depending on the nature of your business, you may also need specific licenses and permits to operate legally in Japan. Industries such as food and beverages, healthcare, finance, and real estate have stringent regulatory requirements. It’s crucial to research and obtain the necessary approvals from relevant government agencies to avoid legal issues.

Japan offers several visa options for entrepreneurs and employees, including the Business Manager Visa for business owners and the Highly Skilled Professional Visa for talented employees. Understanding the visa requirements and application process is essential for ensuring that you and your team can legally live and work in Japan.

Step 2: Develop a Business Plan

A well-structured business plan is essential for guiding your venture and is often required for visa applications and securing financing. Your business plan should encompass the following components:

• Executive Summary: Provide a concise overview of your business concept, objectives, and the value proposition you offer.
• Market Analysis: Conduct thorough research on your target market, including customer demographics, market size, and trends. Analyze your competitors to identify opportunities and threats.
• Marketing Strategy: Detail how you plan to attract and retain customers. This should include your pricing model, promotional activities, distribution channels, and sales strategies.
• Financial Projections: Present realistic forecasts of your income, expenses, cash flow, and profitability over the next 3-5 years. Include assumptions and scenarios to demonstrate financial planning.
• Operational Plan: Describe the day-to-day operations of your business, including location, facilities, equipment, and staffing requirements. Outline the production process or service delivery method.

Properly addressing these financial aspects ensures a solid foundation for your business operations in Japan. So, if you need a more in-depth article on this topic, check out Ultimate Guide to Corporate Tax in Japan!

Step 3: Register Your Company Name

Choosing a unique and appropriate company name is a critical step in establishing your brand identity. In Japan, the process involves:

Cultural Considerations: If you plan to use a foreign name, consider how it will be perceived and pronounced in Japanese. It’s advisable to consult with a local expert to ensure cultural appropriateness.

Uniqueness Check: Ensure that your desired company name is not already in use or too similar to existing company names. This can be verified through the Legal Affairs Bureau.

Compliance with Naming Conventions: The company name must include “Godo Kaisha” (GK) or “Kabushiki Kaisha” (KK) as a suffix, depending on your chosen business structure.

Step 4: Draft and Notarize Articles of Incorporation

The Articles of Incorporation (定款, “teikan”) are fundamental documents that define your company’s purpose, structure, and operational guidelines. Key elements to include are:

• Company Objectives: Clearly define the scope of your business activities. In Japan, companies are only allowed to conduct activities specified in their objectives.
• Shareholder Information: List the names, addresses, and contributions of all shareholders.
• Capital Structure: Specify the total amount of capital and the number of shares issued.
• Management Structure: Detail the roles and responsibilities of directors and other officers.

For a KK, the Articles of Incorporation must be notarized by a public notary, which involves additional steps and fees. This notarization process ensures the legality and authenticity of the document.

Photo from SmartStart Japan

Step 5: Deposit Initial Capital

Depositing the initial capital is a crucial step in the incorporation process. The procedure involves:

• Opening a Temporary Bank Account: Before registration, open a bank account in the name of the representative director or incorporator. This bank account must be a branch office of a Japanese bank or a foreign bank in Japan with a Japanese branch.
• Depositing Capital: Transfer the initial capital into this account. While there is no minimum capital requirement for a GK, a KK typically requires a substantial amount to establish credibility.
• Obtaining a Certificate of Deposit: Request a certificate from the bank confirming the deposit, which will be needed for company registration.

Properly managing the capital deposit process is essential for the smooth registration of your company.

Step 6: Register Your Company

Submit the necessary documents to the Legal Affairs Bureau, including:

• Articles of incorporation
• Certificate of capital deposit
• Shareholder agreements (if applicable)

Fees:

• GK: ¥60,000 (no notarization required)
• KK: ¥150,000

Timeframe: 2-3 weeks for processing.

Step 7: Secure Necessary Permits and Licenses

Certain industries in Japan require additional permits or licenses. Examples include:

• Food and Beverage: Requires a food business license.
• Healthcare: Requires approval from the Ministry of Health, Labour, and Welfare.
• Finance: Requires registration with the Financial Services Agency.

Research specific requirements for your industry and apply early to avoid delays.

Step 8: Open a Corporate Bank Account

Once your business is registered, you can open a permanent corporate bank account. This is essential for managing operations, paying taxes, and receiving payments.

Pro Tip: Japanese banks often require:

• Proof of registration
• Articles of incorporation
• Personal ID of the representative

Step 9: Register for Taxes

Register your business for:

• Corporate Income Tax
• Social Insurance Contributions for Employees

Late registration can result in penalties, so complete this step within two months of incorporation.

Step 10: Hire Employees

If you plan to hire staff, adhere to Japan’s labor laws and regulations:

• Labor Standards Inspection Office: Notify the office about your company and comply with labor standards.
• Employment Contracts: Prepare contracts that outline job responsibilities, working hours, and compensation.

Step 11: Leverage Government Support

Japan offers numerous programs to support entrepreneurs:

• JETRO Services: Free market entry consultations, temporary office space, and regulatory guidance.
• Startup Subsidies: Grants for research, development, and operational costs.
• Startup Hubs: Cities like Fukuoka and Tokyo provide coworking spaces and mentorship programs.

Incorporate your company into Japan with SmartStart Japan! With our help, you can shorten the entire incorporation process from a dreadful 6 weeks down to just 3 weeks!

H2: 4: Government Support for Entrepreneurs

• Startup Cities: Cities like Tokyo, Osaka, and Fukuoka are recognized as startup hubs, offering vibrant ecosystems with resources, coworking spaces, and networking opportunities. For example, Fukuoka City has been designated a National Strategic Special Zone for Global Startups & Job Creation, providing various incentives and support for startups.
• Startup Visas: Japan’s startup visa program is designed to attract foreign entrepreneurs by providing a streamlined process for establishing a business. This visa allows entrepreneurs to stay in Japan for up to one year to set up their business, with the possibility of extension upon meeting certain criteria. Cities like Tokyo and Fukuoka offer specific startup visa programs to simplify the process.
• Business Manager Visas: The Business Manager Visa is suitable for business owners and executives who wish to manage their companies in Japan. This visa requires applicants to show a detailed business plan, proof of office space, and sufficient funds to operate the business. It allows for long-term residency and the ability to bring family members to Japan.
• Subsidies and Grants: The Japanese government provides financial support through various subsidies and grants to help startups with research, development, and operational costs. Programs such as the Small and Medium Enterprise (SME) Support, Japan, offer grants for innovative projects, while the New Business Activity Subsidy Program provides financial assistance for new business ventures.
• JETRO (Japan External Trade Organization): JETRO offers extensive support for foreign businesses looking to enter the Japanese market, including market entry consultation, business matching, and assistance with regulatory procedures. JETRO’s Invest Japan Business Support Centers (IBSCs) provide free temporary office space and professional support services to foreign companies.

Marketing and Growing Your Business in Japan

Marketing your business effectively in Japan involves a mix of digital and local strategies tailored to the unique preferences and behaviors of Japanese consumers. This is a crucial step to consider if you want to start a business in Japan.

Digital Marketing: SEO, Social Media, Online Advertising

• SEO: Optimize your website for search engines to improve visibility. Focus on local keywords and ensure your site is in Japanese.
• Social Media: Leverage popular platforms like LINE, Twitter, and Instagram to engage with customers. Share content that resonates with local trends and culture.
• Online Advertising: Use targeted online ads on platforms like Google and Yahoo Japan. Consider using influencers to reach a broader audience.

Local Marketing Strategies: Traditional Media, Events, Networking

• Traditional Media: Utilize newspapers, magazines, and TV to reach a wider audience. Japan still values traditional media for advertising.
• Events and Networking: Participate in local events, trade shows in Japan, and networking opportunities such as Chambers of Commerce in Japan to build your brand and connect with potential clients.

Conclusion

Starting a business in Japan involves a rather tedious process from choosing the right business structure (GK or KK), registering your company, obtaining necessary permits, to understanding financial and legal obligations. However, maximizing government support, working with the right team, and utilizing effective marketing strategies will help you launch your company in no time!

That being said, Launch Labs encourages you to take the first step on your business journey in Japan. With its robust economy and supportive infrastructure, Japan offers a promising landscape for entrepreneurs. Start planning today and turn your business vision into reality.