Start a Business in Japan 

Step 1: Outline Company Information

• Company name
• Business address
• Nature of the business
• Name of the founder
• Amount of capital investment
• Composition of directors/managers

Note 1: Company name

You may choose any business name you like, but it must clearly indicate the type of company structure. For example: [Company Name] Kabushiki-Gaisha

Common company structures in Japan are:

• Joint-Stock Company (Kabushiki-Gaisha)

• Limited Liability Company (Godo-Gaisha)

Joint-Stock Company

This is a type of company that raises funds by issuing shares.

• In a single-investor setup, the founder acts as the sole shareholder and may also serve as the manager　(CEO).
• With multiple investors, each holds portion of equity. Shareholders appoint managers to delegate the running of the company to them. Therefore, managers have a responsibility to act in the interest of shareholders.

The advantage of this company structure is that it enables faster fundraising, but the ultimate decision-making authority remains with the shareholders.

Limited Liability Company (LLC)

Shares are not issued under this structure.

• All investors actively participate in management as company employees.
• In a single-investor LLC, the founder takes on the role of manager.

LLC offers greater control of management. However, as all investors are involved in the management, there is a tendency for divergent opinions among them, which could slow down the decision-making process.

Note 2: Company Seal

Once you have decided on a company name, the next step is to create a set of company seals. These are essential items for company setup and later business operations.

The use of seals is a unique aspect of Japanese culture that has been deeply ingrained in society for centuries. To date, seals are still widely used for binding legal documents, giving approvals, and serving as a means of identification. Their use is not limited to company establishment, and you will find that these stamps are frequently used from the very start of business operations in Japan.

• The representative seal (official company seal) must be registered at the Legal Affairs Bureau along with company incorporation registration. It is the most important seal, as it is used to validate company decisions.

• Banking seal is used for opening and managing a corporate bank account.

• A square company stamp is often used on documents such as invoices and purchase orders.

Step 2: Company registration

The next step is to officially register your business as a company. This process involves following steps:

i) Prepare Articles of incorporation - This legal document includes the company's core details (outlined in Step 1). For Joint-Stock Companies, it must be submitted to a notary public.

ii) Make initial capital payment – Transfer the capital into your personal bank account in Japan.

iii) Register the company incorporation – File the incorporation documents with the Legal Affairs Bureau, together with your representative seal registration.

iv) Notify government agencies – This is to inform government agencies that you have established a company and are ready to begin operations.

• Local and Prefectural tax office
• Health centres/Prefectural authorities for permit/licence applications
• Pension Centre
• Labour Standards Supervision Office

Company Setup

JPUK Accounting Solutions will connect you with a legal team that will handle the legal filings necessary for company setup. You will be kept fully informed throughout the process.

Company setup include more:

◎ With a team of partner tax and payroll specialists, we will proceed with notifying the relevant government agencies (as Step 2 iv).

◎ Connect you with HR agencies for staff recruitment.

Opening a Corporate Bank Account

When opening a corporate account, Japanese financial institutions will normally ask for a copy of the articles of association or a certified copy of the company register. However, these documents alone may be insufficient, especially for startups that are new to Japan.

Opening a bank account is a major challenge for many foreign startups.

Each bank has its own criteria for assessing a company's credibility, and requirements vary on a case-by-case basis. Some banks may request additional evidence of your business's existence, such as a company website.

Given the time it can take to open a bank account, it is advisable to apply as soon as company registration is complete.

Financial Forecasts

JPUK Accounting Solutions will prepare financial forecasts based on the data you provide.

Financial forecasts estimate a company's future financial outcomes and serve as a vital source of information that supports your business plan.

Supporting documents include:

◎ Startup Cashflow

◎ Profit and Loss Projection

◎ Cashflow Forecast

The initial costs of business setup can place significant financial pressure on startups. Detailed monthly cashflow forecasts enable startups to control spending more effectively and ensure adequate funds are reserved for the business launch.

It is also important to work out how much you will need during the first few months of operations. Maintaining an adequate cash level is essential to keeping a business operational. Without sufficient cash, the risk of business failure or liquidation increases.

The key to maintaining healthy cash levels is creating a realistic cashflow forecast. It gives businesses better control over their spending and reduces the risk of running out of funds. 

Internal Accounting Operations Setup

It is crucial for start-ups to have internal accounting processes set up before opening.

Internal accounting plays a major role in managing cash flow, which is a vital resource for the business. For this reason, businesses must ensure that a functional process is properly established from the beginning to avoid errors and confusion later on.

◎ Receivables & Payables

◎ Petty cash

◎ Employee expense reimbursement

◎ Employee time sheet for payroll calculation

◎ Cashflow management

◎ Advisory on developing company policies for petty cash management and employee expense reimbursement

Begin your journey with JPUK Accounting Solutions. 

Further reading on the startup is available in articles on LinkedIn.

• How to Start a Business in Japan / Entering the Japanese Market
• How to Prepare a Business Plan / An Essential Guide to Starting a Business in Japan
• How to Prepare Financial Forecasts / Your Business Potential in Japan