Sole Proprietorship In Japan

One of the most developed countries globally, Japan’s economy is unique in its ways. Having a strong-willed and highly educated industrial workforce, the country has become one of the most stable financial powerhouses in the Asia-Pacific region.

Japan is an excellent spot for those who plan to start and expand a business globally. It is vital to understand the nuances of registering a sole proprietorship in Japan. 

The following article will give you all the information you need to know about sole proprietorship in Japan.

Who can be a Sole Proprietor in Japan?

Being a sole proprietor is comparatively easier than opening a brand new company in Japan; easy to operate and is free from several taxes.

A sole proprietorship should not be confused with establishing a company because it requires ownership and several partners and firms. Also, since sole proprietorship in Japan considers the owner and business as a single entity, the owner bears all the risks involved. 

One can start a sole proprietorship in Japan if they are:

  • ~Japanese nationals
  • ~Married to a Japanese national, or to residents with long-term resident permits or permanent permits
  • ~Immigrants with a Working Holiday visa
  • ~Immigrants with work visas who already work full-time
  • ~Immigrants with a student visa, dependent visa or a cultural activities visa. The holders of these visas must be permitted to work for upto 28 hours a week by the Immigration office

Documents Required For Registering Your Business In Japan

Keep these points in mind while registering for a sole proprietorship. Understanding the rules and regulations can make setting up a sole proprietorship in Japan easy and hassle-free.

The following documents are required for registering your business in Japan: 

  • ~A seal certificate of the director and each investor. If one of the investors turns into the director, it is mandatory to submit two copies within three months. This seal certificate can be acquired at a local city hall if you are a Japanese resident. For people living overseas, this seal certificate can be replaced by an attestation from the Embassy or the Consulate of Japan.
  • ~All documents must be signed by the investors and the director.
  • ~A personal bank account along with a passbook for depositing capital is necessary to keep track of the financial records.
  • ~The seal certificates should be submitted to register the company in the registry office.

If you are a member of a separate company but want to set up a sole proprietorship in Japan, the following steps should be kept in mind.

  • ~A registry certificate from the parent company is required to be submitted within three months.
  • ~Attestation of the director in two copies is necessary to be submitted.
  • ~A seal certificate is needed in this scenario too. Two certificates must be handed over to the registry office if it's a private company. If you cannot gain one, a signature attestation from the Embassy of Japan or verification by a notary public can also be used.
  • ~Personal bank account details plus the passbook should be shown to notify the financial records.
  • ~The company seal must be registered in the registry office.

Other Criteria for Registering a Business in Japan

The other documents required to register a sole proprietorship in Japan are as follows:-

Documents Competent Authorities
Articles of Incorporation of Stock Company Japanese National Notary Association
Report Relating to Acquisition etc. of Shares and Equity International Department, Bank of Japan
Affidavits Legal Affairs Bureau, Ministry of Justice
Application form for registration of incorporation of stock company Legal Affairs Bureau, Ministry of Justice
Registration for the establishment of a business or a company Legal Affairs Bureau, Ministry of Justice

How to Register a Sole Proprietorship Company in Japan?

An eight-step procedure must be followed to register a sole proprietorship in Japan. These include:

Bringing a structure to the company:

A proper structure should be built to suit the company's business model. These must be flexible and open to all forms of decision-making capacities.

Selecting between GK and KK:

It can be noted that a GK is comparatively faster, easier, and cheaper to allow profit sharing. But if you are looking forward to holding shares with various companies, KK is a more viable option. KK believes in a traditional structure, while GK brings about new possibilities introduced in 2006.

Reservation of company name:

One of the primary business objectives is to choose a proper name for the company. The name should not be misleading or casually placed and should not violate the trademark's official rules. Employers should choose a unique name to speed up the incorporation process.

Preparing and noting documents:

Documents such as the articles of incorporation should be prepared well with all relevant details. Employers must mention notables such as the organizational model and internal regulations. Other essentials such as financial deposits and company seal notifications are required to fix appointments. They should also prepare an application letter.

Paid-up capital and opening a corporate bank account:

Regardless of 1 yen as the minimum paid-up capital, a corporate account should be opened. A bank account for business should be separately created to not mix finances up with your income.

Financial reporting and meeting requirements of shareholders:

A business registration number and certificate is required for the registration of the company. The director must register the company seals. Annual financial reporting is also essential as it should be presented to the shareholder’s meetings at the year-end.

Tax registration:

The company must register in the Japanese Company Tax registration. This should be sooner notified to the National Tax Agency to support the payment of salaries along with taxes such as enterprise taxes. The registration number should be used for all these activities.

Application for visa and licenses:

A Business Manager Visa comes in handy if you require a closer hand with other foreign companies. However, it is necessary to have a physical office to apply for such a visa. Licenses related to labor requirements, public employment security, and pensions should also be taken into account to create better ties.

Benefits of a Sole Proprietorship in Japan

Sole proprietorship in Japan can be acknowledged as the fastest and simplest pathway to fulfill your business dreams.

A sole proprietorship in Japan includes businesses like small restaurant owners, teachers, designers, etc. It offers the following benefits:

  • ~Ownership and full control of the business
  • ~Potential of your branch to expand
  • ~Proper income and flexible work hours
  • ~Deductions and claim-making powers
  • ~Low bankruptcy risks
  • ~Sponsorship opportunities
  • ~Easy tax payments

Sometimes, sole proprietors also don’t need an accountant. You can have your name or a separate business name for trading purposes. A valid address is required if you are a local. For foreigners, a residential address is acceptable.

No startup fee is required to set up a sole proprietorship in Japan. It is possible to start a sole proprietorship in Japan even if you are a part of a separate company. However, it is not possible if one’s present employer imposes any outside employment prohibition. 

Conclusion

Establishing and expanding a business in Japan are challenging. Still, it can become easier if you are well acquainted with the country’s rules and regulations. Japan has a rich business culture, which is great for non-residential citizens. Legal benefits are also applicable if you plan to set up a sole proprietorship in Japan.

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Frequently Asked Questions

What are the disadvantages of sole proprietorship in Japan?

Potential disadvantages such as unstable income, lack of health insurance, filing your taxes, and all ownership with zero partners are some pointers that one needs to check before becoming a sole proprietor.

Does one require a license for selling goods online?

Licenses are required only for certain businesses such as food, liquor, and cosmetic products. Second-hand goods usually require one if you plan to sell them in Japan.

Is it difficult to manage a business in Japan?

It is natural to face some challenges when running a business in Japan. For instance, registering property in Japan is a lengthy process requiring extensive documentation. English proficiency is another issue because the population is mostly Japanese-speaking. It is essential to learn Japanese at A1 level if you want to settle in this country.

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