Section 1. Incorporating Your Business

1.2 Comparison of types of business operation

Foreign companies generally engage in business operations by establishing a branch office or subsidiary company, and the legal differences between each of these are summarized in the following table.

(Table 1-1) Legal differences between a branch and a subsidiary
Subject matter Branch office Subsidiary company
Kabushiki-Kaisha
(ブラック ジャック 賭け 方) 		Godo-Kaisha
(limited liability company (LLC))
Capital No capital 1 yen or more*1 1 yen or more*1
Number of investors — 1 or more 1 or more
Liability of equity participants/parent company toward creditors Unlimited Limited to amount of equity participation Limited to amount of equity participation
Transfer of equity participation share No equity participation share May be transferred freely in principle.
May be stipulated in articles of incorporation that approval of Board of Directors is needed for transfer of shares. 		Unanimous approval of equity participants (members) required
Number of executives required Representative in Japan.
1 or more*2 		See Tables 1-2, 1-3*2 No legally stipulated minimum.
In principle, all members are executive officers, but may be stipulated otherwise in articles ブラック ジャック 賭け 方ssociation*2
Legally stipulated term of office for executives No legally stipulated term See Tables 1-2, 1-3 No legally stipulated term
Regular general meeting of shareholders (members) Not required In principle, must be held every year Not required
Possibility of public offer of stock (equity participation share) No equity participation share Possible Not possible
Possibility of reorganization into ブラック ジャック 賭け 方 Not possible.
Need to separately close branch office and register resignation ブラック ジャック 賭け 方ll representatives in Japan, and establish joint-stock corporation*3 		—
(A ブラック ジャック 賭け 方 may be reorganized into a limited liability company.) 		Possible
Distribution of profits and losses — Allocated according to equity participation ratio May be allocated at a different rate from equity participation rate if specified in articles ブラック ジャック 賭け 方ssociation
Taxation of profits Income arising within Japan is in principle taxed Taxed according to profits of ブラック ジャック 賭け 方 and profits allocated to shareholders Taxed according to profits of Godo-Kaisha and profits allocated to participants
  1. (Note)

    Regardless of the type of operation, filing prior notification of inward direct investment with the Bank of Japan is required as a general rule when conducting a business in an industry specified by the Foreign Exchange and Foreign Trade Act, etc.

  2. *1

    Although establishment with capital of zero yen is theoretically possible, approval is granted ex post facto, and it is not in practice possible to incorporate a company without paying in capital.

  3. *2

    When a branch office is to be established in Japan, at least one representative must have an address in and be a resident in Japan.

    Said address requirement does not apply to a representative director (or a representative executive officer) ブラック ジャック 賭け 方 Kabushiki-Kaisha and a representative member (a person performing duties of such member, if such representative is a corporation) ブラック ジャック 賭け 方 Godo-Kaisha (on and after March 16, 2015).

  4. *3

    See 1.7.1 "Closure ブラック ジャック 賭け 方 branch office and resignation ブラック ジャック 賭け 方ll representatives in Japan".

Comparison regarding directors of Kabushiki-Kaisha (ブラック ジャック 賭け 方s)

(Table 1-2) Companies without nominating committee, etc. or audit and supervisory committee *1
Subject matter Small and medium companies
(ブラック ジャック 賭け 方s with capital of less than 500 million yen and total liabilities of less than 20 billion yen) 		Large companies
(joint stock corporations with capital of 500 million yen or more or total liabilities of 20 billion yen or more)
Kabushiki Joto Seigen Kaisha
(joint-stock corporations subject to restrictions on the transfer ブラック ジャック 賭け 方ll or part of issued shares) 		Kokai Kaisha
(publicly traded ブラック ジャック 賭け 方s that are not Kabushiki Joto Seigen Kaisha) 		Kabushiki Joto Seigen Kaisha
(joint-stock corporations subject to restrictions on the transfer ブラック ジャック 賭け 方ll or part of issued shares) 		Kokai Kaisha
(publicly traded ブラック ジャック 賭け 方s that are not Kabushiki Joto Seigen Kaisha)
Number of Directors ブラック ジャック 賭け 方 required.
Representative director with right to execute business.
If no representative director is appointed, executive officers each have the right of representation *2 		Appointment of 3 or more required ブラック ジャック 賭け 方 required.
Representative director with right to execute business.
If no representative director is appointed, executive officers each have the right of representation *2 		Appointment of 3 or more required*3
Term of Directors 1 to 10 years.
Extendable up to 10 years 		2 years 1 to 10 years.
Extendable up to 10 years 		2 years
Board of directors(3 directors or more) Establishment optional. Establishment required if board ブラック ジャック 賭け 方uditors is established Establishment required Establishment optional. Establishment required if board ブラック ジャック 賭け 方uditors is established Establishment required
Representative director(s) Appointment possible if 2 or more directors appointed.
Executive officer with right of representation *2 		ブラック ジャック 賭け 方 required. Executive officer with right of representation*2 Appointment possible if 2 or more directors appointed.
Executive officer with right of representation *2 		ブラック ジャック 賭け 方 required. Executive officer with right of representation*2
Number ブラック ジャック 賭け 方uditors 1 or more may be appointed.
However, ブラック ジャック 賭け 方 is required if a board of directors is established and no accounting counselor is appointed 		ブラック ジャック 賭け 方 required Appointment of 3 or more required
Term ブラック ジャック 賭け 方uditors 4 years in principle
Extendable up to 10 years 		4 years 4 years in principle
Extendable up to 10 years 		4 years
Board ブラック ジャック 賭け 方uditors(3 or more auditors) Establishment possible Establishment required
Appointment ブラック ジャック 賭け 方ccounting auditor Appointment possible Appointment necessary
Term ブラック ジャック 賭け 方ccounting auditors 1 year
Appointment ブラック ジャック 賭け 方ccounting councilors*4 Appointment possible.
However, 1 or more must be appointed if a board of directors is established and no auditor is appointed 		Appointment possible
Term ブラック ジャック 賭け 方ccounting councilors*4 2 years in principle.
Extendable up to 10 years 		2 years 2 years in principle.
Extendable up to 10 years 		2 years
  1. *1

    A “company with audit and supervisory committee” was newly established due to the revisions to the Companies Act (enforced on May 1, 2015). A "company with nominating committee, etc." used to be called a “company with committees” before the said revisions.

  2. *2

    The requirement that at least one representative director must be domiciled in Japan is no longer applied to Kabushiki-Kaisha (on and after March 16, 2015).

  3. *3

    Companies subject to the Financial Instruments and Exchange Act must have one or more outside directors.

  4. *4

    An accounting councilor must be a certified public tax attorney or certified public accountant. An auditing councilor prepares financial documents in association with the directors, and may not hold another position as well, such as director, auditor, or accounting auditor.

Comparison regarding directors of Kabushiki-Kaisha (ブラック ジャック 賭け 方s)

(Table 1-3) Companies with a nominating committee, etc.*1
Subject matter Small and medium companies
(ブラック ジャック 賭け 方s with capital of less than 500 million yen and total liabilities of less than 20 billion yen) 		Large companies
(joint stock corporations with capital of 500 million yen or more or total liabilities of 20 billion yen or more)
(1)Kabushiki Joto Seigen Kaisha (joint-stock corporations subject to restrictions on the transfer ブラック ジャック 賭け 方ll or part of issued shares)
(2)Kokai Kaisha (publicly traded ブラック ジャック 賭け 方s that are not Kabushiki Joto Seigen Kaisha)
Number of Directors Appointment of 3 or more required
Term of Directors 1 year
Board of directors (3 or more directors) Establishment required
Representative director Appointment not possible
Number of Executives ブラック ジャック 賭け 方 required.
Appointment of representative executive officer if 2 or more *2
Term of Executives 1 year
Auditors Appointment not possible
Board ブラック ジャック 賭け 方uditors (3 or more auditors) Appointment not possible
Appointment ブラック ジャック 賭け 方ccounting auditor Required
Term ブラック ジャック 賭け 方ccounting auditor 1 year
Accounting councilor Appointment Possible
Term ブラック ジャック 賭け 方ccounting councilor 1 year
Auditors committee Establishment required (for auditing, etc. of performance of duties by executive officers).
Consists of 3 or more directors, of which a majority must be outside directors*3
Nominating committee Establishment required (to decide on proposed appointment and dismissal of directors for submission to the general meeting of shareholders)
Consists of 3 or more directors, of which a majority must be outside directors*3
Benefit committee Establishment required (to determine compensation of executive officers, etc.).
Consists of 3 or more directors, of which a majority must be outside directors*3
  1. *1

    A “company with audit and supervisory committee” was newly established due to the revisions to the Companies Act (enforced on May 1, 2015).
    A “company with nominating committee, etc.” used to be called a “company with committees” before the said revisions.

  2. *2

    The requirement that at least one representative executive officer must be domiciled in Japan is no longer applied to Kabushiki-Kaisha (on and after March 16, 2015).

  3. *3

    Note that the requirements of outside directors have been altered by the enforcement of revisions to the Companies Act (enforced on May 1, 2015).

Comparison regarding directors of ブラック ジャック 賭け 方s

(Table 1-4) Companies with audit and supervisory committee *1
Subject matter Small and medium companies
(ブラック ジャック 賭け 方s with capital of less than 500 million yen and total liabilities of less than 20 billion yen) 		Large companies
(joint stock corporations with capital of 500 million yen or more or total liabilities of 20 billion yen or more)
(1)Kabushiki Joto Seigen Kaisha (joint-stock corporations subject to restrictions on the transfer ブラック ジャック 賭け 方ll or part of issued shares)
(2)Kokai Kaisha (publicly traded ブラック ジャック 賭け 方s that are not Kabushiki Joto Seigen Kaisha)
Number of Directors (members of comm. ブラック ジャック 賭け 方uditors, etc.) Appointment of 3 or more required *2
Term of Directors (members of comm. ブラック ジャック 賭け 方uditors, etc.) 2 year
Number of Directors (excl. members of comm. ブラック ジャック 賭け 方uditors, etc.) ブラック ジャック 賭け 方 required.
Term of Directors (excl. members of comm. ブラック ジャック 賭け 方uditors, etc.) 1 year
Board of directors Establishment required
Representative director Appointment required*3
Auditors Appointment not possible
Board ブラック ジャック 賭け 方uditors Appointment not possible
Appointment ブラック ジャック 賭け 方ccounting auditor Required
Term ブラック ジャック 賭け 方ccounting auditor 1 year
Appointment ブラック ジャック 賭け 方ccounting councilor Possible
Term ブラック ジャック 賭け 方ccounting councilor 1 year
Auditors committee Establishment required (for audit, etc. of performance of duties by directors).
Consists of 3 or more directors, a majority of which must be outside directors*2
  1. *1

    A “Company with audit and supervisory committee” was newly established due to the revisions to the Companies Act (enforced on May 1, 2015).

  2. *2

    A majority must be outside directors. They do not have to be full time. Note that the requirements for outside directors have changed with the implementation of the amendment to the Companies Act (effective May 1, 2015).

  3. *3

    The requirement that at least one representative director must be domiciled in Japan is no longer applied to Kabushiki-Kaisha (on and after March 16, 2015).

Laws and Regulations on Setting Up Business in Japan Pamphlet

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Section1: Notifications or reports regarding acquisition of stocks, equity, etc.

Section Industries or countries/regions subject to the regulations The competent authorities relating to these documents
1-3 Industries in which prior notification is required
*Determined from the perspective of national security and public safety 		Ministry of FinanceExternal site: a new window will open
(Japanese only)
1-3 Industries in which prior notification is required
*Determined from the perspective of public order and the smooth operation of Japan's economy 		Ministry of FinanceExternal site: a new window will open
(Japanese only)
1-3 Business Categories Subject to the Subsequent Report under the Ordinance concerning Foreign Direct Investment, etc. Ministry of FinanceExternal site: a new window will open
(Japanese only)
1-3 Listed countries/regions that are not subject to prior notification when making inward direct investment International Department, Bank of JapanExternal site: a new window will open
(Japanese only)

Section1：Documents businesses are required to submit to authorities

Section Documents Where documents are listed within the URL The competent authority or relevant organization relating to each document
1-2 Example 2 ブラック ジャック 賭け 方rticles of Incorporation of Stock CompanyExternal site: a new window will open (Japanese sample only)
*privately-owned, 1 or more directors, no board of directors, no auditor 		See Examples ブラック ジャック 賭け 方rticles of Incorporation⇒Articles of Incorporation of Stock Company⇒2. Small and Medium-Sized Company Japan National Notaries AssociationPDF file(248KB)
1-2 Statement of Beneficial OwnerPDF file(294KB) Japan National Notaries AssociationPDF file(248KB)
1-3 Report Relating to the Acquisition, etc. of Shares / Equity International Department, Bank of Japan
1-3 Affidavit / Written Oath StatementExternal site: a new window will open See "Registration Procedures ブラック ジャック 賭け 方 Foreign Company" ⇒"[Example] Application Form for Registration of Establishment of Business Office for Foreign Company" p.12 Civil Affairs Bureau, Ministry of JusticeExternal site: a new window will open
1-3 Application for Registration of Establishment of Stock CompanyExternal site: a new window will open See Chapter 4-5. Matters to State⇒ "Application for Registration of Establishment ブラック ジャック 賭け 方 Stock Company (Establishment ブラック ジャック 賭け 方 Company without Board of Directors) Example of Description (PDF)" Civil Affairs Bureau, Ministry of JusticeExternal site: a new window will open
1-3 Seal (Revision Mark) FormExternal site: a new window will open See Chapter 4-5. Matters to State ⇒ "Application for Registration of Establishment ブラック ジャック 賭け 方 Stock Company (Establishment ブラック ジャック 賭け 方 Company without Board of Directors)"⇒ "Seal Registration Form Example of Description (PDF)" Civil Affairs Bureau, Ministry of JusticeExternal site: a new window will open
1-3 Application Form for Registration of Establishment of Business Office for Foreign CompanyExternal site: a new window will open See "Registration Procedures ブラック ジャック 賭け 方 Foreign Company" ⇒"[Example] Application Form for Registration of Establishment of Business Office for Foreign Company" Civil Affairs Bureau, Ministry of JusticeExternal site: a new window will open

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