Are you an entrepreneur who has started thinking of venturing into the Japanese market? This article is the perfect guide on how to start a business in Japan! Aside from the fact that Japan boasts one of the biggest economies in the world, the country offers diverse opportunities for entrepreneurs through startup cities and other forms of support! Through this article, we hope to give you a helpful view on why you should push for your business here and how to do it!
Why You Should Start A Business in 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”.
Fast-forward to the 2020s, Japan has now become the 21st largest VC cluster in the world. In 2023, Japan Times also suggested that the country’s startup scene is more or less ready to make large-scale progress in the near future. Cities like Shibuya and Kobe are bustling with innovation, providing robust support systems for new businesses. The country’s strong economy, coupled with government incentives and a skilled workforce, makes it an ideal location for entrepreneurs. Additionally, Japan’s emphasis on research and development, along with its strategic location in Asia, enhances business feasibility and potential for growth.
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
This section will highlight essential insights for aspiring entrepreneurs. It covers the two common business structures in Japan, legal and regulatory requirements, financial planning, and government support for entrepreneurs, providing a comprehensive guide to help you get started on your business journey in Japan!
1: Different business structures in Japan
Before you start a business in Japan, it is important to know how your business will be run. The table below compares 合同会社 Godo kaisha (GK) and 株式会社 Kabushiki kaisha (KK), two primary business structures in Japan. A GK is a limited liability company known for its simple and flexible management, making it cost-effective and easier to set up. In contrast, a KK is a joint-stock company, offering higher credibility and better capital-raising opportunities but with more complex regulations.
| Feature | 合同会社 Godo kaisha (GK) | 株式会社 Kabushiki kaisha (KK) |
| Definition | A limited liability company with a simple and flexible management structure. | A joint-stock company with a more complex and formal management structure. |
| Pros | Simple and cost-effective setupFewer regulations and requirementsFlexible management structure | Higher credibility and prestigeEasier to raise capitalSuitable for larger and more complex businesses |
| Cons | Lower credibility compared to KKLimited appeal to investors | More complex and expensive to set upStricter regulations and requirements |
Learn more about this topic through this article on A Quick Start on Japan Sole Proprietorships!
2: Legal and Regulatory Requirements to Start A Business in Japan
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.
3: Financial Planning
Effective financial planning is essential for starting a business in Japan, as well as operating it in the long run. Key considerations include:
- Initial Capital Requirements: Vary depending on the business structure, with a Kabushiki Kaisha (KK) typically needing higher initial capital than a Godo Kaisha (GK).
- Opening a Corporate Bank Account: Critical for managing business finances, requiring selection of a bank and meeting documentation requirements.
- Corporate Taxes and Financial Obligations: Includes corporate income tax, consumption tax, and social insurance contributions. Understanding these helps ensure compliance and optimize tax strategies.
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!
4: Government Support for Entrepreneurs Who Want to Start A Business in Japan
Japan offers robust support for entrepreneurs through various programs and incentives designed to foster innovation and attract foreign investment. Key initiatives include:
- 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.
How to Start A Business in Japan in 10 Steps
1. Choose a Business Structure
- Decide between a Godo Kaisha (GK) and a Kabushiki Kaisha (KK)
- Fees: Notarization fee for KK articles of incorporation: ¥50,000. No notarization required for GK
- Timeframe: 1-2 weeks to decide and prepare necessary documents
2. Create a Business Plan
- Develop a detailed business plan outlining your business goals, target market, financial projections, and operational strategy
- Timeframe: 2-4 weeks for thorough planning and research
3. Register the Company Name
- Ensure your chosen company name is unique and not already registered by conducting a search at the Legal Affairs Bureau
- Fees: None
4. Prepare Articles of Incorporation
- Draft the articles of incorporation detailing the company’s purpose, structure, and operational rules
- For a KK, the document must be notarized
- Fees: Notarization for KK: ¥50,000. GK does not require notarization
- Timeframe: 1-2 weeks for drafting and notarization
5. Deposit Capital
- Open a temporary bank account and deposit the initial capital required for your business structure
- Fees: Bank fees vary, typically ¥0-¥5,000
- Timeframe: 1-2 weeks for bank procedures and obtaining a certificate of deposit
6. Register the Company
- Submit the necessary documents, including the articles of incorporation and certificate of capital deposit, to the Legal Affairs Bureau for registration
- Fees: Registration fee for KK: ¥150,000. Registration fee for GK: ¥60,000
- Timeframe: 2-3 weeks for processing
7. Obtain Necessary Permits and Licenses
- Depending on your industry, apply for and secure any required permits or licenses to operate legally
- Fees: Varies by industry and license type
- Timeframe: 2-8 weeks depending on the complexity and industry
8. Open a Corporate Bank Account
- Once the company is registered, open a permanent corporate bank account to manage your business finances
- Fees: Bank fees vary, typically ¥0-¥5,000
- Timeframe: 1-2 weeks for account opening
9. Register for Taxes
- Register your company for corporate taxes, consumption tax, and social insurance with the relevant tax office and social insurance office
- Fees: None, but penalties apply for late registration
- Timeframe: Within 2 months of company registration
- Look for Accountants in Japan to take this off your plate and manage your taxes better!
10. Hire Employees and Set Up Payroll
- Recruit employees and set up a payroll system to manage salaries, benefits, and social insurance contributions.
- Fees: Varies based on payroll service provider
- Timeframe: Constant, initial setup 1-2 weeks
- This article on HR in Japan might be of help to you!
Incorporate your company into Japan with Launch Lab! With our help, you can shorten the entire incorporation process from a dreadful 6 weeks down to just 3 weeks!
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.
