Types of companies in Japan
Although there are four types of company structures in Japan, this article will go over the two main company structures — a corporation/joint stock company (kabushiki-kaisha) and a limited liability company (gōdō-kaisha). Both of these company structures have their pros and cons, so it’s important to determine what type of structure your business falls under — this will depend on factors such as your organizational structure and the current financial capacity of your business.
Corporation/Joint Stock Company (kabushiki-kaisha, or KK)
A kabushiki-kaisha is the most widely known and credible type of company structure in Japan. As with any corporation structure, these types of companies are governed and owned by investors and owners (i.e. shareholders) as well as by directors of the company.
If you’re looking to set up your company as a kabushiki-kaisha, you’ll need at least one shareholder and one representative director — this can also be the same person. The advantages to the kabushiki-kaisha company structure is that it provides a reputation of trustworthiness and credibility to your company name, as well as the capability to raise additional capital through stock options, selling shares, and other similar methods. Although the KK company structure is typically most appropriate for medium to large companies, you can incorporate your company as a KK even if your business is a one- or two-man operation, as long as you have sufficient capital to do so.
- Adds credibility to your company image/name in Japan
- Capability to raise additional capital through stock options, selling shares, etc.
- Can attract outside investors in the public stock market
- Protects shareholders from personal liability
- Can be easier to attract Japanese employees due to the good reputation of KKs
- Tedious and expensive process to incorporate your company as a KK
- Stricter regulatory requirements than a gōdō-kaisha (GK)
Limited Liability Company (gōdō-kaisha, or GK)
A gōdō-kaisha is a company structure that is typical among small- and medium-sized companies, with a partnership structure as opposed to a share structure. This type of company structure is relatively new in Japan, having been introduced in 2006 to replace the yugen-kaisha structure, and is therefore not as prominent as the kabushiki-kaisha company structure.
There are several advantages to the gōdō-kaisha company structure, such as a lower start-up cost than the kabushiki-kaisha structure. In addition, incorporating your company as a gōdō-kaisha will not require you to submit Articles of Incorporation or establish a board of directors, and is therefore a faster and simpler way to establish your company in Japan if you are the sole investor of your company. However, your options for raising additional capital for your business will be limited due to not being able to sell shares or issue stock options (as opposed to a KK), and therefore it’s important to keep this point in mind if you register as a GK. Additionally, GKs are not as well known as KKs, and therefore this may negatively affect how your potential clients view your company in Japan.
- Less expensive to incorporate than a KK
- Most of the same legal protections as a KK (limited liability protection for shareholders
- Doesn’t require submitting Articles of Incorporation
- Doesn’t require establishing a board of directors
- A relatively new company structure in Japan; doesn’t provide the “prestigious” reputation that a KK typically does
- Can’t raise additional capital through selling shares and/or stock options (can’t be listed on the Japanese stock market)
- Investment amount for shareholders is not equal to authority — can be difficult for seeking future outside investments
You can learn more about staffing your company in Japan by reading our article on this topic here.
Get an expert’s opinion
While it’s definitely possible to change your company structure from a GK to a KK and vice versa, this can be a very tedious and high-cost process — therefore, it’s imperative that you properly weigh the advantages and disadvantages of each option in regard to your business before you start.
In order to determine the best decision possible for your situation, we highly recommend reaching out to an English-speaking lawyer in Japan by calling 03-6868-8647 for an expert consultation, or contacting one through our online contact form.
This page is intended to be used for informational purposes only and should not be a substitute for obtaining professional legal advice. For advice from a lawyer, please call the number listed above.