LLC is called as Godo Kaisha in Japan.
A Godo Kaisha (G.K.) is a relatively new type of business legal form that provides liability protection like K.K. and other features similar to a partnership. Nomally G.K. is designed for small businesses with a small number of investors who operate the company on their own. and it gives them more flexibility to develop its organization and internal rules.
The Companies Act provides 4 types of company, Kabushiki Kaisha (K.K.), Gomei Kaisha, Goshi Kaisha, and Godo Kaisha (G.K.). The three companies other than K.K. are membership companies, designed for members, ― investors who own membership company, to operate the company on their own. And over 99% of companies in Japan are Kabushiki Kaisha (K.K.) and Godo Kaisha (G.K.).
There are two types of members: one that is liable for the company’s labilities if it becomes insolvent (unlimited liability member), and one that is not liable (limited liability member). Gomei Kaisha can only have unlimited liability members while Goshi Kaisha can have both. Godo Kaisha (G.K.) is consisted of limited liability members only.
G.K. can design its organization and rules relatively freely. For example, G.K. is allowed to distribute dividends depending on how much contribution members made to the business, instead of based on the investment amount like K.K. In the case of a joint venture between a big corporation who invests more money and a SME who provides unique technology, it is possible to pay more dividends to the smaller member who made greater contribution by providing its technology.
Although G.K. features partnership characters, pass-through taxation ― the income generated by a legal entity is treated as income of its owners ― does not apply to G.K. Corporate income tax is imposed at the level of the entity.
A Incorporating G.K. is a three-step process.
① Person(s) who wishes to become a member of the G.K. is appointed as an incorporator(s) called “hokkinin” and prepares the articles of incorporation.
The articles of incorporation are prepared almost the same way as K.K. However, it dose not require to be notarized by a notary public.
② The incorporator(s) make contributions to the company to become a member.
As G.K. adopts limited liability, proposed members must make contributions before incorporation.
In the case of K.K., contributions must be made at a bank account, and a copy of the bank statement must be submitted to the authority.
On the contrary, G.K.’s contributions are not required to be made in a bank account. Therefore, 1nstead of bank statements, a copy of the receipt issued by G.K. will be submitted to the authority to prove that the contribution has been completed.
③ A member applies for registration of establishment with the Legal Affairs Bureau.
Finally, a member applies for registration of establishment with the Legal Affairs Bureau, by submitting articles of incorporation, a copy of the receipt and other relevant documents. Lawyers, Judicial Scriveners and Certified Public Accountants can be appointed as the agent to apply for registration of incorporation. The registration license tax payable at the time of application is the higher one of either 0.7% of the capital or JPY 60,000.
You can start your business after finishing the process.
Our team provide legal service of incorporation.
Please feel free to ask us if you have a plan of setting up a company in Japan.
