The Distinction of the Company Natures

Kabushiki Kaisha
(Company Limited by Shares)

Goudou Kaisha
(Limited Liability Company)

Shiten
(Branch Office)

Capital

JPY 1 and above

JPY 1 and above

No Capital
(The capital of branch office will same as the foreign company in tax discipline.)

Number of Investors

1 Person and above

1 Person and above

N/A

Title for Investors

Shareholder

Member

N/A

Representatives of the company

Representative Director

Representative Member

At least one representative must be a resident in Japan

Operating of Company

Investor and the manager of the company are separated

Investor equals to manager

To operate the business decided/ authorized by the foreign company

Power to Make Decision

Annual General Meeting

Consent of All Members

Depends on the foreign company

Liability of Investor / Parent Company to the Company Creditor

Limited to capital contributed

Limited to capital contributed

The foreign company is ultimately responsible for all debts and credits

Transfer of Capital

Could be transferred freely in principle but stipulated in articles of incorporation that approval of Board of Directors is needed for transfer of shares.

Consent of All Investors (Members)

N/A

Officers of the Management

At least 1 director should be appointed (corporations subject to restrictions on the shares transfer)

At least 3 directors should be appointed (listed company)

※ According to the nature and scale of the company, other necessary management also needs to be selected

No legal management

In principle, all members are business executives, but different regulations could be stated in the articles of association

At least one representative must be a resident in Japan.

Legally stipulated term of office for executives

2 years in principle. Maximum up to 10 years.

No legally stipulated term

Depends on the foreign company

Regular General Meeting of Shareholders (Members)

In principle, must be held every year

Not required

Depends on the foreign company

Public offer of stock (Capital distributed)

Yes

No

N/A

Transferring of company type between Kabushiki Kaisha and Goudou Kaisha

Yes

Yes

N/A

Distribution of Profits and Losses

Allocated according to capital distributed

Allocated according to the rate specified in the articles of association

Depends on the foreign company

Taxation on Profit

Taxed according to profits of company and the profits allocated to shareholders

Taxed according to profits of company and the profits allocated to members

Tax amount is based on the profits generated by the branch in Japan.

Notice obligation during the Dissolution of Company

Yes

Yes

Yes

The Distinction of the Company Natures

Kabushiki Kaisha (Company Limited by Shares)

Goudou Kaisha (Limited Liability Company)

Shiten
(Branch Office)

Registration and license tax
(登録免許稅)

At least JPY 150,000.

At least JPY 60,000

(The tax is charged at a rate of 0.7% of the capital increase, with a minimum tax of JPY 60,000)

JPY 90,000

Other tax system

The tax systems of Kabushiki Kaisha and Goudou Kaisha are basically the same, they are known as the legal person in tax law so the types and rates of taxes are basically same.

For Shiten, since the tax basis for shiten depends on the capital of the foreign company, please note that if the share capital of foreign company exceeds JPY 100 million, shiten would be taxed on a pro forma basis using income, added value, and capital as the taxable base.

Please also be advised that the calculation of income subject to corporate tax of shiten for several items (like entertainment expenses and donations), and the obligation to pay consumption tax of Shiten, would be different to normal legal person. Therefore shiten would not always have more advantageous in term of tax.

For the details, please consult the tax officer.

Kabushiki Kaisha (Company Limited by Shares)

Pros:

1.       Well-known, the most popular type

2.       various tax-saving benefits

3.       Balancing between income tax and corporate tax, maximize the cash on hand

Cons:

1.       Higher establishment cost

2.       Corporate Tax is equally distributed for all corporate entity, it means that JPY 70,000 is required to pay annually, even company has deficit.

3.       Complicated tax filing and operations for annual maintenances

Goudou Kaisha (Limited Liability Company)

Pros:

1.       Low establishment cost

2.       Higher flexibility

3.       No difference with Kabushiki Kaisha for fund raising

4.       Similar tax system with Kabushiki Kaisha

Cons:

1.       Less well-known (starting from 2006)

2.       Since consent from all members is required for decision making, it would be a problem if members are unable to reach a consensus.

Shiten
(Branch Office)

Pros

1.       Low establishment cost

2.       The P/L of shiten could be included within the management account of foreign company. If shiten has deficit, foreign company would have tax-saving benefit.

3.       Able to open bank account and rent property

4.       In general, to remit profit from shiten to foreign company would be tax-exempt.

Cons

1.       Less well-known, unable to apply several government subsidies

2.       Success rate for visa application is relatively lower

3.       At least one representative must be a resident in Japan. Since the representative need to engage the company’s decision making, an agent cannot be appointed as representative.

4.       The foreign company is ultimately responsible for all debts and credits generated.

5.       Several documents of foreign company (e.g. Certificate of Incorporation, Article) are required to translated to Japanese for incorporation, which may increase the cost.

6.       Official filing might be required to proceed for shiten if the particular of foreign company is changed.

7.       Aggregated to the foreign company's accounting. Non-consolidated balance sheet of foreign company is required to attach to the financial statement of shiten for annual reporting.