Forms of Business Expansion in Japan for Foreigners or Foreign Corporations

June 19, 2019

Question:

What are the types of operations in Japan for foreigners or foreign companies to establish their business presence in Japan?

Answer:

In expanding to Japan, foreign companies or foreigners can operate in three ways: (1) set up a company in Japan (subsidiary company); (2) set up a branch office in Japan (branch office); or (3) set up a representative office in Japan.

Explanation:

When engaging in business in Japan, the three mentioned above are the legally acknowledged forms of business. However, they differ from each other, so how they are established, and their merits and demerits, as well as the activities they can do as a business vary. As such, it is important to choose wisely what form of business you will choose to use.

Company in Japan (subsidiary company)

【Merits】

Since they gain legal corporate status in Japan, this makes business transactions easier to perform due to its public nature (e.g. published financial statements, etc.), it can gain the public’s trust easier it can open a bank account under the company name.

【Demerits】

Capital is required (for those aiming for a “business manager” visa, it needs to be more than 5 million Japanese yen) the legal costs of putting up this company would be no less than 200,000 Japanese yen

Branch office in Japan

One can also establish their business as a branch office in Japan.

【Merits】

Due to its public nature (e.g. published financial statements, etc.), it can gain the public’s trust easier. It is particularly more beneficial if they were to show the trust ratings for their head company.
It can open a bank account under the company name

【Demerits】

The legal costs of putting up this company would be at least 90,000 Japanese yen (60,000 Japanese yen if no business office would be set up).
There needs to be a designated Japanese representative (who must be a Japanese resident)
If there are changes made to the head company’s head office address or executives, the Japan branch’s registration details also need to be updated

Representative office

Representative offices usually engage in preparations for a possible expansion into Japan as a subsidiary company or branch office. These include activities such as information gathering, advertisement/publicity, procurement of goods, market research and so on.

【Merits】

Since there is no need to register, there are less legal costs

【Demerits】

There is no way to guarantee actual work through contracts with contacts due to the lack of publicized documents, it is difficult to establish public trust
Getting work visas for foreign employees is difficult, and it is also difficult to hire local staff since they cannot open a bank account under the company’s name, the representative has to open an account under their name (although it is possible to use the company name as the trade name).