Tuesday, November 5, 2013

Incorporated! Becoming a kabushiki kaisha

It’s official, the business is incorporated! It took about 3 weeks in all, with the help of a fantastic lawyer to prepare and submit the documents.

The official seal (round), and the every-day seal (square)

It costs about 400,000 JPY including lawyer’s fees to incorporate as a kabushiki kaisha (stock corporation - the most common company type) in Japan - standard notarization fees are 52,020 JPY, registration duties are 150,000 JPY and there are some other sundries such as company seal creation in addition to the lawyer’s service fee. Though it is possible to prepare and submit the documents yourself, I felt it was more than worth it to have a lawyer's help for the process to happen quickly and efficiently, without the mistakes I undoubtedly would have made, and to be able to ask questions along the way.

Even with a lawyer’s help, there are certain things you will need to decide and prepare for the articles of incorporation to become a 株式会社 / kabushiki kaisha / joint stock corporation:
  • 会社名 / kaisha mei: company name 
  • 住所 / jyusho: company address 
  • 資本金額 / shihon kingaku: starting capital 
  • 代表取締役 / daihyou torishimariyaku: Representative Director 
  • 取締役 / torishimariyaku: Director 
  • 出資者 / shusshisha: investors 
  • 目的 / mokuteki: business activities 
  • 取締役の任期 / torishimariyaku no ninki: serving term of Directors 
  • 営業年度 / eigyo nendo: financial year
  • 定款 / teikan: articles of incorporation
  • 代表者印 / daihyoushain: company's representative seal, registered with the legal affairs bureau. Your most important company seal as it legally represents your company (also called 会社実印 / kaishajitsuin, or 社長印 / shachoin)
  • 会社印 / kaishain: corporate seal for every day use, stamping invoices etc.

Note that after incorporation there are a number of notifications that need to be submitted within specific time frames to the tax office by your accountant, and so you’ll probably want to be sourcing an accountant while you are undergoing the process of incorporation. TBEP have many good and often bilingual accountants to refer you to if you are not sure where to start.

For the company name, you could start by checking here (in Japanese) to see that no-one has already registered a business under the name you are considering. I have found that not all companies are listed in this database, but it's not a bad place to start.

For a more complete database and also bit of help deciding what you'll list up for your business activities, if your Japanese is quite good, consider registering with www.touki.or.jp and have a look at the articles of incorporation for other companies. You'll need to know their company name and what region they are registered in, in order to look them up. You can also drop in your local legal affairs bureau and look up company records at their office, if you don't want to go to the trouble of registering with this site and wading through the kanji.

This site can be helpful to see what kinds of activities other companies have listed, and also includes the documents for companies that have since closed. You need to register a credit card to use the service, and wait for your user name to arrive through the post (snail mail!).

There is a small charge each time you request a pdf of a company’s incorporation document, and the system only keeps them in your account for a short time. When listing your planned business activities, the general advice is to be quite broad and extensive, as changes to your articles of incorporation later on will incur additional charges. Strictly speaking, you're not supposed to carry out any activities not covered by your incorporation document.

If you do not yet have an office address and don't want to/can't use your home address to register, some virtual offices allow you to use their address for setting up new companies, and for registering with bank accounts as well as serving as a mail box/mail forwarding service until you are set up at your new premises.

Regarding the financial year, you can choose to have it whenever you like. You don’t have to keep with end of March like most Japanese companies, and perhaps it will be better to have your year end at a time your accountant will be less busy with other year end accounts. Another important consideration is that setting your year end to almost a full 12 months after your date of incorporation means that you have a couple of financial benefits – you have the longest period of time before your first corporate tax bill and you get to benefit from not paying consumption tax for a full 24 months (if your accountant has submitted the appropriate tax notifications for you, as these have effect for the first 2 financial years of your business).

Once you've decided the details of your articles of incorporation (in English or Japanese, depending on whether translation is included in the service you use) your lawyer will prepare the necessary documents for you and any other shareholders to stamp with your officially registered personal seals. You’ll need certifications from the ward office to prove your personal seal is registered with them as officially belonging to you (they take a copy of your stamp's impression and keep it on record).

With these documents submitted, you will now need to show proof of the starting capital for your company. A kabushiki kaisha can now be created with any amount of capital, but most small companies have between 3-million and 9.9-million yen. Note that you will need 5-million or more if you are going for a business manager/investor’s visa. Higher than 10-million yen takes you into a different tax bracket.

Since you won’t have a corporate bank account yet, you prove your capital using the passbook of your bank account. I used my Shinsen account which is online only, and so we proved the account was mine by using an official statement I requested printed on Shinsen headed paper for a previous month, and then a screenshot of recent transactions showing the amount of capital.

Somewhat strangely, this involved me having to withdraw the exact amount from my account and re-deposit it into the same account, so that the exact amount of capital was visible on one line on the screen shot.. Oh, and I had to do this physically, with the cash, at an ATM..!

If you are planning to withdraw and redeposit like this, do call the bank in advance, as certain branches don’t have millions of yen in cash available every day and may need to order it in for you, and they may also want you to book an appointment to do it. Similarly, if you’re planning to just transfer the amount in bulk to another account you own, make sure your daily transfer limit is set high enough in advance so everything will go smoothly. Finally, if there is more than one investor, you’ll need to transfer everyone’s contribution to one bank account.

Once you've submitted this proof of capital you can then start using it if you need to, to pay your lawyer etc. My lawyer’s incorporation package very handily included her sorting out the company seals for me too, and so once all the documents were submitted I just needed to wait for the update that everything was approved, and it was. Hurrah I say! Now we can start having serious fun :)

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