1.Incorporation

Whether you are an entrepreneur establishing your start-up in Japan or a foreign corporation establishing your subsidiary in Japan, you will need to incorporate an entity in Japan.

If you are an entrepreneur, you will need an entity that will allow you to expand your business, so that you can raise capital, hire employees and purchase assets. In general, in that case, a sole proprietorship (i.e., doing business without a legal entity) would have its limitations, so you would use a corporate structure. If are targeting an IPO and intend to raise significant capital, this means that you will need to establish a corporation (kabushiki kaisha). On the other hand, if your main goal is to establish a business with just a few business partners and to limit your liability, you may wish to consider an LLC or an LLP.

As for the incorporation procedure, there are entrepreneurs who prefer to handle this themselves, either for the satisfaction of doing it themselves or simply to save cost. However, if in the future you wish to raise outside financing or to sell your company, you may be required to have a Japanese lawyer issue a legal opinion on the validity of the incorporation procedure. Notwithstanding that the company is registered with the local legal affairs bureau, the registration process is simply a check of legal formalities, and does not necessarily mean that the company has been validly incorporated. So it would be safer to consult with a Japanese lawyer from the incorporation of your company.

If you are a foreign company establishing a Japanese subsidiary, the same choice of entity principles described above will apply. And even though you are not likely to take the subsidiary public or perhaps even to raise outside financing, you could decide to sell the subsidiary. Accordingly, you may wish to consider consulting with a Japanese lawyer to incorporate your company.