By Oscar Johnson
There comes a time when the ambitious, creative or those struggling to stay on top of the game ponder, “Maybe I should go into business for myself”. Well, perhaps you should. If you’ve got a product or service - and know the local market - there are few places better than Japan to put your entrepreneurial spirit to the test. It’s even more so now. This month, a new law kicked in to scrap a 10-million-yen minimum once required for starting a corporation.
Still not convinced? Along with the uptick in the economy, consider this: Last month, Japan External Trade Organization (JETRO) reported that more than 83 percent of 614 foreign-affiliated firms said business is fair to booming. More than half plan to expand, and roughly 10 percent said that compared to a decade ago the cost of doing business here is down, local markets are more open and - perhaps the best news of all - the red tape involved is not the headache it once was. So what are you waiting for?
If you know what you have to offer and what the corresponding market needs are, a good place to begin is with a Strengths, Weaknesses, Opportunities and Threats analysis. (If you don’t know what a “SWOT” is look it up. As an entrepreneur you’re embarking on a long-term commitment to self-education.) Once you’ve decided to take the plunge, line up as much work or product as possible before venturing out. If you’re not in the sales business it doesn’t matter; you are now. So, be prepared to work those contacts and get your brand identity (name and logo) out there. It will no longer be just your career that depends on it, but your business - your “baby”.
How that baby is born should depend on your business plan, strategies and resources. There are a number of options. They range from full-time self-employment to a full-fledged Kabushiki Kaisha (KK) corporation. If being your own boss is your sole priority, then going into business for yourself without a formal business may be tenable. All it really entails is taking responsibility for your own taxes (as well as pension and insurance payments) as an employer would. The annual filing process is based on self-assessment; simply tally your tax receipts, fill out the form and pay up at your local tax office. (Don’t forget to log those business expenses throughout the year – anything from train fare to part of your rent if you work from home can count as a deduction.) Paying an accountant to file your annual tax returns can be money well spent. The downside to not starting a formal business is that if you need to work with or for companies - especially larger ones - you may scarcely be noticed among all the competition. And sometimes simply having a company name allows you to charge more.
On the opposite end of the spectrum is incorporating as a more prestigious Kabushiki Kaisha. Thanks to the revised Corporate Law, this became more affordable as of May 1. KK are public firms that can be listed on the Japanese stock exchange. While 10 million yen in start-up capital is no longer a prerequisite, there’s been no talk of nixing various filing fees. And if you don’t have superior Japanese skills with a strong business background, any attempt to set up a corporation in Japan without professional assistance would be foolhardy. So figure in additional costs - at least 500,000 yen, by one estimate. Other expenses to consider are office space, which can vary in cost, as well as various hanko, or official stamps, for your corporation, which can run you up to 60,000 yen in total.
The services of lawyer or accountant are often used to set up a KK but the latter is recommended. This professional will help with tasks ranging from a name search to ensure the company name you want to use is available, to researching special permits, licenses and approval you may need for the kind business you’re starting. For example, some enterprises deemed to be in the national interest require notifying certain ministries in advance. Other tasks include opening a business bank account under the name of your company and filing for articles of incorporation, or teikan. Will you be hiring staff? If so, then figure in set-up time and costs for paying into pension, unemployment insurance and, if more than a half-dozen employees, health insurance.
There are also other options for starting a business in Japan. They include the new Godo Kaisha (GK), a limited liability company similar to the Yugen Kaisha (YK), which the revised law phased out. A Limited Liability Partnership (LLP) is another way to go. In both cases there is no option for offering public stock. While profits for a GK are taxed similar to those of a KK, only the profits partners in an LLP allocate to themselves are taxed. Starting a business as a Godo Kaisha also allows you to leave the door open for later reorganizing as a KK.
For a detailed breakdown of the different options available for starting a business in Japan see that section of JETRO’s Web site at: http://www.jetro.go.jp/en/invest/setting_up
