Choice of company type, KK or GK

There are several types of Japanese companies.

It’s not required for Japanese companies to have Japanese local shareholder or local director, at least for company registration. It is not difficult for foreign investors to open Japanese companies. Documentation will be more complicated than that for residents of Japan though.

But normally a director or an employee who lives in Japan is required to create a bank account, and to get many types of business licenses. You don’t always need business licenses. Depending on the business you want to do, licenses may be required.

Kabushiki Kaisha

Kabushiki Kaisha (KK) is the most popular type of entity in Japan. It is stock corporation of Japan. Basic requirement is the followings:

  • One shareholder
  • One director
  • Registered office
  • Minimum paid-in capital of one (1) JPY

Board of directors

Board of directors is one of  optional organ of KK. It is not required for KK to have it. In general, it is not recommendable to open KK with board of director.

If company has board of directors, it needs to have at least 4 officers, 3 or more directors and 1 statutory auditor. Most of early stage companies don’t need so many officers, and one director is enough for their business.

Also having 4 officers requires more works to do. Names of officers are registered in company certificate of Japan. If one director resigns, company needs to find someone else to fulfill requirement of minimum number of directors, and it requires change of registration.

Godo Kaisha

Godo Kaisha is the second most popular entity. This entity type is relatively new compared to Kabushiki Kaisha. It is partnership company with limited liability.

  • One partner
  • One registered executive (partner only)
  • Registered office
  • Minimum investment of one (1) JPY

Partner of GK is its shareholder. At least one partner must be registered as Executive Partner and Representative Partner.

GK with paid in capital of zero (0) JPY can exist, not like KK. But at least one yen must be contributed for incorporation. The contribution is credited to capital surplus, if it’s not paid in capital.

Which type is better, KK or GK?

Some foreign investors choose GK, because the structure of GK is more familiar to them. But you need to think well before deciding which to open knowing more than the structures.

Advantage of opening KK

KK has higher credibility and reputation than the other structures, GK, branch or representative office. It is well known and recognized in Japan. It is safer option for most of entrepreneurs, including foreigners. Only KK can be listed. It has more choices of finance, such as issuance of new shares or stock options.

Disadvantage of opening KK

Initial cost is higher because of higher registrtion tax and notary’s fee. More regulations are applicable to KK under Japanese company law, such as required annual meeting of shareholders, and obligation of public notice of financial statement. Running cost is higher if KK does all required procedures.

Advantage of opening GK

Main advantage is cheaper initial cost. Notarization of articles of incorporation is not required to open GK. Also it is easier to handle, because there are less regulations than KK. It has higher reputation than Japanese branch of foreign companies in general.

Disadvantage of GK

Sometimes banks don’t open account for GK. Also sometimes it’s more difficult to finance money from banks. Some Japanese big conservative companies are not willing to do business if it’s not KK.