Oak Admin Guides
Incorporation Is Administrative, Not Operational
For many founders and executives, incorporation feels like the moment a business "becomes real." In Japan, incorporation is an important milestone, but it is frequently misunderstood.
Registering a company creates a legal shell, not a functioning business. It is entirely possible to complete incorporation successfully and still be unable to open a bank account, hire employees, sponsor visas, or conduct meaningful commercial activity.
In Japan, incorporation is best understood as an administrative act. Once the company is registered, it exists legally, but it does not automatically gain access to the systems required to operate.
The Two Structures Most Foreign Companies Choose Between
Although Japanese law provides several corporate forms, foreign businesses almost always choose between two.
Kabushiki Kaisha (KK)
The Kabushiki Kaisha is the traditional corporate form in Japan. It is widely recognized and culturally familiar, particularly among banks, large corporations, and government institutions.
KKs are often chosen by:
- Established foreign companies
- Businesses planning to raise capital
- Firms operating in conservative or regulated industries
The structure carries an implicit signal of seriousness and permanence. At the same time, KKs involve more formal governance expectations. Shareholder and director roles are more clearly separated.
Godo Kaisha (GK)
The Godo Kaisha is a more modern structure, closer in spirit to a limited liability company in other jurisdictions. It is commonly used by startups, founder-led businesses, and wholly owned subsidiaries.
GKs offer greater internal flexibility and often lower setup and maintenance costs. For companies that will remain closely held, this can be a very practical choice.
While acceptance of GKs has improved significantly, some banks and counterparties still perceive them as less conventional than KKs. Whether this matters depends on industry, scale, and growth plans.
Ownership, Nationality, and Control
Contrary to persistent myths, Japan allows 100% foreign ownership of most businesses. Japanese shareholders or directors are not legally required in the vast majority of industries.
Nationality itself is rarely a barrier at the incorporation stage. What matters more is transparency of ownership, clarity of purpose, and alignment with banking and immigration requirements.
Capital: No Legal Minimum, Real-World Expectations
Japan does not impose a statutory minimum capital requirement for most companies. In theory, a company can be incorporated with a very small amount of capital.
In practice, capital levels influence how seriously the company is taken by banks, immigration authorities, and counterparties. Extremely low capital can raise questions about sustainability, even if it is legally permissible.
Choosing an appropriate capital level is therefore a strategic decision rather than a legal one.
Directors and Management Responsibility
Japanese company law places responsibility clearly on directors, regardless of where day-to-day decision-making occurs. Directors are legally accountable for management and compliance.
Residency is not strictly required, but it often affects how smoothly post-incorporation steps proceed. Many banks are more comfortable when at least one director or decision-maker is locally based.
The Registered Address as a Signal of Substance
Every Japanese company must have a registered address, and this address appears on public records. While virtual offices are commonly used at the incorporation stage, the choice of address has downstream consequences.
Banks, immigration authorities, and counterparties often treat the registered address as a proxy for substance and permanence. Companies that plan to hire staff or sponsor visas frequently find that they need to upgrade to a physical office sooner than expected.
In Japan, an address is more than a mailing location, it is a credibility signal.
What the Incorporation Process Actually Involves
From a procedural standpoint, incorporation is relatively straightforward. It typically involves:
- Drafting articles of incorporation
- Notarization where required
- Contributing capital
- Registering the company with the Legal Affairs Bureau
With preparation, this can often be completed quickly. The ease of this step is precisely why its limitations are so often underestimated.
What Incorporation Does Not Accomplish
Incorporation alone does not:
- Guarantee a corporate bank account
- Enable visa sponsorship
- Authorize employment
- Simplify tax compliance
- Establish operational credibility
It is a foundation, not a finish line.
Why Sequencing Matters More Than Speed
Successful market entries tend to prioritize sequencing over speed. Rather than rushing to register a company, they align incorporation with office planning, banking strategy, immigration needs, and tax compliance.
This approach may slow down incorporation slightly, but it dramatically increases the chances that the company can operate immediately once registered.