With many countries ranking Japan the best partner in the region, maybe your business is looking to expand into the country. After doing some preliminary research on allies and employees the time will come to get boots on the ground.
There’s just one small problem – without completing the right administrative processes, it could be illegal for you to operate your business there.
In this edition of our definitive guide for expanding into the Japanese market, we’re going to take a look at the decisions you’ll have to make in order to get your company registered and your Japan team legally working in the country.
The easier hard thing – registering your company
Before you can go about securing visas, the company itself needs to exist first. Two types of legal entities that can secure visas for foreigners are godo kaisha (abbreviated as “GK”) and kabushiki kaisha (abbreviated as “KK”). The former is similar to a standard corporation while the latter is the equivalent of a limited liability company. An excellent breakdown of the two, with an easy to understand comparison chart can be found here. Nishimura & Asahi, widely known as a top-tier law firm in Tokyo, wrote the explanation.
“Simply due to the process involved, setting up a KK takes much longer than setting up a corporation in a place like Delaware or California. A comfortable time frame is around 4 weeks on the short end and 6 weeks on the long end. It’s hard to imagine someone getting it done in less than five to seven business days, even with a great Japanese lawyer and full client cooperation,” says Reid Monroe-Sheridan, an American lawyer based in Tokyo.
The time is needed to submit a variety of forms to the Legal Affairs Bureau and have them process and (hopefully) approve the application. Enlisting a local lawyer, “judicial scrivener” (basically, a licensed Japanese paralegal) or consultant specializing in Japanese market entry is highly advisable for accelerating the process and avoiding unnecessary mistakes. He or she can also help procure your company’s official seal.
The first order of business that must be handled before the registration process can begin is giving your company an address. “For the address – you can, prior to even signing, verbally agree to enter into a lease with the landlord of the business premise, and use that address to register the company (i.e., it is unlikely that anyone will check with the landlord to verify). Even if you change your mind, it’s easy enough to change the registered address of the company later, albeit for a small cost. Or, you can have the promoter (an initial shareholder in a kabushiki kaisha) enter into a lease contract with the landlord, on behalf of the company (again no one will verify). So basically, it’s the least of your worries, amazingly enough,” says Aki Itoh, an attorney at Tozai Sogo Law Office.
As noted above, there are significant differences between KK and GK, so businesses expanding into Japan will need to decide what makes the most sense in light of their needs.
Each company is going to have its own revenue, tax, and human resource considerations. All of these can factor heavily into the registration decision making process. Be sure to have a thorough review of all your options and rely on your advisors (and those allies you found earlier) to make the best decision for your company.
Now, let’s flash-forward a few weeks. The registration is taken care of and it’s time to get your visa.
Whatever you do, make sure your lawyer has a more sophisticated method of giving advice.
Short-term visas and visa runs – are you feeling lucky?
It’s relatively easy to procure a short-term visa for Japan. They are good for tourism as well as business but are only valid for 90 days. Unless you’re a miracle worker or your app is the cannot-miss equivalent of hugging puppies on a cold winter day, three months won’t be enough. It is possible to do visa runs – calculated trips in and out of Japan to renew your status – but by your third time, immigration will start to get suspicious.
If you are denied entry to the country, getting that decision reversed is highly unlikely. Japan closely monitors the immigration status of its visitors and is not in the habit of granting exceptions. If an individual receives a so-called order of departure, then he or she cannot return for a minimum of five years. There is no guarantee that visiting Japan is possible after that time passes.
If you are an entrepreneur who wants to be hands-on in building the Japan business and don’t mind taking risks, then the visa run approach might be good for you. However, recognize that you will be taking a risk. Please note that if you are staying for shorter periods of time, two months or less, you are far less likely to attract suspicion, especially if Japan does not require in-advance visa applications from your country.
One problem, four solutions
The visa run approach may be appealing for its lack of paperwork but if you want to set up a business to last, you will need to accept that in every life a little bureaucracy must fall. The core issue that you must solve is who will be the Representative Director (the head) of your Japan operations. Will it be the founder, a trusted lieutenant, a local non-Japanese hire, or a local Japan hire?
Overseas offices are almost always intended to supplement revenue, not be the main source of it. Going through extensive paperwork to make the founder the head of an overseas operation as well is a poor use of resources and patience. Cross that option off from the start.
The easiest path is going to be hiring a Japanese citizen, preferably someone with a strong command of English. The person will not require any visas or investment to place in your company. That said, it is an individual whom you will need to trust immensely. He or she will be the face of your company and will essentially determine your firm’s rise or fall.
A local non-Japanese hire can also be equally stress free. If the person is on a spouse visa or has a permanent residence visa, then the company will not need to provide any additional paperwork to make him or her the Representative Director. In both instances, the individual will have the same working rights as any Japanese citizen.
Finding the right local hire to lead your startup can sometimes be an exhausting effort. Like any other hire, the person needs to have both a skill and culture match with your firm. Easier said than done, and the pressure is even greater due to the special nature of this particular role. Faced with this scenario, many firms decide to just plow forward and install one of their own as the Representative Director. That is where it can get tricky.
Don’t settle for temporary status. Get the real thing.
According to Kevin Edwards-Yano, director at ProWorks Group, a one-stop business support services provider, the best option is an investor visa. Aside from standard paperwork, the applicant must submit proof that he or she invested a minimum of five million yen (about US$43,000) into the company or have the ability to hire two full-time Japanese staff.
See: Mitsubishi is an unlikely guide to Japan for some of Silicon Valley’s hottest startups
The standard paperwork includes an explanation of the company’s current asset and expense breakdown and its business plan for the next three years. This may be a red flag for some, as the immigration examiners are not necessarily fluent in assessing businesses. If one of them has doubts about your company then your plans will be scuttled.
Edwards-Yano offers another alternative. “If you don’t go the investor visa route, then the company in Japan could be set up via ownership by the parent company. Then it can hire a person from overseas as an employee under a regular working visa, and put a proxy Representative Director on the company registration. Meaning that there would be no minimum investment of five million yen needed and the individual from overseas could effectively run the company but have more flexibility by not being listed as the Rep Director. The proxy is then paid for the name-only compliance requirement.”
By the way, if you are wondering if your new company can sponsor work visas for other expats, the answer is yes. Again, there is some paperwork – which is best handled by a professional – but the stress is minimal. Ultimately, all the company needs to do is agree to sponsor the visa and put up the appropriate legal and processing fees. Then Japanese immigration will assess both the company and the applicant to determine if a one, three, or five-year visa should be given or withheld entirely.
Generally speaking, if your new employee has a clean record and a strong resume, at least a one-year visa should be attainable. That will put some pressure on the company. If the immigration inspector sees that your Japan business is bleeding money, your employee’s chance of getting the visa renewed could be negatively impacted. A key component of earning a work visa is working at a strong or promising company.
Talk is cheap, except when a lawyer is speaking
Finding the right legal advisor to guide you through this process is a big decision. Do your research first. This article is a high-level summary so look through the Japan External Trade Organization’s guide to setting up a business in Japan for more granular detail. Another solid resource will be your country’s Japan-based embassy or chamber of commerce. Either one will have a team dedicated to helping promote cross-border trade and ready to show you the ropes.
Once you have a strong grasp of what steps you need to take, you’ll be ready to assess the many firms claiming to be the best in facilitating Japan market entry. The cost of having someone else run around Tokyo’s municipal centers compiling your paperwork for company registration and visa application is typically between US$4,000-8,000. Money tends to shorten the registration process but cannot hasten the approval process on the government side.
It is a lengthy, bureaucratic, and (sometimes) painful process. There is no sugar-coating that fact. Japan is going to throw some challenges your way and this is definitely one of them. Just take a deep breath, concentrate on your business, and let the paperwork wind its way through the system.
This post Here’s how to expand into Japan without legal problems ruining your company appeared first on Tech in Asia.
Here’s how to expand into Japan without legal problems ruining your company
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