Establishing Your Business in Japan: A Guide for Foreign Entrepreneurs

Copyright © 2017 Yuki Nakamura All Rights Reserved.
BUSINESS ESTABLISHMENT
AND
EXPANSION IN JAPAN
Yuki Nakamura
Attorney at Law

OVERVIEW
•  Introduction
•  Why Japan?
•  Why Now?
•  Tokyo or Local?
•  Choice of Entity
•  Legal Issues

Introduction
Mr. Yuki Nakamura
Attorney at Law
・Licensed in Japan,
USA and Singapore
(SICC)
・Certificated
Immigration Attorney

Introduction: Partners
Attorney at Law (CA&HI)
Founder of
Silicon Valley Law Firm
Clients ranges from
VCs to Startups
US CPA
President of
consulting firm in
China & Hong Kong
Speak Chinese
Dai YOSHIDA Mistuhiro KINKAI

Why Japan?
Traditional Players

Why Japan?
Japanese Startups
Foreign Startups

Why Japan?: Pros
・Huge & Sophisticated
Market
・Developed Manufacturing
Skills
・Business Friendly
Infrastructure
・Opportunities for
Foreign Startups

Why Japan?: Pros
Investment Trend
• Japanese VCs invested 130 billion yen in
1,162 cases (2015)
• 55 VC and CVC newly established with 276
billion yen (2016)
• Tech and health care industries flourished
• Mercari, a Japanese peer-to-peer
marketplace app, became the first pre-IPO
unicorn in Japan after raising 8.4 billion yen
(2016).

Why Japan?: Cons
Tax Burden
・30% of corporate tax
・Up to 45% of income tax
Aging Society
・27.3% over 65 year olds
・24 million yen “under the
mattress” per single family

Why Now?
24M foreign
visitors in 2016
(+21.8%）
Olympic &
Paralympic Games
in Tokyo 2020

Why Now?
・Deregulation movement
Guest
house
business
Integrated
Resort
(Casino)
Startup
Visa
NISA

Why Now?: Careers & Living in Japan
Living
Careers
Japan is currently suffering
a shortage of 170,000 IT
human resources
5,750,000 yen is typical
annual salary for IT engineer
24/7 open restaurants are
clean and safe

Why Now?: Careers & Living in Japan
• Access to Japanese companies
Recruitment
Agency
Career
Center in
University
Meet up
events
BEAM

Tokyo or Local?
Tokyo is the megalopolis with the largest
population in the world (37 million
people) and has special economic zones.
94% of foreign companies choose Tokyo.

Tokyo or Local?
Tokyo One-Stop
Business Establish Center
FREE assistance on all
procedures for company
establishment!!!
JETRO
(on the same floor)
A temporary office is
assigned for three months
for FREE!!!

Tokyo or Local?
福岡Fukuoka
仙台Sendai

Choice of Entity
1. Representative office (Liaison)
2. Branch office
3. Corporation

• Function just as a market research or
marketing activity
• No administrative procedure required
Choice of Entity: Representative Office

• Sales activity and contract execution
• No capital funds required
• The registration fee is 90,000 yen
• Please note PE risk
Choice of Entity: Branch Office

Choice of Entity: Corporation
• Common & the most reliable type of entity
• Merits
Separate legal entity from a parent
corporation
1 yen suffices the capital fund requirement
• Demerits
More than 5 million yen required as capital
funds for business manager visa

• Incorpora(on Cost (yen)
• CerBﬁcaBon of bylaw 50,000
• RegistraBon 150,000
• Company seal 18,000
• Postage and transportaBon 2,000
• ANorney fee (hypo) 300,000
• Total 520,000

Require a possible representative director to
have a bank account for capital transfer
• Japanese bank
• Offshore branch of foreign bank in Japan
Bank Account

Seal Practice in Japan
A new branch office or corporation uses a
seal for registration and succeeding
businesses

Limited liability corporation (LLC)
Amazon, Walmart or other companies
chose this entity in Japan
Flexible corporate structure
Make your choice of how to divide profits

Legal Issues: Co-Founders & Employees
Co-founder has to give back
some shares at retirement
In hiring local employees
•  Difficult to dismiss; “Abuse
of right of dismissal”
Employment at will
•  Anti-competition clause
Co-Founders
Employees

Legal Issues: Stock Option
Tax-Qualified Stock
Option
•  Defer tax payment until
the sale of stocks
•  Vesting clause in
retirement

Legal Issues: Visa
Market research, 90 days validExemption of Visa
Business manager Visa
80 points will be eligible just after 1-year stay
Permanent Residency Visa
Engineer Visa University degree or 10-year
working experience
Strict requirements
•  Secure office with help of Japanese partner
•  Invest at least 5,000,000 JPY or hire two local
employees

Legal Issues: Visa
Startup Visa (from 2016)
Startup
visa
Business manager
Visa
• No requirement of office,
hiring or investment
• Only prepare a business
plan
• Allow to stay 6 months for
further set-up procedures
• Available in Tokyo,
Sendai, Fukuoka, and
others

Legal Issues: Visa
• Visa Processing Fee (yen)
• ApplicaBon fee (new) 0
• ANorney fee (hypo) 200,000
• Total 200,000

Legal Issues: Finance
Angel Investors Venture Capitals

Legal Issues: VC Investment
Investor agreement
1.  Basic terms: type of stock, numbers of stock,
valuation
2.  Representations and warranties after due diligence
3.  Control over business
•  Investor can appoint some directors
•  Investor’s approval in business judgments
4.  Restriction on stock transfer
Preferred Stock vs Convertible Bond

Legal Issues: Regulation
• System to Eliminate Regulatory Gray
Zones (2014~)
• Consult with Japanese government to
clarify the scope of regulation
• Response comes out within 1 month
• Useful for disruptive business

Hypothetical scenario
•  1. Obtain a startup visa
•  2. Get assistance of the Tokyo One-Stop
Business Establishment Center
•  3. Settle at a temporary private office in the
JETRO
•  4. Prepare to establish a corporation
•  Open a bank account
•  Look for Japanese business partners
•  5. Apply a business manager visa
•  Rent an office with help of the partners
•  i) hire two local employees or ii) invest 5,000,000 yen

Thank You,
See You in Japan.
Startup Bridge

Establishing Your Business in Japan: A Guide for Foreign Entrepreneurs

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