Incorporation

Question:

When putting up a company in Japan, which type is recommended: a kabushiki gaisha or goudou gaisha?

Answer:

It depends on your company purpose during the incorporation, but generally we recommend the kabushiki gaisha.

Explanation

In putting up a company in Japan, depending on the profit motive of your company, you may choose to establish it as either a kabushiki gaisha or goudou gaisha.

The difference between these two company types are summarized in Table 3-1 below.

In terms of incorporation and other maintenance costs (such as change in directors and preparation of financial statements), a goudou gaisha has less compared to a kabushiki gaisha; however, public recognition is higher for a kabushiki gaisha compared to a goudou gaisha.

However, since public recognition for a goudou gaisha can be increased given time, more business owners are choosing to incorporate their business as a goudou gaisha.

If more than one person were to invest into the company, it is better to use a kabushiki gaisha that easily pays dividends and gives voting rights according one’s investment ratio.

Table 3-1　Comparing a kabushiki gaisha and a goudou gaisha

	kabushiki gaisha	goudou gaisha
Trade Name	The term kabushiki gaisha (“株式会社” in Japanese) is included in the trade name	The term goudou gaisha (“合同会社” in Japanese)is included in the trade name
Public Recognition	High	Not so High
Minimum Number of Members	1 member	1 member
Public Recognition	High	Not so High
Minimum Investment	More than 1 Japanese yen	More than 1 Japanese yen
Amount During Incorporation
Investor Responsibility	Limited liability	Limited liability
Number of Voting Rights of Investors	One share, one vote	One person, one vote
Financial Statement	Required yearly	Not required
Terms of Executives	(Privately held company) Director　1 to 10 years Auditor　4 to 10 years	No term limitations
Number of Voting Rights of Investors	One share, one vote	One person, one vote
Flexibility in Structure	Normal	High
Abbreviation	“(株)” in Japanese publications “K.K.” in English publications	“(合)” in Japanese publications “G.K.” in English publications
Qualification of Representative(s)	Representative director (CEO)	Representative officer
Treatment under Corporate Tax Law	Ordinary corporation	Ordinary corporation
Contract Using Company Name	Possible	Possible
Minimum Cost of Establishment	Approx. 200,000 Japanese yen (Assuming no professional was asked to process the establishment, and the articles of incorporation were certified electronically)	60,000 Japanese yen (Assuming no professional was asked to process the establishment, and the articles of incorporation were certified electronically)

While there are times where the “goudou-gaisha” is abbreviated as “LLC” (limited liability company), it should not be completely likened to a similar company type in the United States called an LLC, as Japan does not have a pass-through taxation system. (➡For further information, kindly refer to Q35.)