Around how much capital should be put in if I, a foreigner, would incorporate my business in Japan?
★ Explanation ★
Following the enforcement of the Companies Act (May 1, 2006 onwards), capital amount requirements have loosened, making it possible to incorporate a business in Japan with at least a capital amount of 1 Japanese yen (JPY). Nevertheless, there following are points one must be careful of.
1. Obtaining a status of residence in Japan
A foreigner who wishes to engage in activities related to the operation of a business will need to obtain an “business manager” working visa. Since one of the requirements of the business manager visa is a capital/investment amount of at least 5 million JPY in your company. Those who are looking at obtaining an business manager visa would benefit from incorporating their business with a capital amount of 5 million JPY or more to begin with. (➡ For further information, kindly refer to Q83.)
2. Government approval
There are certain businesses that require approval from the government to operate, and there are cases where a capital requirement is a requirement to obtain approval. For example, engaging in the private employment service requires a capital of more than 5 million JPY.
3. Relationship with Financial Institutions
If you are looking at applying for a loan/financing at a financial institution after you incorporated your business with a capital of 1 JPY, the financial institution may ask you whether you are serious about running your business with just a capital of 1 JPY. As a result, this would affect the assessment of your loan/financing application.
4. Should You Choose to Become a Duty-free (consumption tax-exempt) Company
A company incorporated with a capital of more than 10 million JPY will be considered a company subject to consumption tax at their first fiscal year. If you start your company as one that is exempted from consumption tax, it would be better to keep your capital under 10 million JPY. (➡ For further information, kindly refer to Q110.)