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

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

★ Explanation ★

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