How is the limited liability company (goudou gaisha) in Japan different from the LLC in the United States?
★ Explanation ★
The limited liability company corporate structure was introduced to Japan following the enforcement of the Companies Act from May 1, 2006. The goudou gaisha structure was modeled after the United States’ LLC, or Limited Liability Company.
The term goudou gaisha is often translated as Limited Liability Company (LLC) in English. This comes from the fact that the employees of a limited liability company bear limited liability should the company incur debt ― their liability is limited to the amount they have invested (Article 580 of the Companies Act).
Source: Japanese Law Translation Database System
While the Japanese limited liability company and the American LLC do have in common the fact that their investors are limited in their liability and have its own legal personality, taxation imposed on the two vary. In the United States, LLCs are given the option to apply pass-through taxation, while limited liability company in Japan are subject to corporate taxation. Thus, it is important not to confuse the two when establishing a business in Japan.