Q_iconWhat is the recommended number of established business purposes when incorporating a company in Japan?

A_dark_iconIt varies according to the actual nature of business, but there are certain points to be careful of.

★ Explanation ★

A Stock Company must establish its company’s purposes in its articles of incorporation (Companies Act, Article 27). Having one (1) company purpose would be enough; for example, if one were to put-up a restaurant, its purpose can simply be recorded as “management of a restaurant” and there would be no problems with this.

Companies Act

(Matters Required to Be Specified or Recorded in the Articles of Incorporation)

Article 27 Articles of incorporation of a Stock Company must specify or record the following matters:

(i) purpose(s);

(ii) trade name;

(iii) location of the head office;

(iv) value of property to be contributed at the incorporation or the lower limit thereof;

(v) name(s) and address(es) of the incorporator(s).

Source: Japanese Law Translation Database System

business-purposeIf there is a business operation that you have plans to engage in in the near future but not immediately, it is possible to include this in your purposes during the incorporation of your company. In our example of a restaurant, while the current purpose of your business is to engage in the restaurant business, you may have plans to sell products at the store as well. As such, it is better to include “selling goods” in your list of purposes. It is recommended to include this during the period where you are incorporating your business, as adding a new purpose to your articles of incorporation after the business has been incorporated will cost 30,000 Japanese yen as the registration and license tax due to the Legal Affairs Bureau will be levied on the process.

Additionally, to engage in a specialized type of industry in Japan, one must obtain the necessary authorization (permits, licenses, etc.) to conduct business. Going back to our example, if you were to open a restaurant and engage in the restaurant-running business, you will need to obtain the authority to engage in such business. In applying for the authorization(s), you will need to furnish a copy of your Certified Copy of Register. This document must indicate the fact that your business purpose is to run a restaurant business; otherwise, the authority to engage in the restaurant business may not be granted.

When establishing your company’s purpose(s), avoid adding too much purposes that may make it difficult to understand what exactly the nature of your business is. Also, note that investments in certain industries (for example, rice farming) require prior notification with the Minister of Finance and the competent minister (through the Bank of Japan). Regardless of whether the chances of the company engaging in such a business in the future is high or not, the required prior notification can add to the cost and time needed to prepare the articles of incorporation.