Starting a New Business in Japan
When starting a new business in Japan, it is often best to start as a sole proprietor (kojin jigyo), at least at the beginning to see how it develops, as it is less complicated and requires less tax until the business reaches a certain amount of profit.
- Is a business owned and run by one individual
- Can use a commercial name
- Doesn't separate its owner and the business
- Owns all profits / losses, assets / debts of the business
However, the sole proprietor option is only available for:
- Holders of Spouse of Japanese National visa, Long Term Resident visa, Permanent Resident visa, or Spouse of Permanent Resident visa
- Holders of Working Holiday visa (with no restriction until the visa expires)
- Holders of Dependent visa, Student visa or Cultural Activities visa with the permission to engage in other activities granted by the Immigration office (up to 28 hours per week)
- Those who have stable contracts with Japanese companies, one of which is willing to provide necessary documents for obtaining or renewing "Engineer / Specialist in Humanities" visa or "Skilled Labor" visa (freelance translator, IT engineer, freelance sports instructor etc.).
- Holders of work visas who do freelance work as a side job on top of the full time job they already have
If you wish to get a work visa through your own business that you will start in Japan, it is necessary in most cases to set up a company.
Also, it becomes more advantageous in some cases to set up a company even if the sole proprietorship is an option for you.
For example, it is easier to gain credibility to do business as a company, especially if you deal regularly with Japanese companies.
A company has a limited liability, so the responsibility is limited to the amount of the capital invested.
After generating certain amount of profit, having a company could offer a possibility to use different tax rate, this would eventually allow you to reduce the amount of tax to pay.
If you are starting business with several partners, it is easier to manage the financial aspects by setting up a company.
How to Start a Business as a Sole Proprietor in Japan
There isn't any registration procedure required to become a sole proprietor, so you can simply decide to do so when you are ready.
All you need to do is to submit certain notifications to the tax office within 2 months after the beginning of the business activities, and file a tax declaration (kakutei shinkoku) once a year, between February and March for the income earned during the previous year.
- One of the forms that need to be submitted at the beginning (*this is just an example and there are more)
- Income Tax Guide for Foreigners by National Tax Agency
Obviously, these tax related procedures are all done in Japanese. You can also hire an English speaking accountant who will take care of all the required procedures.
It is possible to hire employees (full-time or part-time) as a sole proprietor.
As for the social security, a sole proprietor can join the national health insurance and pension scheme (kokumin kenko hoken and kokumin nenkin).
It is necessary to obtain business licenses or permission from Japanese authorities when your activities fall into one of those that require a business license.
We support with setting up a business in Japan.