Different types of company in Japan

There are currently 4 different types of company in Japan :

  • Gomei Kaisha consists of partners with unlimited liability.
  • Goshi Kaisha has at least one partner with unlimited liabilitiy and other partner(s) with limited liability.
  • Godo Kaisha works in a similar way to what is known as LLC (limited liability company) in Western countries and has one or more partners with limited liability.
  • Kabushiki Kaisha is run by shareholders with limited liability and by directors who are appointed by shareholders. This is the most well known, prevailing form of incorporation in Japan, used by most major companies.

The new law does not allow to establish a new Yugen Kaisha (form of company that existed in the past and was largely used by small and medium sized companies) anymore, but existing YK can remain as they are.

There is hardly no interest in newly setting up a Gomei Kaisha or Goshi Kaisha since they need to include partners with unlimited liability.

So practically you have 2 options as to set up a company - Kabushiki Kaisha (KK) or Godo Kaisha (GK / LLC). Now let's see their differences.

 Kabushiki Kaisha (KK)Godo Kaisha (GK)
Credibility This is widely known, the most credible form of company in Japan. Introduced in 2006, GK is still not very well known by many people and some might think that it's not as credible as KK.
Setting up costs Around 380,000 yen* Around 250,000 yen*
Governance Basically those who invest (shareholders) and those who run the company (directors) are separeted, although it is possible for a shareholder to become a director at the same time. It consists of partners who invest and run the company at the same time. Different from KK, it is necessary to invest (no matter how small the amount may be) in order to run the company.
Minimum number of people required A shareholder and a Representative Director (can be the same person). The Representative Director needs to be a resident in Japan. One partner who needs to be a resident in Japan
Publication of financial statements Necessary Not necessary
Directors term of office 1 to 10 years with possibility of re-election (which needs to be registered) No fixed term
Advantages Being the most credible form of company, it is easily recognized or trusted by Japanese companies.
KK is useful when you need to have directors who won't invest, or investors who won't involve in the day-to-day management.		 Possible to decide freely how to share the profits (dividends) between partners, without being binded to the investment rates. Useful when you have partners who would like to join without making a big financial contribution but who can contribute by providing their knowledge, skills or network.
Disadvantages More costly when setting up Less credible