Monthly Archives June 2020

KK vs GK – the Complete Story! The 5 Key Differences between KK and GK entities in Japan.

Types of Companies in Japan
weConnect Resources

KK vs GK – the Complete Story!

The 5 Key Differences between KK and GK Entities in Japan.

Struggling to understand the differences between KK and GK entity types in Japan? We’ll help you out.

You’re so excited to start your business in Japan. One day, you decide it’s time. Let’s do this. You plop into your chair, crack your knuckles, and start typing away on your computer, researching the process on how to incorporate in Japan. But then…you come across different types of companies in Japan. And you realize you have to choose between entities you’ve never heard of, like Kabushiki Kaisha and Goudou Kaisha. Your brow furrows. What the…?!

At this point, after reading a bunch of jargon in random internet articles and rubbing their temples, our clients typically come away with more questions than answers. 

Don’t let this hiccup put a delay on starting your business!

We’ve handled over 1,000 entity registrations across all industries and have seen it all. So let’s take out the confusion when deciding whether KK or GK is better for your business in Japan. We want to help you quickly make the right choice and move on with expansion of your business.

For the record, there are 4 different types of “business entities” in Japan

They are: Kabushiki Kaisha (KK), Goudou Kaisha (GK), Gomei Kaisha and Goushi Kaisha.

The second two are NEVER used, so let’s forget them. The first two are the most common, so let’s focus on those.  

What’s the difference between Kabushiki Kaisha (KK) and Goudou Kaisha (GK)?

If incorporating in Japan was like Star Wars, Kabushiki Kaisha is like Yoda and Goudou Kaisha is like Luke Skywalker (hey, we’re going out on a limb with this one – stay with us!). One has been around for ages and is honored and revered; the other is respected and has unique talents not even Yoda can do. There’s no doubt that Yoda is a great option, but you might have a specific reason to go with Luke.

From an academic perspective, the KK is a joint-stock company (like the American C Corp) that’s been around since 1873 and has the most flexibility as an entity type. The GK is a limited liability company (LLC, originally modeled after the US LLC structure) that has been around since 2006 and can do almost the same thing that KKs can do with some unique benefits.

To Break it All Down, Here are 5 Key Differences to Consider when Comparing KK vs GK:

1. Credibility

Since the KK has been around for over a century, your Japanese customers, employees, and business partners might feel it carries more credibility compared to a GK. However, now that GK has been around for 15 years, credibility is becoming less of an issue, especially when big names like Amazon, Apple and ExxonMobil are GKs. It’s impossible to know for sure how strong the image is of the GK, but depending on the industry and commercial plan, a KK may still be the safest bet. 

2. Scalability

KK allows for a scalable organization, with the ability to have a Board of Directors, list on the stock exchange, and raise additional money through selling shares, etc. In contrast the GK can do none of these things.

3. Ownership

With a KK, there is a clear distinction between ownership (shareholders) and management (directors). In contrast, GK investors are considered partners who help run the company and their investment amount does not always reflect the same level of authority nor voting rights over the company. 

4. Cost

The registration process and ongoing corporate compliance for GKs is simpler and less expensive compared to KKs. For example, KKs have higher registration taxes charged by the government to legally establish compared to GKs (JPY 150,000 for KK and JPY 60,000 for GK). Also, KKs are required to, at minimum, annually hold shareholders meetings, publish financials and submit other reports, whereas GKs do not have any of these requirements. If a KK is set up with a Board of Directors, even more compliance is required including holding quarterly Board of Director meetings and taking minutes as well as appointing a statutory auditor (this is a named person, not a audit company) who is responsible for the financial integrity of the KK and must submit an auditor report at the end of the year. All these additional requirements for a KK come with additional legal support costs on an annual basis. Without a Board of Directors, you are looking at JPY 200,000 – 300,000 (USD 2,000 to USD 3,000) per year in additional compliance cost. If you have a Board of Directors, this cost is even greater.

5. Tax Benefits

If the GK is wholly owned by an American corporation, the American corporation has the option to elect the GK as a “disregarded entity” for international tax purposes, allowing it to be treated as a branch of the US from the perspective of US tax. This option does not exist with the KK.

So which one’s better, Kabushiki Kaisha or Goudou Kaisha, KK or GK?

We literally had an internal debate about this for over an hour and couldn’t come to a conclusion about which is better by comparing the features, alone. It’s like comparing Yoda and Luke Skywalker – you might think that Yoda is the obvious choice, but if your primary goal is to defeat Darth Vader, then Luke Skywalker is the guy for the job.

Likewise, most people assume that KK is the safer choice, but there are benefits to going with a GK depending on your business aims. So in general, one is not better than the other; but there’s one that’s better for you depending on what you’re looking to achieve with your business.

Still stuck? This can help:

Credibility and cost are the two things that weigh the most on the minds of leaders during this process. If you have Japanese clients, and you want absolute credibility with them, then go for the KK. If you’re mindful of expenses and not so hung up on the image, then the GK may be the best choice for you. 

And if you’re an American company? You can take advantage of the unique tax benefits that the GK offers (we can walk you through this if you want more info).

Want to talk it through? We’re happy to help – contact us here and we’ll guide you to the best decision!

Oh, and let the force be with you (c’mon, we had to say it). 

How to Set Up a Business in Japan from Abroad

Start a Business in Japan from Abroad
weConnect Resources

How to Set Up a Business in Japan from Abroad

What if we told you that you could set up your business in Japan in one week, without stepping foot in the country?

Most people find it hard to believe. Why? Because for many, even setting up their home internet in Japan can feel like a trek up Mount Fuji. Japan is notorious for having a lot of paperwork, one-too-many regulations, and processes that can take weeks longer than you’d expect in any other country. So, the idea of being able to set up your business in Japan without being in the country can sound impossible.

But the reality is that none of these things are issues when it comes to setting up your business in Japan.

Covid-19 forced Japan to impose travel restrictions which might make you feel delayed in starting your business in Japan. So, we want to take this opportunity to share with you how you can set up your business even if you can’t travel to the country right now. Luckily, you don’t have to let Covid-19 stop you from moving forward with your plans!

To set up your business in Japan, all you need are: incorporation documents and registration forms, a registered address, a registered company seal, and a bank account. 

For starters, you don’t need to hire a local representative to set up your business in Japan…

Most people assume that in order to expand their business into Japan, they need to hire a local native to be the director for their Japan subsidiary. It feels like you need to rely on a person you don’t even really know to get your business set up. Plus, not to mention the fact that they’ll have total control and power of attorney over your business. Yikes.

Unlike in other countries, hiring a local director is not a prerequisite to registering and opening your business in Japan. You can set your business up first, and then think about the hiring process later.

…But you will need help from someone based in Japan (hint: us!)

There are three parts of the business registration process where you’ll need someone on the ground to help if you want to set up your business remotely: a registered address, a registered seal, and a bank account. 

  1. Registered Address: A registered address is a requirement for incorporation. Provide us with the address and proof you are allowed to use it and we’ll register it for you. Don’t have a location in Japan, yet? You can use our address. Added benefit? We can receive and handle any government mail and scan it to you. (And, if you use our accounting and payroll services, we can even take care of it for you… *wink wink* )
  2. Registered Company Seal: A seal is also a requirement, which represents the Power of Attorney of your company. We can make one for you and safeguard it.
  3. Bank Account: You need a bank account to receive the capital to set up the entity. If the representative and shareholders don’t have bank accounts, then you can use a third party. You can use our weConnect custody account for this part of the process. 

There’s one last thing you’ll need to set up your entity (but if you work with weConnect, it’s optional): 

When preparing your forms for incorporation, you’ll need to get your documents notarized in your home country. That means you’ll need to visit your local public notary office and send the documents to Japan. This process can really extend the timeline of registering your business. And if that’s not inconvenient enough, Covid-19 will definitely put a delay on you getting a notary and sending it to Japan.

If you want to speed up registering your business to as little as a week, then we can set up the business on your behalf in our name and then immediately transfer the ownership to you, which doesn’t require you to have anything notarized. 

You don’t need to be present if you hire a firm to help you – heck, you don’t even have to leave your chair – and we are the masters of making this happen. Get it done fast and out of the way so you can focus on business development. 

Let’s help you figure this out

To get started, contact us here to set up a time for a chat and we’re happy to walk you through the process.

And if you want to learn more about how to set up a business in Japan, check out all of our resources on this page, here.