Doing business in Japan information
by Venture Japan
PLEASE NOTE - Effective May 1, 2006, Japan's Limited Liability Company Law is abolished and for legal purposes yugen kaishas will be treated as sole director kabushiki kaishas. Existing yugen kaishas will continue to operate as "tokurei yugen kaisha" or "TYK". The last day upon which a yugen kaisha can be registered is April 30, 2006.
In the previous section on incorporating the yugen kaisha 'YG', I noted that those infamous Japanese business and market myths want you to believe that no Japanese customer will treat you seriously if you are "only a yugen gaisha". The truth in 2004 (at least in the corporate Japanese markets) is that your customers will be far more interested in the quality of your product or service and the quality of your local team than in the form of corporate entity you use. There are of course certain industries, most likely the Japanese consumer financial markets, where competing as a yugen gaisha may not create the desired impression on your intended customers, but in general the "kabushiki kaisha is king" mentality is an artifact of the pre-1990s and if your intended consumer market is age 35 or younger, they will be less concerned with your corporate entity than your overall brand image.
Nevertheless, and despite the obvious fiscal benefits of a properly structured yugen kaisha, many foreign companies fall into the trap of establishing a kabushiki kaisha simply because of its supposedly more prestigious image - they then spend substantial amounts of cash and management resource to administrate it. Even for larger foreign companies with internal legal divisions, the administrative simplicity and efficiency of a yugen gaisha should not be ignored. The world's largest oil company, Exxon Mobil, operates in Japan as a yugen gaisha and you can be sure they chose that structure for good business reasons.
Once again it is likely that the main opposition to incorporating a yugen kaisha, and the main proponent of using the administratively intensive kabushiki kaisha '..because of its prestige with customers..', will be your Japanese subsidiary manager. Only you can decide whether he/she is worth the substantial administrative overhead and additional tax burden of doing business in Japan as a kabushiki kaisha - I will only comment that in England we have a saying that "A bad workman always blames his tools."
To summarize, the key administrative and statutory requirements for a yugen gaisha 'YG' are:
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