If you are thinking about incorporating a company in Japan, you will quickly find that the standard choices for incorporation are either a kabushiki kaisha (hereafter “KK”) or a godo kaisha (hereafter “GK”). While both are limited liability, each has certain characteristics which may make one or the other more attractive to you when considering which type to incorporate.

Some Common Characteristics

According to the Companies Act, the KK and the GK have certain common features. To begin, both can be incorporated by just one person with a minimum start-up capital amount of one (1) yen. Regardless of which type you select, at least one person with an address in Japan will be needed in order to register the new company with the authorities.

Comparison and Differences

The first difference you will find is that procedures involved in incorporating a GK tend to be simpler than the KK. For example, it is not necessary to have the Articles of Incorporation of a GK notarized during the incorporation process. This obviously means that you will not need to pay notarization fees (approximately 50,000 yen) for a GK. Combined with the fact that the government registration taxes for a KK are considerably more than for a GK (150,000 yen compared with 60,000 yen), if you are looking for a less costly and simpler set-up option, then the GK may be right for you.

In terms of annual compliance requirements, the Companies Act specifies that a KK must hold an annual General Meeting of Shareholders. In addition, a summary of the financial statements of the company must be publicly announced, and in principle, the Directors of the company must be changed or re-appointed each two years[1]. On the other hand, the GK does not have any such annual requirements.

While the KK has been a traditional mainstay in the Japanese corporate scene, the GK is a relatively new type of entity and thus literature and information available tends to be considerably more limited. Furthermore, because of its new status, the GK is generally less well known to the public. Thus, if recognition is important to your business model, the KK is probably better for you.

One of the major differences between the KK and the GK can be found in the underlying management structure of each. While the KK consists of shareholders and company directors, the GK is made up of members. Although one can be a director of a KK without making any individual capital contribution, all members in a GK must contribute at least one (1) yen capital to the company. Furthermore, while management decisions of a KK operate principally on the concept of a majority vote, the GK requires the agreement of all members for matters such as the addition of new members or modifications to the company Articles of Incorporation. Therefore, the GK may be more suitable for companies where all members are easily available and generally in close contact with each other. If, however, you expect the company to expand, then the KK may be a better choice.

This article is intended as just a short sampling of just some of the differences and matters for consideration when deciding on the type of company to incorporate. For more specific details and incorporation consultation, please contact Shinonome Group.