Article written by Michio Matsuzaki.
A representative office is suited to the preparatory stages of a business launch by a foreign company on a small scale in order to study Japanese markets and to plan for business structures etc. in the future. A representative office can be easily set up without registration. A representative office is, however, not permitted to get involved in any of actual sales transactions in Japan. Furthermore, the representative office can neither open a bank account nor make lease contracts of real estate for an office etc. as a corporate entity as such. Therefore, a representative office needs a “representative person” who makes such agreements/contracts in an individual capacity.
In order for a Foreign Company to operate a business actually involved in any kind of transactions in Japan the foreign company needs to set up a branch office or a subsidiary company. A branch office can be more easily set up than a subsidiary company, which only needs to locate an office, assign a representative of the office and be registered with the required information. Unlike a representative office it can open a bank account and make a lease contract of real estate for its office as a business legal entity.
However, a branch office is regarded as a local entity and also as a part of the organization of a foreign company that conducts business transactions upon authorization by its HQ in the foreign country. Therefore, all its liabilities, credits and outcomes of its business operations and transactions ultimately belong to the HQ.
In order for a Foreign Company to be a legal business entity in Japan for operating all kinds of business transactions, it needs to set up a subsidiary company in the form of Kabushiki-Kaisya (KK - a stock company) or Goudou-Kaisya (hereafter GK as an LLC - a limited liability company) or others.
A subsidiary company is regarded as an independent corporate entity established under the Japanese laws concerned so that all the liabilities and credits belong to the subsidiary company as such, as well as other Japanese corporations in general.
Another method of incorporating a business in Japan other than a subsidiary company is to set up a joint venture company with a Japanese company or an investment company by having a foreign company own equities as a partner of Japanese investors.
Those foreign entrepreneurs as individuals, who do not have any foreign company and are planning to launch a new business in Japan, can set up a corporate entity established under the Japanese laws concerned as an independent company in the form of KK, GK or others as well as other Japanese companies in general.