How to Set Up an Entity in Japan

Japan is the world’s third-largest economy and a strategic gateway to Asia, offering access to a highly skilled workforce, advanced infrastructure, and a stable legal and financial system. For international companies, establishing a local entity in Japan can strengthen credibility with customers and partners while enabling long-term growth in a sophisticated, high-value market.

While Japan actively encourages foreign direct investment, the entity setup process is often perceived as formal and detail-oriented. Common challenges include navigating Japanese-language documentation, understanding local corporate governance rules, and managing tax and social insurance registrations. However, the benefits—such as direct operational presence, the ability to hire employees locally, and improved long-term cost efficiency—make entity setup an attractive option for businesses committed to the Japanese market.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Japan?

Opening an entity in Japan means registering a legally recognized business structure with the Japanese authorities, granting the company the right to operate, contract, hire employees, and generate income locally. Foreign companies typically register either a Japanese subsidiary, a branch office, or a representative office, depending on their commercial objectives and level of activity.

Entity overview in Japan

Here is a summary of the key aspects of company formation in Japan:

Step-by-step guide: How to open an entity in Japan

Step 1: Choose the right structure

Foreign investors most commonly choose a Kabushiki Kaisha (KK), similar to a corporation, which is well-recognized by Japanese banks and partners. A Godo Kaisha (GK) is similar to an LLC and offers simpler governance with more flexibility, though it may be perceived as less prestigious. Branch offices allow foreign companies to operate in Japan without incorporating a separate legal entity, but expose the parent company to direct liability.

Step 2: Verify business name availability

You can check business name availability online. The company name must be unique within the same jurisdiction and cannot include restricted terms.

Step 3: Prepare incorporation documents

To incorporate a company in Japan, the following documents are required. Templates and guidance are provided by the Ministry of Justice:

• Articles of incorporation
• Company seal registration application
• Proof of capital contribution
• Affidavit and identification documents for directors and shareholders

Step 4: Register with the Legal Affairs Bureau

Incorporation documents are filed with the Legal Affairs Bureau, either in person or through a legal representative. Upon approval, the company receives a Certificate of Registered Matters, which serves as official proof of incorporation and is required for banking and tax registrations.

Step 5: Register for tax and social security

New entities must notify the National Tax Agency to obtain a corporate tax number and register for consumption tax if applicable. Employers must also register with the Japan Pension Service and labor authorities for social insurance and labor insurance coverage.

Step 6: Open a corporate bank account

Opening a corporate bank account in Japan requires in-person verification, company registration certificates, a company seal, and detailed information on shareholders and business activities. Local banking is not legally mandatory but is often required in practice for payroll and tax payments.

Step 7: Set up payroll and employment compliance

To hire employees, companies must establish compliant employment contracts, register for payroll withholding, and enroll employees in mandatory social insurance schemes. Payroll reporting and tax withholding must be conducted monthly in accordance with National Tax Agency rules.

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Post-registration obligations

After incorporation, companies in Japan must stay compliant with local governance, tax, and employment laws. Typical requirements include:

• Tax and financial reporting: File corporate income tax returns, consumption tax, and local tax declarations according to the schedule set by the National Tax Agency, generally on an annual basis, using Japanese accounting standards or IFRS where permitted
• Corporate registers: Maintain up-to-date records of directors, shareholders, and beneficial owners and report changes to the Legal Affairs Bureau within the required statutory timeframes
• Compliance tracking: Monitor all tax, licensing, and corporate filing deadlines through a structured compliance calendar or managed service provider to avoid penalties
• Licenses and renewals: Renew any industry-specific licenses or permits with the relevant ministry or local government authority based on their prescribed cycles
• Recordkeeping: Retain accounting, payroll, HR, and transaction records for at least 7 years, ensuring availability for audits
• Employment law compliance: Comply with Japanese labor standards, social insurance, and data protection laws, including proper payroll reporting, benefits contributions, and statutory insurance coverage under the supervision of the Ministry of Health, Labour and Welfare

Taxes and financial considerations

Key obligations include:

• Corporate income tax: Approximately 23.2% national rate, plus local taxes, filed annually
• VAT/GST: Consumption tax at 10%, with mandatory registration once thresholds are met
• Payroll/social contributions: Shared employer and employee contributions to pension, health, and labor insurance
• Accounting standards: Japanese GAAP or IFRS for qualifying companies

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into the United Kingdom—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Japan?
Typically 4–8 weeks. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required?
There is no statutory minimum; capital can be as low as JPY 1.

Can foreign companies own 100 % of an entity in Japan?
Yes. Japan allows full foreign ownership with no local shareholder requirement.

Do I need a local director or representative?
No local director residency is required, but a local representative is often needed for banking and administration.

How much does it cost to register an entity?
Government fees and basic costs typically range from JPY 300,000 to 600,000, excluding professional services. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Japan?
Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.