Setting Up a Japanese Subsidiary or Branch for Overseas Brands

Why establish a Japanese entity at all

Many overseas brand owners begin sourcing in Japan through a third-party distributor or a Japanese trading company, and never need a local entity. A Japanese subsidiary or branch becomes worthwhile when one or more of the following applies:

• Direct-to-consumer presence in Japan. Selling on Japanese e-commerce platforms, opening a flagship store, or running Japanese-language customer service.
• Holding licences in the buyer's own name.For cosmetics, becoming the Marketing Authorisation Holder (MAH, 化粧品製造販売業) directly rather than relying on the manufacturer or a distributor.
• Direct hiring of Japanese staff. Sales, RA, or QC staff employed by the overseas parent face complex labour and tax exposure; a Japanese subsidiary cleans this up.
• Direct trademark or design ownership in Japan.Some overseas brand owners prefer a Japan-domiciled holder of their Japanese IP for enforcement and tax reasons.

Kabushiki Kaisha (KK, 株式会社)

The traditional Japanese stock corporation. Higher formality, better external recognition, and the standard choice for a long-term commercial presence. Practical points:

• Minimum capital: JPY 1 (statutory minimum); practical minimum for a working business is JPY 5–10 million for a credible banking relationship. The minimum capital required to sponsor a Business Manager visa is JPY 5 million.
• Governance: a representative director is required; Japanese residence is not required as a matter of company law, but is required for many practical purposes (bank account opening, visa sponsorship).
• Formation: articles of incorporation drafted and notarised; share capital deposited; registration filed with the Legal Affairs Bureau (法務局).
• Ongoing: annual general meeting required; financial statements published; corporate tax filings required.

Godo Kaisha (GK, 合同会社)

A lighter-weight LLC-style entity introduced under the 2006 Companies Act. Increasingly used by foreign investors for Japan-domiciled operating subsidiaries.

• Minimum capital: JPY 1; in practice the same JPY 5–10 million floor applies for credibility and visa support.
• Governance: simpler than KK. Member-managed by default; no AGM required; no statutory auditor.
• Formation: faster than KK because the articles of incorporation do not require notarisation.
• Drawback: external recognition is lower than KK. Some Japanese customers and banks still prefer KK counterparties.
• Drawback: GK is treated as a transparent entity for US tax purposes by default if the appropriate check-the-box election is made; a wrong election can produce unintended US tax consequences. Coordinate with US tax advisers.

Branch office (日本支店)

A Japan-registered office of the overseas parent, not a separate legal entity. Used by some overseas brands for entry-stage operations, especially when the home-country parent wants to consolidate profits and losses without a separate Japanese company.

• Setup: requires registration with the Legal Affairs Bureau and appointment of a Japan-resident representative.
• Documentation: more complex than KK / GK setup because the home-country incorporation documents must be notarised and apostilled or legalised.
• Liability: the overseas parent is directly liable for the branch's activities. No corporate veil between branch and parent.
• Taxation: the branch is treated as a permanent establishment of the parent for Japanese tax purposes; tax filing is required at branch level.
• Common use case: representative offices that do business development but not contracting; transition to KK or GK once revenue arrives.

FEFTA inward investment notification

The Foreign Exchange and Foreign Trade Act (外為法, FEFTA) governs foreign investment into Japan. Most overseas investments into cosmetics, food, and supplement businesses are subject to ex post notification — filing required within 45 days after the investment. Ex ante notification (filing required before the investment, with a 30-day review period extendable to 5 months) applies to designated sensitive sectors, which include national security, defence, telecoms, energy, and certain biotech and pharmaceutical activities.

For most consumer brand subsidiaries, the practical impact is a post-formation filing through the Bank of Japan, prepared by the company's Japanese law firm or tax accountant. Consult qualified advisers if the business has any biotech, advanced materials, or regulated pharmaceutical adjacency.

Practical setup sequence

1. Choose entity type (KK / GK / branch) based on the criteria above.
2. Engage a Japanese judicial scrivener (司法書士) or law firm for formation work, and a tax accountant (税理士) for ongoing compliance.
3. Decide on registered address (real office or virtual office), representative director or representative person, fiscal year, and initial capital.
4. Prepare and notarise (KK) or finalise (GK) articles of incorporation.
5. Deposit initial capital into a temporary capital account; obtain deposit certificate.
6. File for registration at the Legal Affairs Bureau.
7. After registration, open a corporate bank account and file the relevant tax registrations (corporate tax, consumption tax, withholding tax) and social insurance registrations.
8. File the FEFTA inward investment notification within the applicable window.