Japan, sometimes referred to as the Land of the Rising Sun, is an island country in East Asia, located in the northwest Pacific Ocean. It has a highly developed economy and it attracts thousands of investors each year. If you're looking to run a business in Japan by yourself, a sole proprietorship can be an attractive option.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
Sole proprietors in Japan
Japan has the legal concept of sole proprietorship (個人事業 - kojin jigyo), under which you and your business are the same entity (though it is possible to use a different name for your business). It means that you own all profits/losses and assets/debts of the business. Because you're the same entity as your business, taxation is simpler, and can be advantageous over having a company. Other benefits include being able to expense a portion of your apartment rent (if you work out of it) and no need to hire an accountant.
Who can become a sole proprietor in Japan?
- Japanese citizens
- Those married to a Japanese national, those who have long-term or permanent resident permits
- Holders of Working Holiday visa (with no restriction until the visa expires)
- Holders of Dependent visa, Student visa or Cultural Activities visa with the permission to engage in other activities granted by the Immigration office (up to 28 hours per week)
- Specialists and work permit holders who have signed contracts with Japanese companies
- Holders of work visas who do freelance work as a side job on top of the full time job they already have
How to establish a sole proprietorship
First, your business needs a name. You can use your family name, and it must be reserved and registered with the Companies Registrar. Then, it needs to have a legal address. The home address can be used.
After that, you only need to file an application form with the Companies Registrar and one with the tax authorities.
Special permits for sole proprietorships
Depending on the type of business you decide to establish you will require one or few permits. Since the most common businesses which foreign residents in Japan decide to establish are, export-import trading companies, restaurants and language schools, below only related permits to those activities are referred to.
- Exporting & Importing – While you don’t need a permit for this type of business, you need to pay required customs tariffs for Japan, and in some cases the country you are exporting to;
- Restaurant – To start a restaurant you require a permit from the Local Public Health Center (保健所 - hoken-jo), and if you intend to operate after 22:00 or serve alcohol you also need to obtain a permit from the Public Safety Commission (公安委員会 - koan-iinkai);
- Language School – For opening a specialized private school a permit from the Ministry of Education is required, however no permit is needed to run an Eikaiwa or other types of after-school class.