Key Takeaways
| What is a shelf company in Japan? | An Inactive company incorporated to age and be purchased |
| Advantages? | Quicker than incorporating, flexible customization of the company |
| Disadvantages? | Hidden liabilities, higher costs than incorporating from scratch, risks of scams |
| How long does it take? | 1 ~ 2 weeks to purchase |
| Cost | Prices vary |
| Documents to register | Statutory documentation, articles of incorporation, and shareholder registration forms |
| Tax obligations | National corporate tax of 23.2%, with a reduced 15% on the first ¥8 million of annual income for companies with capital of ¥100 million or less |
| Shelf vs Shell | Shelf is ethical, while shells are more likely to be operating illegal business activities |
- Why should I invest in a shelf company in Japan?
- What are the advantages of investing in a shelf company in Japan?
- What are the disadvantages of investing in a shelf company in Japan?
- Step-by-step process of acquiring a shelf company in Japan
- Documentation and financial considerations to make
- Key considerations after purchase
- FAQ
- Conclusion
Are you an entrepreneur planning a startup business in Japan? Consider a shelf company first. A shelf company is a pre-registered business waiting to be bought by investors who want to skip the lengthy process of company incorporation in Japan. Most shelf companies are created for aging; hence, it is sitting on a shelf.
By the end of this article, you will leave with an in-depth understanding of what a shelf company in Japan is, how to purchase one, and a clear decision on whether buying one is a good option for you or not.
Now, let’s explore the shelf company market in Japan, whether it’s a good idea for you, its advantages and disadvantages, and the steps for purchasing one.
Why should I invest in a shelf company in Japan?
Incorporating a new business and purchasing a shelf company are completely different options. Why exactly would one choose to buy a shelf company in Japan?
Brief overview of shelf companies in Japan
Shelf companies in Japan can be divided into two:
- Kabushiki Kaisha: A joint stock company where the stockholders own the company.
- Godo Kaisha: Similar to an LLC, the company is owned by its members.
These shelf companies are often purchased by foreign investors who want to quickly start a business by skipping the registration process. Some also hope to benefit from the company’s history, but that does not give a new owner an established bank relationship.
What are the advantages of investing in a shelf company in Japan?
It’s crucial to consider the advantages and disadvantages before investing in a shelf company
Quick incorporation process
- It’s quick:
You can skip the tedious work of registering for a new company by purchasing a shelf company in Japan. Oftentimes, purchasing a shelf company may take less than 1 week. Overall, it may take up to a month to fully operationalize the company (setting up a bank account, tax registration, etc.). However, you will save a lot of time, as you can skip the process of incorporating, filing documents, paying registration fees, depositing an initial amount of capital, and waiting for approval by the Legal Affairs Bureau and Notary Public.
Flexibility after purchase
- Customize your company after purchase:
A shelf company in Japan is flexible and customizable. You can change the company name, business purpose, and directors and shareholders.
What are the disadvantages of investing in a shelf company in Japan?
Chances of hidden liabilities
- Hidden liabilities that preexisted:
Ever purchased a second-hand jacket and found old chewed gum in the pocket? The same thing could happen when purchasing a shelf company, where the shelf company being sold has hidden liabilities such as unpaid debt or legal problems. It’s crucial to look through the company’s history with a careful eye, to avoid any potential legal troubles.
Expensive compared to a new company
- High costs:
Purchasing a shelf company, especially one that has been aging for a long time, can be costly compared to incorporating a new business. When contemplating purchasing a shelf company in Japan, it’s important to know the costs.
Scams and schemes
- Risks of scams:
Keep in mind that not all shelf company sellers are altruistic. Look out for non-existent or inaccessible credit lines, fabricated business histories, or even pump-and-dump schemes.
Bank trust does not transfer with the company
- No inherited bank relationship:
Buying a company’s shares does not give you its bank relationship. Banks require you to report a change of representative, company name or address and to submit an updated company registry certificate (履歴事項全部証明書) showing the change. Do not buy a shelf company mainly for its bank account.
SmartStart Japan regularly receives requests to buy existing companies mainly for their bank accounts. We do not offer this route. Older online advice can make it sound straightforward, but ownership changes and banking checks create risks that a company’s age does not remove. Plan the account directly with the bank and assess any company purchase on its business merits and liabilities.
Step-by-step process of acquiring a shelf company in Japan
Now that you are ready to invest in a shelf company, how exactly do you buy one?
Step 1: Finding a credible seller
- It’s important to find a credible seller who understands your business needs. Will you choose a Kabushiki-Kaisha or a Godo-Kaisha? What industry is your business in? How old of a shelf company are you looking for? Knowing these answers will help you and your seller find the perfect company for you.
Step 2: Investigating the company’s history
- Thoroughly check the company’s financial history. While liabilities are not always a sign to cross out a shelf company, you do not want to overlook undisclosed debts, loans, unpaid taxes, or even legal liabilities. We recommend hiring an accountant or a professional to run a background check of the shelf company you desire.
Step 3: Purchasing your shelf company in Japan
- After agreeing upon a price, sign the agreement that finalizes the transfer of ownership of the company to you!
Step 4: Customize your company
- Update the company’s details. Change the name, appoint new directors, and update the address of the enterprise. Notify the bank of every change to the representative, company name and address, submit the documents it requests, and complete the tax registrations.
How much will it cost to buy a shelf company in Japan?
Buying a shelf company can be more expensive than starting a new company. The cost of setting up a company in Japan breaks down every fee involved.
How much will it cost?
- Pricing can start from anywhere from around USD 650 (100,000 yen). However, pricing will vary depending on your needs, such as how old the shelf company is, or what field the enterprise is in. Further, the price range of buying a shelf company will vary depending on the seller.
Documentation and financial considerations to make
Let us help you prepare for documentation and financial considerations
You will need:
- Statutory documentation/Tokibo Tohon, issued by the legal affairs bureau
- Articles of incorporation / Teikan, the company’s constitution
- Shareholder register/Kabunushi Meibo, a list of the company’s stakeholders and their shares
Tax obligations and financing
- After activating your shelf company, you will be subject to tax obligations. The national corporate tax rate in Japan is 23.2%. A company with capital of ¥100 million or less pays a reduced rate of 15% on the first ¥8 million of income each year (for business years starting on or before 31 March 2027). Local corporate taxes apply on top of the national rate.
- Learn more about Japanese tax laws from us.
Key considerations after purchase
Now that you have acquired your company, what’s next?
Where to locate your business in Japan?
- Japanese cities to start your incorporation to know where entrepreneurial activity is booming in Japan!
From shelf to full-scale
- When transitioning from a shelf company to a fully integrated operation, you may need to obtain licensing and permits for your business. It’s important to have a clear understanding of the business regulations in Japan!
Building trust in the industry
- Read our article on building trust between your clients and partners!
FAQ
What is the difference between incorporating a new business and investing in a shelf company in Japan?
- Purchasing a shelf company allows you to bypass most of the registration process, which could take months to incorporate a new business.
What is the difference between a “Shelf” and a “Shell” company?
- A shelf company refers to an entity that has been created and purposefully left inactive to be purchased by an individual or entity looking to grow a business with a corporate history, most likely for legitimate purposes. On the other hand, a shell company is a corporation with little or no real operation, and shells are a common vehicle for illegal activities such as tax evasion and money laundering.
At SmartStart, we offer assistance in getting you the visa you need. For the full process, see our guide to the Business Manager Visa in Japan.
- At SmartStart, we offer top-notch assistance in getting you the visa you need. Contact us for a free consultation!
Conclusion
Overall, if you are a foreign entrepreneur looking to start a business in Japan, purchasing a shelf company may be a good choice for you. A shelf company in Japan is a business that you can quickly and easily buy and start, unlike incorporating an enterprise from scratch.
Advantages of shelf companies include speed and the flexibility to change the company name to suit your business. It's important to thoroughly check the company's financial history. Purchasing a shelf company in Japan will include the processes of preparing necessary documents and changing the business's details to suit your framework. Once you have purchased your company, you can work on building a governance structure and hiring an accountant who can handle your company's taxes. If you have the money but not the time, buying a shelf company is the right decision for you.
If you’ve realized that you're looking for a shelf company in Japan, you're on the right path to accelerate your business journey. It’s an exciting time to start a business in Japan, a country with a thriving economy and expanding industries for innovative businesses. Good luck with your journey, and we wish you great success!
Read more: Acquiring a Shelf Company in Japan: The Shortcut to Success
