Acquiring a Shelf Company in Japan: The Shortcut to Success

Key Takeaways

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 and entrepreneurs who want to skip the lengthy process of starting a business. 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: 

1. Kabushiki-kaisha: A joint stock company where the stockholders own the company.
2. 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 processes or aiming to work off of the given companies’ pre-existing credit history.

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. 

Trust through existing credit

• Gain the trust of customers and suppliers through existing credit: 

Depending on the shelf company you purchase, you may get your hands on an enterprise with a good credit history. This could help you gain the trust of clients, customers, government agencies, and financial institutions. Local banks are more likely to trust your business if the shelf company has a good credit history. 

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. 

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 histories. 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. Connect your new Japanese bank account and register for taxes.

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. 

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:

1. Statutory documentation/Tokibo Tohon, issued by the legal affairs bureau 

2. Articles of incorporation/Teikan, the companies constitution 

3. Shareholder register/Kabunushi Meibo, a list of the companies stakeholders and their shares

Tax obligations and financing 

• After activating your shelf company, you will be subject to tax obligations. The corporate income tax rate in Japan is 23.2% if your enterprise has a capital of 100 million yen or more.
• 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? 

• Check out our article on Japan’s top cities for startups 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 shelf company is an inactive corporation often used as a disguise for illegal activities like tax havens or money laundering.

How do I acquire a visa to start a business 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 building off of the preexisting line of credit to gain the trust of customers and suppliers, as well as flexibly changing the name of the company 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!