【EN-sup-103】Steps for foreigners to start a business in Japan! Explaining the necessary residence status and key points for success

Preparation is important for foreigners to start a business in Japan

When a foreigner starts a business in Japan, they need to go through various procedures.
In recent years, support measures and systems that foreigners can use when starting a business have appeared, so the number of foreigners aiming to start a business in Japan is likely to increase.
However, if there are many unknown points, such as obtaining a residence status and the procedure for starting a business, it will be difficult to start a business smoothly.

In this article, we will explain the types of residence status and conditions required for foreigners to start a business in Japan, as well as the process of starting a business.
We will also introduce the key points for successful startups, so please use this article as a reference for foreigners who want to become managers in Japan.

Table of Contents

Types of residence status required for foreigners to start a business

Unlike when Japanese people start a company, there are certain conditions that must be met when a foreigner starts a business. One of these conditions is obtaining a residence status.
There are different residence statuses that can be obtained depending on the purpose of your stay in Japan, and your activities in Japan are restricted by your residence status.So
, first of all, we will explain the type of residence status you should obtain.

business administration

There are various types of residence status, such as medical, research, nursing, technical training, and study abroad. Some foreigners residing in Japan may have these statuses. For
example, one type of residence status that allows employment is “artist.” This is a qualification required to work as a composer, writer, or painter.
To work as a lawyer or certified public accountant, you need to obtain a “legal/accounting work” qualification.

This is a status of residence required to work in Japan, but if you start a business, you will need to change to a “business manager” status of residence. However, this will only be a qualification as a manager.
In the case of a restaurant, the manager may also work as a chef.
In that case, since most of the activities are as a chef, the Immigration Bureau may determine that “business manager activities are not the main focus” and may not allow the acquisition of a business manager status of residence.
Please note that in this case, you will need to show that your role as a manager is the main focus.

Conditions for obtaining

There are conditions to obtain Business Manager status of residence.

• An independent business establishment is located in Japan
• Invest 5 million yen or more or employ two or more full-time staff members residing in Japan
• Demonstrate the appropriateness, stability, and continuity of your business

The above three conditions must be met. The business establishment must be independent, so it is impossible to operate in a rental office or rented space.
Regarding stability and continuity, a business plan must be prepared and explained to the Immigration Bureau. Companies that are expected to continue to run at a loss will not be approved.
Although there are strict conditions, the Nihon Keizai Shimbun reports that the conditions for obtaining a business manager visa are scheduled to be relaxed in fiscal 2024.
The residence status was originally one year in principle, but is expected to be extended to two years. It is said
that joint offices and shared offices are also allowed as business establishments. It is said that the 5 million yen capital investment will also be eliminated, so if this is realized, it will be easier for foreigners to start a business.

Permanent resident, long-term resident, etc.

If you have a residence status such as permanent resident, long-term resident, spouse of a Japanese national, or spouse of a permanent resident, there are no restrictions on your activities in Japan, so you can start a business.

Permanent Resident:
A foreigner who has the right to live in Japan permanently without any restrictions on the period of stay. A person
can obtain a permanent resident visa if they are of good behavior and have not violated any laws or regulations, have assets and skills that allow them to earn an independent living, and are recognized as contributing to the benefit of Japan.

・Spouse
or Child of a Japanese National Foreigners who have married a Japanese national, their biological children, or specially adopted children can obtain a “Spouse or Child of a Japanese National” status of residence.
However, the period of stay is limited to 5 years, 3 years, 1 year, or 6 months, and renewal is required each time.

・Spouse of a permanent resident
A foreigner who is married to a permanent resident or special permanent resident, or a person born as a child of a permanent resident, can obtain the status of “spouse of a permanent resident.”
The period of stay is determined by an examination and can be 5 years, 3 years, 1 year, or 6 months.

・Long-term Residents
There are two types of foreigners who have settled in Japan: “Notified Long-term Residents,” which mainly apply to people of Japanese descent, and “Notified Long-term Residents,” who are refugees or Japanese or permanent foreign residents who have lost their spouses to death or divorce. They have
a period of stay of 5 years, 3 years, 1 year, or 6 months, and renewal is required.

Foreign Entrepreneurship Promotion Project (Startup Visa)

The Foreign Entrepreneurship Promotion Project was launched in 2018.
In response to the decline in the number of business manager visas being issued, the project was launched to attract foreign entrepreneurs to Japan and encourage the start-up of businesses.

In order to obtain this status, you must formulate a support plan for managing foreign entrepreneurial activities and receive certification from the Minister of Economy, Trade and Industry.
The premise is that you make a plan to start a business within one year, and you are allowed to obtain a specific activity status for up to one year as a preparation period.
Once you are ready to start a business, you can change your status of residence to Business Manager and start a business in Japan.

The process for foreigners to start a business in Japan

From here on, we will explain the process for foreigners to start a business in Japan. It is a good idea to understand the process in advance to ensure a smooth application process.

1. Obtaining a visa and residence status

When entering and staying in Japan, you need a visa and a status of residence.
Both are important factors when starting a business, but please note that a visa and a status of residence are different things.

A status of residence is a qualification required for foreigners to stay in Japan, and if you stay in Japan without obtaining a status, you will be considered an illegal resident and will be penalized or deported.
Therefore, it is an essential qualification for foreigners to start a business in Japan.
Please determine whether you can start a business with your current status and take the necessary steps to change it.

On the other hand, a visa is used to inspect your entry into Japan. It is shown as a stamp in the visa section of your passport. The visa’s role ends when you enter Japan.
It is easy to confuse the two, but they are completely different, so please understand them before proceeding with preparations to start your business.

2. Think about your business concept

When obtaining a Business Manager visa, you will be required to submit a business plan that clearly states the details of your business.
Consider what you will provide to your customers and how you will provide it, and then consider your business concept.
After that, based on the concept you have come up with, you will need to consider market research, competitive research, revenue plans, financial plans, risk management, and other aspects, and create a business plan.
In addition to submitting it to the Immigration Bureau, this document is also required for applications for loans and subsidies, so you need to think about it carefully.

You will also need to prepare articles of incorporation. These will be created based on the company name, business objectives, etc. When establishing a joint-stock company, you will also need to have it certified by a notary public.

3. Secure your own funds

You will also need to secure your own funds in order to obtain business management qualifications.
In addition to start-up capital, it is a good idea to secure operating funds and immediate living expenses as the funds necessary to start a business.
In many cases, it is difficult to obtain loans when starting a business because there is no collateral available. Please prepare as much capital as possible.

The secured funds must be paid in as capital contributions, and the account must be designated by the founder of the business.
However, to prevent money laundering, Japanese banks do not allow foreigners who do not have a Japanese resident card to open an account.
Therefore, when making a capital contribution, you will need a collaborator, such as a Japanese national or permanent resident living in Japan.
Temporarily appoint the collaborator as a joint representative and have them provide you with a bank account to make the payment.
In some cases, the source of the capital contribution will be confirmed, so please keep any relevant documents and materials and prepare them so that you can submit them.

4. Secure a business location

In order to obtain the status of residence for business manager, you will need to open a business in Japan.
Since you will need to secure a business location separate from your home, you may need to enter into a lease agreement.
However, you will need to submit a seal and identification card at that time.
If you do not have an address in Japan, you will not be able to obtain a seal certificate, and since you do not have a residence card, you will not be able to prepare any identification other than your passport.
To ensure a smooth contract, please ask the person you appointed as your director when opening the account to also enter into a contract for the real estate property.

In addition, in addition to signing a contract under the name of a corporation, you must state that the use of the property is for business purposes. Please note that if you use the property for residential purposes, you will not be able to obtain business management qualifications.
You will also be required to have a sign installed and all the equipment necessary for the business. Please make sure that all interior construction and preparations are completed before applying for your residence status.
In order to establish a company, you must also not forget to register your establishment. You must apply at the Legal Affairs Bureau that has jurisdiction over the place of business, and once registration is complete, your place of business will be open.

5. Submit notifications to government agencies

The documents that need to be submitted to government agencies when starting a business vary depending on the industry.

・Tax-related matters

[Tax office]

• Business start-up notification form (individual/corporate)
• Notification of opening of a payroll office, etc. (individual/corporation)
• Application for approval of blue return filing (individuals/corporations)
• Notification of inventory valuation method (individuals/corporations)
• Notification of depreciation method for depreciable assets (individuals/corporations)

[Tokyo Metropolitan Tax Office (For areas outside the 23 wards, report to the relevant tax office)]

• Application for business start-up etc. (individuals only)
• Notification of incorporation and establishment (corporations only)

・Employment and social insurance

[Pension Office]

• Notification of new application for health insurance and employee pension insurance
• Notification of health insurance and employee pension insurance insured person qualification acquisition
• Notification of dependents

[Public Employment Security Office]

• Notification of establishment of employment insurance applicable business
• Employment Insurance Insured Person Qualification Acquisition Notification

[Labor Standards Inspection Office]

• Labor insurance relationship establishment notification
• Estimated Insurance Premium Declaration Form
• Applicable business report

6. Start business

Once all preparations and applications are complete, you can begin business. If necessary, you can create an official website and advertise using social media, direct mail, flyers, etc.
After you begin business, you will be required to pay taxes according to your income.

[Sole proprietor]

• Income tax
• Individual Resident Tax
• Personal Business Tax

[Corporate]

• Corporate Tax
• Corporate inhabitant tax
• Corporate business tax
• Local Corporate Special Tax

In addition to this, you will have to pay consumption tax, stamp duty, property tax, etc. It is recommended that you consult with the Chamber of Commerce or a tax accountant to gain a deeper understanding of taxes.

Key points for foreigners to succeed in starting a business in Japan

Finally, we will summarize some key points for foreigners to successfully start a business in Japan.

Enhancing our network of collaborators and people

Once you have decided on the direction of your business, you should secure collaborators and develop a strong personal network to ensure the smooth development of your business.
Your collaborators should not only be people directly involved in your business, but also people who can provide you with information and advice related to starting a business, and they can provide you with various types of support.

For example, the Japan Small and Medium Enterprise Agency, which supports the growth of small and medium-sized enterprises, provides incubation services through incubation managers stationed at 29 locations across the country, who provide management consultations, industry-academia-government collaboration, and support for network building.
They also provide advice on market development, so you can get advice during the growth phase.

Startup cafes are facilities run by local governments or agencies commissioned by local governments where you can receive various consultations regarding starting a business.
Seminars and events are also held there, so it is also useful for acquiring knowledge.
Since it is a space where people from various industries gather, it will also be useful for finding friends while interacting with each other.

Be able to create documents in Japanese

Documents such as business plans and articles of incorporation must be written in Japanese.
A business plan must also be submitted when obtaining a status of residence, so it is essential that it is written in correct Japanese in order for others to understand it.
As a countermeasure, you can ask someone who is fluent in Japanese to be the promoter, or you can ask a professional translation company to do the work.

Prepare sufficient investment capital and identification documents

In order to obtain a Business Manager visa, you need to invest more than 5 million yen.
It is okay if you do not use the entire 5 million yen as capital, but if you reduce your capital, you must prove that you invested in the business. Please note that
in the qualification examination, the stability of business continuity is also checked, so if the capital is small, it may not be approved.

You will also need identification documents to open a bank account. If you are a foreigner, you will need to submit documents that can verify your seal, phone number, identity, and address. You must
be in Japan for more than six months to open a regular bank account.
Another requirement is that you have a residence certificate, so if this does not apply to you, please ask someone to help you, as mentioned above.

Summary: Foreigners need to know about residence status and procedures for starting a business in Japan

If you are a foreigner, you may need to change your residence status. There are certain conditions for obtaining this, so please check your residence status and apply for a change if necessary.
Also, the process leading up to starting a business is complicated, so if you have any questions, you may get stuck.
In order to ensure a smooth opening, it is a good idea to secure a network of collaborators and people to support you.is.