Maximize Your Business Potential: Choose the Right Incorporation Type
KK vs. GK. Which one is the better? For foreign entrepreneurs considering setting up a company in Japan, choosing the right type of company structure is a concern. In particular, both the Kabushiki Kaisha (KK) and Godo Kaisha (GK) are popular options, and many people may not know which one is best suited for them.
This article aims to solve the dilemma for foreign entrepreneurs. As a Japanese lawyer, I will compare the advantages and disadvantages of KK and GK, and explain which one is suitable in an easy-to-understand manner.
Specifically, after explaining the basic structure of KK and GK, I will compare and explain the following items:
- Establishment costs
- Method of important decision-making
- Dividend
By reading this article, you will be able to understand the characteristics, advantages, and disadvantages of both KK and GK. In addition, you will gain the necessary knowledge to choose the best company structure for your needs, and acquire valuable information to start your business.
The Similarities Between KK and GK
Both KK and GK are types of companies that can be established in Japan. They are both legal entities with limited liability and have a separate legal status from their owners or shareholders. This means that the company's assets and liabilities are distinct from those of its owners. Also, both types of company can be established with just one shareholder and a minimum of one company officer. So you can invest in and operate a company on your own. While KK and GK share some similarities, there are also several key differences between the two company types. KK vs. GK. Let's compare
Basic Structures
A KK is a common type of company in Japan that raises capital by issuing shares. One advantage of a KK is that it allows for a separation between ownership and management. This means that shareholders can entrust the day-to-day management to directors. They aren't necessarily required to be involved themselves. If your goal is to attract a wide range of investors who won't be deeply involved in management, a KK might be the better option.
A GK is similar to a Limited Liability Company (LLC). One difference between a KK and a GK is that ownership and management are more closely tied together in a GK. Only the shareholders of the company (called 'members') can make decisions and be involved in the business operations.
Establishment Costs
When starting a company in Japan, there are three main expenses that you need to prepare for: initial capital, costs related to the company's articles of incorporation (AOI), and registration fees. The amount of money you need to spend on these expenses will depend on the type of company you want to establish, its size, and the industry it operates in.
| Items | KK (Kabushiki Kaisha) | GK (Godo Kaisha) |
| Minimum Initial Capital | JPY 1 If you do not meet certain conditions, such as employing two or more full-time employees, you will need a minimum capital of 5 million yen to obtain a Business Manager visa. | JPY 1 If you do not meet certain conditions, such as employing two or more full-time employees, you will need a minimum capital of 5 million yen to obtain a Business Manager visa |
| Revenue stamps for AOI | JPY 0 If it is not an electronic AOI , JP40,000 | JPY 0 If it is not an electronic AOI, JP40,000 |
| Authentication fee for AOI (notary public) | from JPY 30,000 to JPY50,000 Dependent on the amount of initial capital | JPY 0 |
| Fee for the Certified Copy of AOI | JPY 2,000 | JPY 0 |
| Registration License Tax | Either JPY150,000 or 0.7% of the initial capital, whichever is higher | Either JPY 60,000 or 0.7% of the initial capital, whichever is higher |
Decision Making
In a KK, important decisions are made at a general shareholders' meeting. Each shareholder has voting rights proportional to their ownership stake, and decisions are made by a majority vote.
In contrast, a GK usually makes decisions based on a majority of the number of investors rather than the proportion of their investment. Important decisions require the unanimous consent of all members. But don't worry too much. GK has more autonomy in their operations. It is possible to design their decision-making processes in their articles of incorporation.
Dividend
In a KK, shareholders can receive dividends from surplus funds. The amount of dividends distributed is determined in proportion to each shareholder's ownership stake.
On the other hand, a GK can distribute profits within the company's profit amount. Dividends can also be distributed in a proportion different from the investment amount, depending on the provisions in the articles of incorporation.
Conclusion: GK Might Be the Better Choice for Your Business
If you're choosing between KK and GK, there are some advantages to GK. It's cheaper to set up, and you can design how it operates in the company's rules. While KK is generally considered to be more trustworthy by business partners, GK is becoming increasingly common. Therefore, it is unlikely that business partners will refuse to work with you simply because you are a GK. Unless you have a clear plan to recruit lots of shareholders, using a GK might be enough. If you need more help, please get in touch through the contact form.
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