I have been back in Japan for almost a month now. For last couple of weeks, I have been trying to figure out how to register a company. First, I was thinking of registering as LLC because it's cheap. It only costs about JPY 60,000 (=approx.USD600), as opposed to JPY 200,000 (USD 2,000) for a C-corp.
But doing some research, I found out Japanese LLC doesn't have a tax pass-thru. It turns out that Japanese government started allowing LLCs a couple of years ago, hoping a lot of people would start new companies. But they thought people might use it for tax evasion and ended up not allowing tax-pass thru. What the hell were they thinking? In my opinion, LLCs are popular in the States because people hate being double-taxed. Naturally, adoption rate of LLCs has not been so high in Japan. Go figure.
There is another reason why LLCs haven't widespread yet, though. It's credibility. I talked with my friends and business associates, and the conversation would go something like:
My friend: "So you are trying to start a company? That's great."
Me: "Yeah, I'm thinking about starting as a LLC."
My friend: "What is LLC?"
Me: "Well, it's a form of a company."
My friend: "I've never heard of it. Is it even legit? It kinda sounds suspicious."
Me: "...."
It usually goes like this with other people as well. After a lot of consideration, I have changed my mind and decided to go for C-corp instead. Why? I might sound very Japanese, but I don't want my potential clients to think of my business as something illegitimate just because it has LLC on its name. Considering conservative nature of Japanese companies, it's very likely, especially when you are a young startup nobody has heard of.
Now that I decided to go for C-corp, I have to come up with other means to compensate for the extra cost. That's why I am writing company by-laws by myself. That's right. No expensive lawyers who charge you hundreds of dollars for doing simple things like filling out company registration form templates. I am already on boot-strapping mode and saving every penny I can think of. Let's hope the government officials will accept my not-so-professional-looking registration documents.
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6 comments:
Good start (to your career as well as to this blog) Kohei. Bylaws are not set in stone and you should be able to amend as and when needed. What about picking a name for your corporation? Do you have to advertise in a paper or something? I remember when we were trying to start an investment club in California, we had to waste our resources in advertising in an obscure paper that none would read and wait for 10 days hoping none would object to our company name.
Hey fellow Beavers,
Congrats on starting your BLOG! I have a couple things to add.
First, Kohei, you should check out a website called www.docstoc.com. (Brett told me about it) It is the ultimate in document sharing...they have everything from legal (NDA's, exclusivity, partnerships) to financial, business, and technology sectors all available free of charge. I've used it on many of contracts etc. I took a quick look and saw there are several bylaw documents.
Secondly, you are spot on about the cost of forming an LLC. I did it recently and it took me about 90min and roughly $600. If anyone needs any help, let me know.
Keep on rockin!
Paul
You may have already checked out this option, but I thought I'd throw it out. In India, I found that recent law school grads, or those in their final year, were willing to help for free in return for a LinkedIn recommendation or just for networking. They get connected/recommended, and you get services for free/minimal price.
Loan-heavy cash-light ambitious recent grads, understand the plight of others in a similar situation, heh heh!
>What about picking a name for your corporation? Do you have to advertise in a paper or something?
It used to be that Japanese laws didn't allow use of the same company name within the same district, but the government recently changed them so you can pick the same name as other companies if you want. But there is still danger that you might get sued if you used really famous company or product's name. There is no obligation to advertise it so I guess you won't know it until later. Reminds me of Apple Computer vs. Beatles' Apple case.
>First, Kohei, you should check out a website called www.docstoc.com
Thanks Paul. I've used the site a couple of times for my MBA assignments, and it absolutely rocks! It's just too bad they don't have Japanese documents yet. Maybe I should start a Japanese copycat.
>In India, I found that recent law school grads, or those in their final year, were willing to help for free in return or a LinkedIn recommendation or just for networking
That's a great idea! Let's see if I can recruit one or two law school students.
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