How to Register a Business in the US from Japan

Step 1: Benefits of starting your US business from Japan

Launching a US business from Japan can be a strategic move that offers a host of benefits. One major advantage is the accessibility to a vast and diverse market. The United States boasts one of the world's largest consumer bases, offering substantial growth opportunities across various industries. This vast marketplace is more accessible than ever, thanks to advances in technology and communication. Additionally, having a US presence can enhance your brand’s credibility and global reach, making it easier to attract customers, investors, and collaborators from around the globe.

Another significant benefit is the favorable business environment in the United States. The US offers a robust support system for entrepreneurs, including access to funding, networks of business advisors, and flexible business regulations. These factors can reduce the complexity and costs associated with starting and running a business. Moreover, if your business involves technology or innovative solutions, the US has an established ecosystem of tech hubs, research institutions, and industry events that can provide invaluable resources and connections. Starting your US business from Japan allows you to take advantage of time-zone differences to ensure your operations and customer support functions can run virtually 24/7, providing a competitive edge in today’s fast-paced global economy.

Step 2: How to start your US business from Japan

Starting a US business from Japan can be a straightforward process if you understand the necessary steps and legal requirements. First, choose the type of business entity you want to establish, such as a Limited Liability Company (LLC) or a corporation. An LLC is often preferred due to its flexibility and simplified structure. Research the specific state in the US where you plan to register your business, as requirements and fees can vary significantly between states. For instance, Delaware and Nevada are popular choices due to their business-friendly laws.

Next, you will need to appoint a Registered Agent who has a physical address in the chosen state. This agent will handle legal documents and correspondence on your behalf. After appointing an agent, file the necessary paperwork to register your business with the state government, which typically includes the Articles of Organization for an LLC or the Articles of Incorporation for a corporation. Additionally, apply for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS) to handle taxes and hire employees. It may also be beneficial to consult with a legal or business advisor to ensure all steps are properly followed and to facilitate communication between the US and Japan.

Step 3: Opening a Business Bank Account

A business bank account is a separate account that is used exclusively for business transactions. But why is it important to open a business bank account?

Keeping your personal and business finances separate is crucial. A dedicated business bank account allows you to do just that, making it much easier to track your business’s income and expenses. This clear separation translates to simpler tax reporting come tax season.

But the benefits go beyond bookkeeping. Having a separate account can provide legal protection. It establishes your business as a distinct entity from yourself. In the unfortunate event of a lawsuit or bankruptcy, this separation can help shield your personal assets from business liabilities.

Furthermore, a business bank account can boost your credibility and project professionalism.

It demonstrates to clients and vendors that you take your business seriously and are committed to maintaining accurate financial records. This can be especially important in establishing trust with potential partners.

Finally, a business bank account is essential for accepting payments, even if you utilize a merchant account. Whether you use doola or another service, funneling those customer funds into a dedicated business account is necessary.

doola partners with banks that allow you to open a bank account remotely from anywhere in the world, like Mercury. Shop around and compare different banks’ fees and services.

Look for a bank that offers the features you need, such as online banking, mobile banking, or overdraft protection.

You may also want to consider working with a bank that specializes in small business banking.

Step 4: Understanding Your Compliance Requirements in Japan

Understanding Compliance Requirements for Running a US Business in Japan

Expanding a US business into Japan presents an array of opportunities but also involves navigating various compliance requirements. It is crucial to understand these requirements to operate smoothly and legally. Here are key considerations to help you on your journey:

1. Business Registration and Structure

• Legal Structure: Decide on the type of business entity, such as a Kabushiki Kaisha (KK) or Godo Kaisha (GK), equivalent to a corporation or a limited liability company (LLC) in the US.
• Local Office: Establish a local office and appoint a representative director who must be a resident of Japan. This is mandatory for most business structures.

2. Labor Laws and Employment

• Employment Contracts: Draft employment contracts that comply with Japanese labor laws, including working hours, benefits, and termination policies.
• Social Insurance: Register for social insurance which covers health insurance, employee pensions, and unemployment insurance.
• Work Visa: Secure appropriate work visas for expatriate employees. This may include engineer, specialist in humanities, or international services visas.

3. Taxation

• Corporate Tax: Understand the corporate tax rates, which differ based on company size and income. Compliance with both national and local taxes is essential.
• Consumption Tax: Register for consumption tax (similar to VAT or sales tax) applicable to goods and services sold in Japan.
• Tax Filing: Ensure timely tax filings, which include annual corporate tax returns, consumption tax returns, and withholding tax reports.

4. Intellectual Property

• Trademark Registration: Protect your brand by registering your trademarks with the Japan Patent Office (JPO).
• Patent Protection: If applicable, apply for patents to safeguard your innovations and inventions within Japan.

5. Industry-Specific Regulations

• Licensing: Some industries require specific licenses to operate, such as food and beverage, pharmaceuticals, and financial services. Understand the prerequisites and obtain necessary approvals.
• Quality Standards: Adhere to Japanese Industrial Standards (JIS) or other relevant quality standards pertinent to your industry.

6. Data Privacy and Protection

• Data Protection Laws: Comply with the Act on the Protection of Personal Information (APPI), which governs the handling, storage, and usage of personal data.
• Cybersecurity Measures: Implement robust cybersecurity protocols to protect sensitive information from breaches.

Prioritizing these compliance requirements will not only help you adhere to legal standards but also build trust with customers and partners in Japan. Consulting with local legal and business advisors can provide additional guidance tailored to your specific industry and business needs.

doola offers a Total Compliance package, including bookkeeping services, to help you stay on top of your compliance requirements. This ensures your business operates smoothly and adheres to all legal and regulatory standards.

Step 5: Understanding Your Tax Obligations in Japan

Understanding Tax Obligations for Running a US Business in Japan

Expanding your US-based business to Japan can open new avenues of growth and opportunity. However, understanding the tax obligations in a foreign country is crucial to avoid legal issues and optimize your business operations. Below are key considerations when it comes to tax obligations for running a US business in Japan.

1. Corporate Tax Rates

Japan has a progressive corporate tax rate structure. The standard corporate tax rate applied to company profits is approximately 23.2%. It is important to note that Japan also imposes local enterprise taxes and special local corporate tax, increasing the total effective tax rate to around 30%. The rate can vary depending on factors such as business size and location.

2. Consumption Tax (VAT)

Japan levies a Consumption Tax (similar to VAT in other countries) on the sale of goods and services. The current rate is 10%. Both domestic and foreign businesses must comply with this tax requirement for transactions conducted within Japan.

3. Permanent Establishment (PE)

A Permanent Establishment (PE) is a crucial concept in international taxation. PE is generally defined as a fixed place of business through which the business of an enterprise is wholly or partly carried on. If your US business has a PE in Japan, it will be liable for Japanese corporate taxes on income attributed to the PE. Factors determining PE status include having employees or business activities that contribute to earnings within Japan.

4. Tax Treaties

The United States and Japan have a tax treaty in place to avoid double taxation and prevent tax evasion. This treaty outlines which country has taxing rights in various situations, helping to minimize the tax burden. Be sure to familiarize yourself with the specifics of the US-Japan tax treaty to leverage any benefits it may provide.

5. Social Insurance

If your business employs workers in Japan, you are obligated to contribute to social insurance programs, including health insurance, employee pension insurance, and labor insurance. These contributions are mandatory and calculated based on employee salaries.

6. Filing Requirements

Foreign businesses operating in Japan must file tax returns for corporate income tax, consumption tax, and local taxes. These filings are typically annual but may require quarterly or monthly submissions for specific taxes. Maintaining accurate records and employing accounting professionals familiar with Japanese tax regulations can simplify this process.

7. Transfer Pricing

International businesses often transfer goods, services, or intangible properties between their domestic and foreign entities. Japan enforces transfer pricing rules to ensure such transactions occur at arm's length prices. Non-compliance can result in significant penalties, so understanding and adhering to these rules is imperative.

Navigating the complex tax landscape in Japan requires a thorough understanding of various obligations and regulations. Consulting with tax advisors knowledgeable in both US and Japanese tax laws can provide valuable insights and ensure compliance. Expanding to Japan holds immense potential, but due diligence in tax matters is essential for sustainable growth.

It’s a good idea to consult with a tax professional or an accountant (or to hire these roles in-house) to make sure you’re not missing anything.

doola's Total Compliance package can handle your tax filings for you, ensuring you remain compliant with federal, state, and local tax requirements.

Step 6: How doola Can Assist

doola simplifies the incorporation and setup process for your company, ensuring you’re ready to charge customers, hire your team, and raise funds as quickly as possible.

Fill out your company details in the doola form in less than 10 minutes. Then, we’ll incorporate your company in any of the 50 US states, get your IRS tax ID (EIN) for you, and file your 83(b) tax election if needed. 

doola can also help you open a bank account and start accepting payments even before the IRS assigns your tax ID.

doola founders also gain access to exclusive discounts at leading software partners, one-click onboarding with select partners, and free CPA consultations.

The doola Application

It takes less than 10 minutes to fill out the details of your new company. You’ll choose your company structure (C corporation, limited liability company) and pick a company name.

Our instant company name checker will let you know if it’s available before you submit your application. You’ll add an address and phone number and review and sign your EIN SS4 letter in one click.

Forming the Company

doola will review your application and file your formation documents in the state within one business day. doola charges $297 for our Starter Plan and your first year of registered agent services (a state compliance requirement), and $297 each year thereafter to maintain your registered agent. 

You can also opt for our Total Compliance plan.

Getting Your IRS Tax ID (EIN)

After your formation in the state is complete, doola will file for your company’s IRS tax ID. Founders who provide a US Social Security number, US address, and US phone are eligible for expedited processing. All other users will receive standard processing. 

For standard orders, doola will fax your form SS4 to the IRS and then call the IRS to retrieve the EIN for you to expedite the process if we can, using real-time IRS data to determine when your filing is likely to be available.

Filing Your 83(b) Tax Election

Many startup founders choose to file an 83(b) tax election to potentially save on future personal taxes. doola can file and mail your 83(b) tax election in one click for both US and non-US founders — no trip to the post office required.

We’ll file it using USPS Certified Mail with tracking, and you’ll get a copy of your signed 83(b) election and proof of filing in your Dashboard.

Partner Perks and Discounts

doola partners with a range of third-party tools to offer special pricing or access to founders. We offer discounts on engineering, tax and finance, compliance, and operations tools, including Amazon Web Services.

doola also partners with Mercury to provide faster, automatic onboarding using your doola company information so you can get ready to bank and fundraise even faster.

Founders may also access discounts on other doola products, including up to one year of free credits toward payment processing.

Read our guides for startup founders, or learn more about doola and how we can help you set up your new business quickly and easily.

Turn your entrepreneurship dream into reality today!

We do our best to provide accurate and up to date information, however the information provided here are just guidelines. Please speak with a tax and compliance professional in your country