G.K. (Godo Kaisha) or Japanese LLC Company
If you are considering setting up a company in Japan, A Godo Kaisha, also known as a G.K. company, may offer several advantages for you over other types of corporate structures. Choosing the right type of corporation for you can be confusing, which is why it is so important to consult an expert when expanding into the Japanese market.
The team at JMC has more than three decades of combined experience in the international business world, so we are uniquely qualified to advise and assist you in every aspect of corporate entity formation in Japan, from filing the paperwork to the office set up in Japan and more.
What is a G.K. Company?
The best way to define a G.K. company is by comparing it to a Japanese K.K., considered the most respected type of corporate entity in the Japanese business world. While your company may be considered more credible as a K.K., forming this type of company carries many additional responsibilities and requirements that can make it difficult for smaller businesses to gain entry. If you are not interested in becoming a publicly-traded company, a G.K. could meet all your needs without having to form a board, hold annual meetings, submit to additional taxation, and more.
Advantages of a G.K. Company:
- Lower Startup Cost
- Lower Maintenance Costs (Corporate Secretary)
- Liabilities Are Not Tied to the Owners
- Tax advantage for a subsidiary of US corporation
Starting a K.K. can get you more respect in the Japanese business community, but it can also present more barriers to entry for smaller businesses without a lot of capital. If you are not concerned about your image, or you are operating on a tight budget, a G.K. will most likely be easier and cost less to incorporate. And while this is the case for most businesses, only a professional consultant like the ones at JMC can properly advise you on the best corporate structure for your business in Japan.
How a G.K. Company Compares to an American Limited Liability Company
When the G.K. was first allowed by Japanese law in 2006, it quickly became known as a Japanese LLC due to its defining feature of limiting legal liability to the company’s owner. While a G.K. does possess some similarities, several important differences make it inaccurate to refer to it by the American definition. Here are some ways in which a G.K. differs from an American limited liability company:
- A G.K. is not considered a “disregarded entity” by Japanese tax authorities; this means the income from a G.K. is not reported as income on the owner’s tax return.
- A G.K. cannot act on its own; all actions must be originated by its members and implemented by an executive member.
- There is no separation between investors and management in a G.K.
- A G.K. does not completely separate the executive member from liability in cases of gross negligence or willful misconduct.
These are some of the main differences between these two types of companies. If you are thinking about incorporating in Japan, you must understand that, despite the name, a G.K. is not the same as an American LLC. At JMC, we specialize in educating and advising our clients about differences such as these so they can make the best decisions about what type of company they want to start in Japan.
Disclaimer: This information is for illustration purposes only. JMC cannot be held liable for any decisions made based on this information. For any legal advice in Japan, a Japanese Legal Professional should be consulted.