A Guide to Registering a Sole Proprietorship in Japan: Steps and Requirements

What is sole proprietorship?

A sole proprietorship is a type of business structure in which a single individual owns and operates the business. This type of business structure is common for small businesses and freelancers.

Benefits of registering a sole proprietorship in Japan

The following individuals are eligible to become sole proprietors in Japan:

• Japanese citizens
• Those married to a Japanese national
• Those who have long-term or permanent resident permits
• Holders of a Working Holiday visa (with no restriction until the visa expires)
• Holders of Dependent visa, Student visa, or Cultural Activities visa with permission to engage in other activities granted by the Immigration office (up to 28 hours per week)
• Specialists and work permit holders who have signed contracts with Japanese companies
• Holders of work visas who do freelance work as a side job on top of their full-time job​

How to register a sole proprietorship in Japan

Here are the steps to register a sole proprietorship in Japan:

Choose a business name: Choose a unique name for your business that is not already registered with the government.

Choose a business address: Choose a physical address for your business, such as a home office or a rented office space.

Prepare documents: Prepare the required documents, including a copy of your residence card or passport, and a certificate of registered seal (inkan shomeisho).

File the registration form: File the registration form with the Legal Affairs Bureau (Homukyoku) in your local area. You may need to make an appointment in advance.

Pay the registration fee: Pay the registration fee, which is currently set at ¥6,000 (subject to change).

Obtain a business license: If your business requires a license, such as a restaurant or retail store, obtain the necessary license from your local government office.

Requirements for registering a sole proprietorship in Japan

Here are the requirements for registering a sole proprietorship in Japan:

Age: The minimum age for registering a sole proprietorship in Japan is 20 years old.

Nationality: There are no restrictions on nationality for registering a sole proprietorship in Japan.

Residence: You must have a legal residence in Japan to register a sole proprietorship.

Tax Registration: You must also register for tax purposes with the tax office in your local area.

Bank Account: You will need to open a business bank account to receive payments and make payments related to your business.

Benefits of registering a sole proprietorship in Japan

In addition to the steps and requirements mentioned earlier, it's important to understand the benefits of registering a sole proprietorship in Japan. Under Japanese law, a sole proprietorship (個人事業 - kojin jigyo) is a legal concept where you and your business are the same entity, although it is possible to use a different name for your business. This means that you own all the profits and losses as well as the assets and debts of the business.
One of the main benefits of this business structure is that taxation is relatively simpler and can be advantageous compared to having a company. As a sole proprietor, you are taxed as an individual, and your business income is subject to personal income tax rates. Additionally, sole proprietors can expense a portion of their apartment rent if they work out of their home, and there is generally no need to hire an accountant for tax filing purposes​.

Permits you might need in order to apply

Depending on the type of business you decide to establish, you may require one or more special permits.

Here are some examples of businesses and the permits they may require:

• Exporting & Importing: While you don't need a permit for this type of business, you need to pay required customs tariffs for Japan and, in some cases, the country you are exporting to.
• Restaurant: To start a restaurant, you require a permit from the Local Public Health Center (保健所 - hoken-jo). If you intend to operate after 22:00 or serve alcohol, you also need to obtain a permit from the Public Safety Commission (公安委員会 - koan-iinkai).
• Language School: For opening a specialized private school, a permit from the Ministry of Education is required. However, no permit is needed to run an Eikaiwa or other types of after-school class​

Taxes for sole proprietors in Japan

As a sole proprietor in Japan, you need to submit certain notifications to the tax office within two months after the beginning of the business activities and file a tax declaration (kakutei shinkoku) once a year, between February and March, for the income earned during the previous year.
Sole proprietors are required to pay sole proprietor tax (kojin jigyo-zei), income tax (shotoku-zei), and residential tax (jumin-zei). These taxes are paid on a self-assessment basis and are imposed at progressive rates based on the annual income reported to the tax authorities. The lowest rate is 5%, and the highest is set at 45%. Other taxes to be paid include the municipal tax (applied at a rate of 6%), the prefectural income tax (levied at a flat rate of 4%), and the enterprise tax (levied at rates ranging between 3% and 5%)

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