Are you looking to register a sole proprietorship in Japan? In this post, we'll provide a guide to registering a sole proprietorship in Japan and cover the essential information you need to know.
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.
The following individuals are eligible to become sole proprietors 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.
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.
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.
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:
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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