There are mainly three entity modes in how your company branch office in Japan is legally classified:
- Representative Office (RO)
- Branch Office (BO)
- Subsidiary Company (SC)
Modes of Legal Entity for your branch
Planning on the mode and the area of the first branch is very important and requires research and decision making. More details can be found in this page.
Typically, many companies take the #1 mode, Representative Office (RO), to commence preparation activities when they start up their business in Japan. This is because RO does not have to go through most of Japan legal procedures as long as RO activities do not involve business operations like sales.
Table below summarizes comparison among the three modes from various perspectives.
Location of your First Branch Office
Geographically Japan consists of islands and is not a large country. However its narrow but long islands span from North East to South West, across over 4000 kilo meters.
Japan – Geographically compared with major world areas
You can feel how Japan would geographically look like when its land is mapped on to other countries in the world. The following is an example – Japan on top of European map. Links to other comparison maps are available in this page.
This means that there are rather significant geographical diversity within Japan. So that selection of a location for your first branch office is very important.
Economy concentration into three major urban areas of Japan
Population and thus economy of Japan are concentrated into three major urban areas: Greater Tokyo Area, Greater Nagoya Area and Greater Kansai Area. Greater Tokyo Area is the largest, occupying around 30% of both population and economy of Japan. Three greater areas combined occupies over 50% of both population and economy. See more details in this page.
Because of this concentration, for most of world enterprises coming to Japan, Tokyo area should be a natural choice of location for their first branch office in Japan.
Depending on purposes for entering into Japanese market, choosing a different location can be however a better choice, especially for a world enterprise in manufacturing, agriculture, fisheries or sightseeing industry. See more details for reviewing other local regions for your branch office location in this JETRO web page.
Estimating Cost of Having Your Branch Office
It is important to have good estimation of cost of business start up in Japan. JETRO has an informative web page on the start up cost. JETRO estimates it as USD 90 – 146 k in Tokyo area.
Cost of establishing a branch office as well as cost of business operations like labor and living expenses are lower in other areas outside of Tokyo. Graph below also at JETRO’s web site compares cost of branch establishment, which is as much as 30% in other locations than in Tokyo. Cost of labor and living are also lower by similar percentages.
This cost factor is also important when you company chooses a location of your first branch office in Japan.
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