How to choose your status to freelance in Japan?

How to choose your status to freelance in Japan?

To start your freelance activity in Japan, you have to choose one of the two legal status below :

  • Individual freelance status (also called "Kojin jigyo" in Japanese)
  • Society status

 

1. Le Kojin jigyo

This is a company ran by one individual person. There is no distinction between the owner and the business. So all the profits, losses, assets and liabilities impact both.

You can use a company name.

 

Advantages:

  • Easy to obtain, no need to register before. Just need to declare your activity on the first month with a simple tax declaration. For more information, read our post "Which steps to take to launch your business in Japan".
  • Reduced costs: no society tax, only income declaration.

 

Disadvantages:

  • These companies are considered "less credible" by Japanese companies.
  • You can’t open a company bank account, you have to use your personal account.
  • The owner's liability is unlimited: he is personnaly responsible for everything that happens in his company.
  • The management is more difficult when there are multiple partners.
  • The tax rate is higher when the benefits exceed 10 million yen per year.

 

 

2. Society 

This is a legal entity where the owner must declare at the Legal Affairs office (homukyoku). There are different types of society : Kabushiki Kaisha (KK), Yugen Kaisha (YK), Godo Kaisha (GK), NPO, associations (Shadan hojin), fondations (Zaidan hojin), etc.

 

Advantages:

  • These companies are considered more credible by Japanese companies.
  • The owner's liability is limited.
  • Management is easier when there are multiple partners.
  • You can separate your professional and personal bank account.

 

Disadvantages:

  • It requires a registration for its creation, modification and liquidation.
  • The investment is heaviest in time and money.
  • Tax return is more complex. You need the help of an accountant.
  • You have to paid 2 types of taxes : society tax and income tax

 

 

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