This article is contributed by LOOK UP ACCOUNTING.

In Japan, companies can be structured in one of four different types, as defined by the Companies Act: Kabushiki Kaisha (KK), Godo Kaisha (GK), Gomei Kaisha, and Goshi Kaisha. This article highlights the characteristics of these companies, with a focus on the two most common forms and their differences. 

1. Kabushiki Kaisha (株式会社) - KK

Kabushiki Kaisha, commonly abbreviated as KK, is akin to a corporation or stock company where all equity holders have limited liability. In a KK, shareholders invest in exchange for shares, and their liability is limited to the amount they have invested. The company must have a representative director who oversees business operations.

Key Features:

・Limited Liability: Shareholders are protected from debts beyond their investment.

・Fundraising: Can raise funds by issuing new shares or bonds.

・Corporate Structure: Requires a general meeting of shareholders and a board of directors.

2. Godo Kaisha (合同会社) - GK

Godo Kaisha, abbreviated as GK, is similar to a limited liability company (LLC) in the United States. It is well-suited for small and medium-sized enterprises (SMEs) due to its flexibility and lower costs.

Key Features:

・Limited Liability: Members (sha-in) are only liable up to the amount they have invested.

・Management: Members manage the company directly.

・Flexibility: Suitable for SMEs and cannot be publicly traded.

3. Gomei Kaisha (合名会社)

Gomei Kaisha is a general partnership company where all equity holders have unlimited liability. This structure is less common due to the higher risk involved for investors.

Key Features:

・Unlimited Liability: All partners are fully liable for the company's debts.

・Management: Partners manage the company directly, without separation of ownership and management.

4. Goshi Kaisha (合資会社)

Goshi Kaisha is a hybrid between a general partnership and a limited partnership. It includes both general partners with unlimited liability and limited partners who are only liable up to their investment.

Key Features:

・Mixed Liability: Combines unlimited liability for general partners and limited liability for limited partners.

Key Differences Between KK and GK

Kabushiki Kaisha (KK) and Godo Kaisha (GK) are the most common types of companies in Japan, given that Gomei Kaisha and Goshi Kaisha have unlimited liability and are rarely established. Below is a simple comparison of some of the key differences between KK and GK. 

Size and Business Type:

・KK: Typically larger and more established companies.

・GK: More flexible and often chosen by smaller businesses.

Governing Laws:

・Both are governed by Japanese law, but KKs are subject to more stringent regulations, especially in terms of securities and public disclosures.

Ownership Structure:

・KK: Owned by shareholders.

・GK: Owned by its members or sha-in, who contribute capital.

Management:

・KK: Managed by a board of directors.

・GK: Managed directly by members, with more flexibility in management structure.

Liability:

・Both KK and GK provide limited liability protection for investors.

Investment:

・KK: Easier to attract investors through shares.

・GK: Investment requires becoming a member.

Changing Organization Type

It is possible to convert between a Godo Kaisha (GK) and a Kabushiki Kaisha (KK), but it takes time (generally at least 2-3 months) and cost. 

Comparison Table: KK vs. GK

* Note: A company can be sha-in too by appointing a person within the company who performs duties on the company’s behalf

Additional Company Types

Gomei Kaisha and Goshi Kaisha are rare due to their unlimited liability aspects. In addition, there used to be another company type called Yugen Gaisha which cannot be established anymore due to the new Companies Act implemented in May 2006. However, Yugen Gaisha established before May 2006 is similar to the Kabushiki Kaisha. Below is a table comparing Gomei Kaisha and Goshi Kaisha. 

Which Company Type Should I Choose?

It’s important to consider the advantages and disadvantages when it comes to establishing a company. While there are many details, here is a simple way of thinking about the common KK and GK: 

・Kabushiki Kaisha (KK): Suitable if you plan to attract outside investors or sell the company.

・Godo Kaisha (GK): Ideal for businesses with no plans for external investment.

Summary

While KK remains a suitable option for medium to large businesses, GK's simplicity and flexibility make it increasingly popular among small and medium-sized enterprises. Understanding the nuances of each type helps in making an informed decision tailored to your business needs.

Services Provided by LOOK UP

LOOK UP ACCOUNTING offers comprehensive accounting services, including bookkeeping, tax returns, tax consultation and advisory, and support for company establishment (Kabushiki Kaisha and Godo Kaisha). 

Disclaimer

This article is intended only as a basic guide to company types in Japan. We make every effort to ensure that the information presented here is accurate and up to date. However, all details are subject to change at any time. LOOK UP Corp. cannot guarantee the completeness of the material and information in this article. All information is available without charge and is provided strictly not as rendering any professional service nor constituting professional-client relationship. In any event, LOOK UP Corp. will not bear any liability or responsibility caused directly or indirectly by the use of the information on this presentation whether in whole or in part.