Comparing a Kabushiki-gaisha and Goudou-gaisha

September 2, 2019

Question:

When putting up a company in Japan, which type is recommended: a kabushiki gaisha or goudou gaisha?

Answer:

It depends on your company purpose during the incorporation, but generally we recommend the kabushiki gaisha.

Explanation:

In putting up a company in Japan, depending on the profit motive of your company, you may choose to establish it as either a kabushiki gaisha or goudou gaisha.

The difference between these two company types are summarized in Table 3-1 below.

In terms of incorporation and other maintenance costs (such as change in directors and preparation of financial statements), a goudou gaisha has less compared to a kabushiki gaisha; however, public recognition is higher for a kabushiki gaisha compared to a goudou gaisha.

However, since public recognition for a goudou gaisha can be increased given time, more business owners are choosing to incorporate their business as a goudou gaisha.

If more than one person were to invest into the company, it is better to use a kabushiki gaisha that easily pays dividends and gives voting rights according one’s investment ratio.

Table 3-1　Comparing a kabushiki gaisha and a goudou gaisha

While there are times where the “goudou-gaisha” is abbreviated as “LLC” (limited liability company), it should not be completely likened to a similar company type in the United States called an LLC, as Japan does not have a pass-through taxation system. (➡For further information, kindly refer to Q35.)