Disclaimer: This is for knowledge-sharing only. I am not a tax, investment, or real estate advisor. Always consult a professional for your specific situation.
Starting a small business in Japan may sound tough—but it’s absolutely possible with the right information. This guide will give you a simple understanding of what to expect before you begin. Whether you’re a salaried employee or thinking of becoming a full-time entrepreneur, this article will help you know your options, costs, and responsibilities.
Before You Begin
I’m not (yet) a business owner myself. What I’m sharing is based on books, podcasts, YouTube, and discussions with real business owners. I’m just trying to pass on helpful knowledge to anyone curious about running a business in Japan.
Common Questions Before Starting a Business
- How much money do I need to start?
- How long does it take to set up?
- Can I get paperwork in English?
- What are the pros and cons of owning a business?
- What about taxes and insurance?
- Can I keep my job and run a business?
- When should I quit my job to go full-time?
Let’s explore!
Common Ways to Start a Business in Japan
There are 5 popular formats to begin:
- 副業 (Fukugyo) – Side hustle (along with your job)
- 業務委託 (Gyomu Itaku) – Independent contractor
- フリーランス (Freelancer) – Self-employed worker
- 個人事業主 (Sole Proprietor) – Small business owner
- 法人 (Company) – Start your own company
The first 3 options are great if you want to try business before going full-time.
Sole Proprietor vs Owning a Company
| Feature | Sole Proprietor | Own Company |
| Start-up cost | Zero | At least ¥200,000 |
| Ongoing cost | Low | Higher (office, staff, legal fees) |
| Setup time | 1 day | Weeks to months |
| Documents | 1-page form (開業届) | Many documents + legal procedures |
You can apply online and print the 開業届 form here:
Or use helpful software like Freee: https://www.freee.co.jp/opening/
Extra Paperwork for Tax Benefits
Submit an optional form called 青色申告承認申請書 (Blue Tax Form Approval) when you start. It gives:
- Up to ¥650,000 in tax deduction
- Carry forward business losses (up to 3 years)
- More expense options (like rent, salary)
But: You must keep very detailed records and may need help from an accountant.
Understanding Taxes
| Tax Type | Sole Proprietor | Company |
| Income Tax | 5% to 45% | 15% to 23.2% |
| Resident Tax | 10% | 10% |
| Enterprise Tax | 3%–5% if income > ¥2.9 million | Based on capital/income |
| Consumption Tax | 10% after 2 years if income > ¥10 million | Same rule applies |
Note: Japan now has an “invoice system” which may affect how you pay consumption tax even under ¥10 million.
Tax and Payment Schedule
Here’s what to remember during the year:
- Income Tax – Feb 16 to Mar 15
- Consumption Tax – Feb 16 to Mar 31
- National Pension – Monthly or annual
- Health Insurance – 10 installments (June to March)
- Resident Tax – June, Aug, Oct, Jan
- Advance Tax – July and Nov (if income > ¥150,000 last year)
- Enterprise Tax – Aug and Nov
Advantages of Owning a Small Business
- Join 小規模企業共済 (Small Business Mutual Aid): a retirement plan, also offers loans.
- Expense part of your rent, electricity, internet, etc. if used for business.
- Pay yourself a salary, which becomes a tax-deductible expense.
- Choose low-cost pension plans (¥16,980/month).
Disadvantages to Be Aware Of
- Consumption and enterprise taxes may increase your cost.
- Retirement savings may be lower unless you invest in iDeCo or 共済 plans.
- Health insurance can be expensive (~15% of previous year’s income). You can:
- Use expense strategies to reduce it
- Pick cheaper plans (like Kokuho)
- Apply for premium reduction schemes
- Use expense strategies to reduce it
Can I Work and Run a Business?
Yes! Many do. But you need to combine all income types (job, business, rent) and file taxes once a year.
Use Kakutei Shinkoku (確定申告) between Feb 16–Mar 15 through e-Tax or your local office.
When Should I Quit My Job?
This is a personal decision, but think about:
- Stable business income
- Tax benefits
- Low setup/operation costs
- Consistent demand for your product or service
- Long-term flexibility and freedom
Resources to Learn More
- TOSBEC (Tokyo): English help for business setup
https://www.startup-support.metro.tokyo.lg.jp/onestop/en/ - YouTube (in Japanese):
- https://www.youtube.com/@kojinjigyonushi
- https://www.youtube.com/@sunday-money
- https://www.youtube.com/@kojinjigyonushi
- Book (in Japanese):
「定年後ずっと困らないお金の話」by Daiki Yorifuji
Topics Worth Studying More
- 小規模企業共済 – Small business pension
- 消費税 – Consumption tax
- インボイス制度 – Invoice system
- 経営セーフティネット共済 – Safety Net insurance
- 青色申告 – Blue return tax system
Don’t wait for the “perfect time.” Learn, plan, and start small. Business in Japan isn’t only for big companies. With the right preparation, even small steps can lead to big success.
This material is open and free to share with those who may benefit.
