We’d like to share some tips about the differences between a branch and a subsidiary and hope that they would help you to decide on a business entity in Japan.
First of all, the major legal difference between a branch and a subsidiary is the attribution of responsibility.
the legal liability of the Japanese branch belongs to the head office in the home country.
On the other hand, since the subsidiary is an independent company in Japan, its responsibility belongs only to the Japanese company.
The major legal procedural differences are a necessity of capital and requirement for representatives.
In the case of a branch office, there is no need to transfer capital. As to a subsidiary, the amount of capital is not restricted by the Companies Act, but remittance of some money as capital to Japan is required.
In addition, the requirements for appointing representatives differ greatly between branches and subsidiaries.
In the case of a branch office, one of the representatives of the Japanese branch office must live in Japan, but Nationality does not matter.
On the other hand, there is no such restriction when establishing a subsidiary.
Therefore, if you don’t have anyone living in Japan to appoint as a rep, or even if you have somebody living in Japan, you think it is not appropriate to appoint the person as a representative, you should choose to establish a subsidiary.
If the representative of the Japanese branch quits and you cannot appoint another representative living in Japan, you need to close the branch, so if you don’t have multiple candidates living in Japan, there might be a risk in business continuity.