Sole proprietor VS company

Overview

When starting a new business in Japan, sole proprietor (kojin jigyo) or set up a company is often important decision for Japanese tax purpose.

Tax regime and social insurance varies between sole proprietor and company.

I explain the differences briefly.

Key Differences Between a Sole Proprietor and a company

	Sole proprietor	Company
Tax	Individual tax	Corporate tax
Tax Rate	15-55% (including local tax)	Approximately 30%
Per capita levy	N/A	At least JPY 70,000
Blue tax payer Special deduction	Available (JPY100,000, 550,000 or 650,000)	N/A
Salary to pay your family	Limited	Unlimited
Social insurance	Low	High
Incorporation cost	N/A	GK JPY140,000, KK JPY260,000 in general
Tax accountant fee	Low	High
Business	Less prestigious	Prestigious

Conclusion

As you can see above table, company generally needs more running cost (per capita levy, tax accountant fee etc.). Also, minimum tax is high for companies.

Consequently, company is not efficient for small business.

That said, company is more prestigious for business purpose. If you would like to expand business as soon as possible, set up a company might be a better option.

The situation varies from person to person. I am happy to discuss and simulate whether sole proprietor or company is more efficient.