Hello,
I’m about to go my own way and start working for foreign companies as a freelancer. As I recently got my PR, I want to enjoy some of that freedom.
I already have a sole-proprietorship but I was thinking about setting up my own company. I have been told that a 合同会社 would be the best for me and my needs. (I will be working alone for the foreseeable future)
However, as I will be working alone, I’m wondering if this is the best move and maybe starting as 個人事業 would be the best for me. I don’t plan on hiring anyone for the foreseeable future, even if I would like to expand my activities in the future.
So my question, what should I do? Should I go ahead and set up a company or continue as kojin jigyo? My concerns are that maybe creating a company might complicate things.
Any thoughts? Any advices would be very appreciated as well!
Thanks!
4 comments
> I have been told that a 合同会社 would be the best for me and my needs.
By who? If the answer is a lawyer or tax expert, then I think you should follow their advice.
A 合同会社 is more trustworthy for clients and has tax and liability benefits, the only downside seems to be the initial cost and paperwork? So if you’re serious about this why not do it?
If you’re making decent money I hear a 合同会社 is better tax wise (by enough that you can pay an accountant to do it and still come out ahead on net). I haven’t dared do it yet but looking at making the switch.
Disclaimer: I’m not a lawyer, and this isn’t legal advice. (But I have a masters in business and have taken a lot of law classes about this kind of stuff).
Since you are a one person so, you can do 個人事業 without any major disadvantages, but if you run any kind of business where getting sued is remotely likely then you would be safer to run a 合同会社. You can register a 合同会社 for 6万円 (the registration fee) if you do the paperwork yourself, or a bit more if you buy a pre-registered company or pay someone to register it for you. However, if you start a 合同会社without much (or any) capital stock, people may want to trust it, and if you put in lots of capital stock, well it costs money. If people know that they are really just contracting to you, they may not bother to research the company anyway. Depending on your type of business operations 合同会社 also makes it easier to take certain tax deductions.
Since we’re talking about company types, there is the all present 株式会社 as well. This will take more like 24万円 to register, and require a lot more paperwork on an ongoing basis. It also requires double taxation in the sense that the company needs to pay a tax on profits, and then when you pay yourself a salary, you need to pay your own income tax on that salary too. Still, it has some advantages for larger companies in terms of being able to raise money, the ability to smoothly share and hand over control, etc. I list it here mainly to mention the disadvantages, but I know people who have registered then to protect “their” money from their family, and more relevant, for purposes of obtaining an investment visa.
I did a 合同会社, I don’t regret it. (1 recurrent customer)
You’ll need at least the 7万円 per year and around 12万円 for the accountant per year.On the other hand, you can write off a bunch of stuff to your company rather than personal to decrease tax liability.
You’ll need to chose between giving yourself a salary (around 25% of your salary in social charges overall) or through dividend (no social charges, but you pay the corporate tax and can’t include that as a cost to your company).
You need every month to make some effort reporting all the expenses and income to your accountant with the receipts. Also, need occasionally to travel from gov office A to gov office B because of some processes. It need some discipline but that’s not too bad. Accountant does the worst parts.
I think the salary is less costly overall in term of tax and pension (though that may depends your salary), but the paperwork for the pensions system is a real pain in the ass (even with an accountant) and imho not worth the trouble. I am switching this year to dividend to avoid the complexity. (this is a subjective analysis where I consider any money going to pension and health insurance as a tax, ie, something I will never receive back as benefit later on)
You aren’t in this case, but if somebody wants a PR, they need to be very careful about the pension system paperwork at the company level. You can have a spotless record of personal pension payment, but if your company isn’t spotless and you are the owner, they’ll reject your PR on this ground as well. To avoid this stress, I would advise anybody who wants to have a PR to never receive salary from their own company, instead receive a dividend. (or avoid mentioning the fact that this company belongs to you)
If you plan doing it long term, I’d bite the bullet and make 合同会社.