Delaware C-Corp with a Japanese subsidiary

[uoamerica]

Hi all,

I’m looking to launch my startup in the next 12 months or so and I was wondering if it’s possible to do so as a US based C-Corp with a local subsidiary. Over the long term I think I ultimately want the company officially based out of the US (and will move more in that direction over time) but for practical reasons I want the first office to be located here.

Apologies if the question doesn’t make sense.
Thanks

 

[jaeb]

@uoamerica Yes that is commonly done especially if you are raising money from non Japanese investors. Delaware is common as is more recently Wyoming depending on the business.

 

[uoamerica]

@jaeb Who would I talk to about getting something like this set up? Or is it trivial to do myself?

 

[dakuyz]

@uoamerica The Delaware one is easy enough with any of the corporation setup services like Stripe Atlas etc. If you intend to raise money from non-Japanese investors, it would be good to set this up, though you don't have to do it right away.

Instead of a lawyer, find a judicial scrivener (司法書士) for Japan that knows about corporation setup. I have one I used in Tokyo, otherwise you can find some using the various resources, such as the expat Facebook groups or maybe your local ward startup support center (indicate that it is supposed to eventually be a subsidiary of the US though).

You can determine whether a GK or a KK makes more sense. A GK would not be able to raise money from outside investors, though the US company of course could raise money instead.

 

[uoamerica]

@dakuyz Super useful thanks!

 

[jaeb]

@uoamerica I would engage a lawyer- one for the KK setup and another for the Delaware entity.

 

[uoamerica]

@jaeb Good to get double confirmation on this, thanks

 

[gankerberg]

@uoamerica jfyi if you use a gk rather than a kk for the japan sub, you can do a check-the-box election and have it disregarded for us tax purposes. talk to a lawyer.

 

[mellie]

@uoamerica Yes, you can do this. I was a c-suite exec for a multi-national fintech with this setup. Just realize that it may create some issues down the road which may or may not be advantageous. I’m thinking about things like licensing issues if you are selling software etc, transfer price issues, funding, etc.

If I had to do it again I would have only had the Japan and UK branches, dealing with the IRS and US accounting/reporting issues was a massive PITA, and a US branch was 100% not needed to attract non-Japanese investment. In fact a Japan head office would have been a benefit.

Especially if you will be generating most of your revenue from Japan, considering just having just a Japan branch if feasible.