There are so many entrepreneurs around me who want to start a business, but if they are not: Japanese, a Permanent Resident, Long Term Resident, Spouse of a Permanent Resident, Spouse of a Long Term Resident or Spouse of a Japanese national, then they need to apply for Business Manager Visa as soon as they incorporate a company and assign themselves as representative directors.

5 million JPY is needed to sustainably operate a business. While this amount is much less than what the US government requests for foreign founders; nonetheless, 5 million JPY is a big chunk of money to invest.

Remember though — we always have alternatives!

Alternative #1 — Highly Skilled Professional

Some intelligent people with rich academic and work experience can target the Highly Skilled Professional Visa (HSP onwards). HSP visa holders can legally open a company without fulfilling the criteria of acquiring a business manager visa which are: 1) 5 million JPY investment; and, 2) a dedicated office space.

One of the biggest advantages of holding HSP visa is the short path for acquiring Permanent Resident (PR onwards) status. If you have over 70 points according to the calculation sheet, you can apply for PR in 3 years. If you have 80 points, you can apply in a year.

The tricky part with HSP is that your status will be tied to a sponsoring organization based in Japan, and the point and cumulative year resets once you leave the sponsoring organization. Let’s talk in depth about HSP in a different article.

Alternative #2 — develop your product under a working permit

The most common working permit in Japan is “Engineer, Humanity and International Services”. According to the Ministry of Justice, 283,380 people hold Engineer, Humanity and International Services visa as of March 31st, 2021, and approximately 20,000–40,000 people are newly entering Japan with this status on an annual basis.

Many people think of launching a company when they have thought of a new idea, but it’s too early. We can establish a company when we actually start generating traction and sales. Why?

1. Owning a company costs

If we are paying a salary, we need to pay social insurances and employees’ insurances on top of the salary. Even if we are not generating any revenue, we need to pay at least 70,000 JPY business residential tax every year. In other words, we do not need to own a company unless we have actual money transactions with the other businesses.

2. Starting as a sole-proprietor

“Company (KK/GK)” is not the only legal entity you can choose when you start a business. Many Japanese people start their business as a “sole-proprietor” instead.

You will need an organization to sponsor your visa, but you do not need to hold employee status to acquire a “Engineer, Humanity and International Services." Even if you are working as a “contractor” without an employment certificate, you can apply for this status (as of 2021). The purpose of holding a sole-proprietor status is mostly for tax deduction as a sole-proprietor is often perceived as “freelancer.” Of course, the credibility of a company is higher than sole-proprietor because starting a company and keeping it is not easy, so the other business owners think the company owner is more committed than sole-proprietors.

Alternative #3 — Generate cash via a consulting business

Consulting business does not scale, but it’s the easiest way to validate whether we have market fit and are capable of earning money by ourselves through our own businesses. We never know the pain-points of our customers until we directly listen to them, and building our clientele base through a consulting business could be a good starting point.

Building an MVP, testing it, getting traction, acquiring the first clients and receiving investment takes time. Investment can cover the 5 million JPY, but generating 5 million sales and bootstrapping your business until you find the right market fit could be another option as long as you see the clear vision in front of you.

You may start the consulting business as a sole proprietor. If your clients don’t mind sending money to a legal entity overseas, you can register your entity in a different country. When your clients start requesting you to have a Japanese corporate bank account to transfer money or make transactions, that’s the time to think of incorporating your company.

In Conclusion

“Startups” and “entrepreneurs” are not the same, and international founders who need residential status in Japan often facing extra difficulties of finding the right path. We will need to take a huge risk when we build a startup. We will have zero revenue stream for a while, zero customers at first, and we never know when it will scale. So much uncertainty is involved, and we still need to push ourselves forward regardless of what happens next.

Many people choose Startup Visa over Business Manager Visa, but within the 12 months, all startup visa holders must fulfill all the criteria to acquire a business manager visa status:

• 5 million JPY capital (or hiring 2 members with stable residential status)
• a dedicated office space (100,000 JPY-/per month in central Tokyo)

In addition, the current startup visa scheme does not allow the startup visa holders to have part-time jobs aside from the main startup activities. Unless we have sufficient clientele base or enough cash to cover all expenses, it’s risky.

All that said, we should know all options and alternatives that we currently have, and find the right path to make our lives better. Remember — we can start a business anytime and we have several options. The straightforward conclusion of “launching a business = Startup/Business Manager Visa” is not always the best answer depending on your goal.

Get More Advice on How to Navigate the Complexities of Japan Business Visa Pathways

Startup Work Inc. based in Tokyo, leads in supporting Shibuya's Startup Visa. With bilingual support staff and extensive, practical experience working with startups, Startup Work Inc. provides a leading source for supporting individuals and startup businesses in Japan.

The Author's goal is to make information transparent to international founders. Connect with Miho and set up a consultation to further discuss how to chose the right route for your business and other matters related to living and working in Japan.

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