Pros and Cons — KK or GK?

The first two terms we learn when we think of starting a company are KK and GK. Many people know KK stands for Kabushiki Kaisha, GK stands for Godo Kaisha, but what’s the difference between the two?

Photo by Juan Rumimpunu on Unsplash

Who makes the decision in your company?

Just for a quick review to understand what’s KK & GK.

  • Kabushiki Kaisha (KK) — Stock Company
  • Godo Kaisha (GK) — Limited Liability Corporation without stock

The company registration fee for GK is ¥60,000 (paid at Legal Affairs Bureau), and the incorporation fee for KK is approximately ¥250,000 in total (paid ¥50,000 at Notary Office, ¥ 40,000 for revenue stamp and ¥150,000 at Legal Affairs Bureau. Some documentation fee will be attached on top of the registration cost, so the total will be around ¥250,000).

Many entrepreneurs decide to go with GK because it’s cheaper and easier to set up, but please note that

  • investors prefer to invest in KK because they can invest based on the share purchase agreement.
  • to change GK to KK, it takes at least 1.5 months in order to list the change of entity on official gazette and to register it at Legal Affairs Bureau.
  • the decision making power in the company is based on how much shares the shareholders have, and it’s easy to visualize the power structure with KK structure.

To go at your own pace, GK is a option

Photo by Shaojie on Unsplash

The most convincing reason that I heard from an entrepreneur was

“ I am launching a GK because I am not planning to get any investment from the third party.
I want to keep pursuing what I want to achieve with my company, so there is no need to think about stocks.”

Another entrepreneur told me

“ I will co-found this company with my best friend. We will not break our relationship through this startup journey.”

When we think of the word “startup”, we think about the scalability or investor relationship associated with the company. As long as we can go at our own pace, no need to grow fast by involving the third party. We can all be entrepreneurial regardless of the entity stile — GK, KK, sole-proprietor or freelancer. The crucial point is not the number of companies that we own or what kind of legal entity we have, but how our business can make a positive impact on society.

Can we trust the members around us?

If I co-found a GK with some of my friends, and if all of us invest at least ¥1 to launch the GK, basically all of us will have the equal decision making power.

Unlike KK, the decision making power in GK is distributed equally regardless of the amount each member invests and making a conclusion among the members tends to be difficult.

Although we can freely set the rule about decision making power on the Articles of Incorporation, GK’s articles of incorporation will not be notarized at Notary Office so the compelling power could be relatively small compared to the notarized Articles of Incorporation that all KK owners have.

Observing several GK startups, I feel the successful GK owners trust the members, or they have strong direction to sustain the business by themselves without financially asking for help to investors.

Side note

  1. According to several “immigration specialists”, the Business Manager visa acceptance rate does not change based on whether the business is owned by GK or KK
  2. The one paying the initial capital can be a company. If you have a company outside of Japan and if you appoint the company to pay the initial capital on your behalf and launch a GK in Japan, the decision making power of the GK will follow the structure of the company in abroad.
  3. As far as I know, most investors prefer to use A type stocks for seed-round. In other words, KK can only accept the investment.
  4. The tax system works exactly the same for GK and KK. No tax benefit for LLC like in the US. All GK&KK owners need to pay at least ¥70,000 Corporate Residence Tax (法人住民税) regardless of they make profit or not.

Hope it helps a bit!

Startup Work Inc.