The main differences between a Kabushiki-Kaisha (KK) and a Godo-Kaisha (GK) are as follows.

First, in a KK, shareholders do not directly manage the business, whereas in a GK, the members (owners) generally participate in the management of the business. In a KK, shareholders decide fundamental matters at shareholders’ meetings and delegate day-to-day management to directors. By contrast, in a GK, all or some of the members who have invested in the company conduct its business directly.

As a result, when establishing a KK, at least one director must be appointed, and a shareholders’ meeting must be held at least once a year to approve the financial statements for each fiscal year. These formalities are not required for a GK.

On the other hand, the costs and administrative burdens of establishing and maintaining a GK tend to be lower than those of a KK. For example, the registration tax for a KK is JPY 150,000 or 0.7% of the stated capital, whichever is higher. In contrast, the registration tax for a GK is JPY 60,000 or 0.7% of the stated capital, whichever is higher. In addition, a KK’s Articles of Incorporation must be certified by a notary public, whereas no such certification is required for a GK’s Articles of Organization.

However, a KK is required to publicly disclose its balance sheet for each fiscal year and is generally regarded as more credible and trusted in the market than a GK. In addition, a KK is often more suitable for raising capital, as it can attract investors who wish to invest in the company without participating in its management.

When deciding whether to choose a KK or a GK for doing business in Japan, it is also important to consider tax treatment in your home country. For example, in the United States, a GK may be treated as a pass-through entity for tax purposes