Trapped by 5,000,000 JPY Business Manager Visa criteria? — you have alternatives.
Photo by Pawel Czerwinski on Unsplash
There are so many entrepreneurs around us who want to start businesses, but if they are not Japanese, Permanent Resident, Long Term Resident, Spouse of a Permanent Resident, Spouse of a Long Term Resident or Spouse of a Japanese, they need to apply for Business Manager Visa as soon as they incorporate a company and assign themselves as representative directors.
5,000,000 JPY is needed to sustainably operate a business, and this amount is much less than what the US government requests for foreign founders, but 5,000,000 JPY is a big chunk of money to invest.
The good news? There are always alternatives.
Alternative #1 — Highly Skilled Professional
Those with rich academic and work experience can target the Highly Skilled Professional (HSP) Visa, and HSP visa holders can legally open a company without fulfilling the Business Manager Visa criteria of 1) 5,000,000 JPY capital investment and 2) dedicated office space.
One of the top advantages of holding the HSP visa is the short path for acquiring Permanent Resident (PR) status. If you have over 70 points according to the application calculation sheet, you can apply for PR in just three years. If you have 80 points, you can apply for it in one year.
The tricky part is that your status will be tied to a sponsoring organization based in Japan, and the points, as well as years accumulated, reset once you leave the sponsoring organization. We will revisit the HSP in detail in a separate article.
Alternative #2 — develop your product under your working permit
The most common working permit in Japan is “Engineer/Specialist in Humanities/International Services” visa.
According to Ministry of Justice, 283,380 people hold the Engineer/Specialist in Humanities/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 naturally think of launching a company when they think of a new idea, but in fact, that might be too early.
We should establish a company when we actually start generating traction and sales.
Why would this be the case?
Owning a company costs extra.
If we are paying a salary, we need to pay social insurances and employees’ insurances on top of the salary, by law. Even if we are not generating any revenue, we need to pay at least 70,000 JPY business residential tax every year. To minimize these costs, we should not look to own a company unless we have actual money transactions with the other businesses and/or customers.Starting as a sole-proprietor
“Company (KK / GK)” is not the only legal entity that you can choose when you start a business. Many Japanese people start their business as “sole-proprietorship” instead.
You will need an organization that sponsors your visa, but you do not need to hold an employee status to acquire an Engineer/Specialist in Humanities/International Services visa. Even if you are working as a “contractor” without an employment certificate, you can still apply for this status (as of 2021).
The purpose of holding sole-proprietorship business status is more for tax deduction, and a sole-proprietor is often perceived as “freelancer”. Of course, the credibility of a company is higher than that of a sole-proprietor because starting a company and keeping it is not easy, so a company owner tends to be viewed as more committed in comparison to sole-proprietors.
Alternative #3 — Generate cash via a consulting business
Consulting businesses do not scale, but it’s the easiest way to validate whether we do have market fit and we 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 start point.
Building a MVP, testing it, getting traction, acquiring the first clients, and receiving investment takes time. Investment can cover the 5,000,000 JPY starting capital, but generating 5,000,000 JPY in 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 can definitely start the consulting business as a sole proprietor. If your clients don’t mind sending money to a legal entity overseas, you may also use your incorporated 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 start thinking of incorporating your company officially in Japan.
“Startups” and “entrepreneurs” are not the same, and international founders who need residential status in Japan are 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, and we never know when it’ll gain traction and scale. Too much uncertainties are involved, and yet we still need to push ourselves forward regardless of what happens next.
Many people choose the Startup Visa over the Business Manager Visa to start, but within the 12 months, all Startup Visa holders must fulfill all the criteria to transition over to a Business Manager Visa status.
5,000,000 JPY capital (or hiring 2 members with stable residential status)
a dedicated office space (100,000 JPY/per month in central Tokyo)
Additionally, the current startup visa scheme does not allow Startup Visa holders to have part-time jobs aside from their main startup activities. Unless we have sufficient clientele base or enough cash to cover all expenses, it’s quite a risky path.
It is crucial to weigh all options and alternatives that are available, and find the right path works for your situation. Remember — incorporating a business can happen at anytime and there are always several options to choose from. The straightforward conclusion of “launching a business = Startup/Business Manager Visa” is not always the best answer depending on your goal.
