We have compiled all the information necessary for starting a business, such as the method and procedure of starting a business, points of preparation, what is necessary for starting a business, costs, and financing method. If you are planning to start a business, this is a complete guide to entrepreneurial methods and procedures.
Entrepreneurial methods and procedures
There are two ways to start a business: starting a business as a sole proprietor and establishing a corporation. In addition to the merits and demerits of each method, we have summarized the tips for smoothly proceeding with the complicated procedure for establishing a corporation.
Advantages and disadvantages of establishing a corporation with a sole proprietor
|Sole proprietorship||The procedure is relatively simple.
Tax calculation is easier than for corporations.
|Credit is low compared to corporations, which may interfere with transactions|
|Establishment of corporation||High social credibility Take
|Procedures are complicated
Accounting and tax affairs require specialized knowledge
Advantages and disadvantages of sole proprietors
One of the merits of choosing a sole proprietor as the method of starting a business is that the procedure is simpler than that of a corporation. In order to start a business as a sole proprietor, submit the “Notification Form for Opening / Closing of Business of Individual Business Owner” to the tax office that has jurisdiction over the place of tax payment, and the establishment procedure is completed.
Another advantage is that tax calculation is easier than for corporations. Taxes of sole proprietor tax return will be accommodated at, but it is one way of tax return blue returns than to satisfy the conditions, special of 650,000 dollars’ deduction is where you want to aim all means for is received. However, in order to receive the special deduction, you must prepare books that were not required on the balance sheet or white tax return. However, if you use a fully automatic cloud-based tax return software such as Money Forward Cloud Tax Return, you will be able to file tax returns smoothly.
The disadvantage of sole proprietors is that their social credibility is lower than that of corporations. Please note that some clients do not trade unless they are corporations.
Advantages and disadvantages of establishing a corporation
Next, I will explain the second method of starting a business, the merits of establishing a corporation. In contrast to the disadvantages of sole proprietors, corporations have the great advantage of gaining a certain level of social credibility. Restrictions on transactions with clients due to social credit will be lowered, and borrowing examinations from banks will proceed more smoothly than for sole proprietors.
Another financial advantage is that you can carry forward the deficit for up to 9 years. For sole proprietors, it can be carried over for up to 3 years, so it can be said that corporations are overwhelmingly advantageous in terms of tax savings. If you are conscious of tax savings, it may be useful to choose to establish a corporation as your entrepreneurial method.
There are disadvantages to establishing a corporation, and one is that the establishment procedure is very complicated. At least the following three documents are required for the tax office notification documents alone.
- Corporate establishment notification form
- Tax withholding tax related notification form
- Consumption tax related notification form
[For sole proprietors] Report the opening of business to the tax office
The procedure for starting a private business is basically just to notify the tax office of the opening of the business. Within one month of opening, submit the “Notification Form for Opening / Closing Private Business” to the tax office that has jurisdiction over your address. In most cases, the business will be accepted without being asked. It sounds a little unsatisfactory, but it’s that easy to complete.
However, you will also need to notify the tax office if you apply a blue filing that gives you tax incentives on the condition that you keep your accounting books in double-entry bookkeeping, or if you hire an employee to pay your salary. It is a good idea to complete the procedure at the same time as the notification of opening of business.
[For corporations] 1. Certification of articles of incorporation
The Articles of Incorporation are the basic rules of a company’s organization and operations. The articles of incorporation that you have created must be certified by a notary public. Certification by a notary public costs a fee of 50,000 dollars.
Revenue stamps worth 40,000 dollars must be affixed to the original articles of incorporation printed on paper as stamp duty, but there is no stamp duty for electronic articles of incorporation. However, it takes time and money to create an electronic articles of incorporation that meet the conditions, so we recommend that you ask an expert to create an electronic articles of incorporation.
[For corporations] 2. Registered at the Legal Affairs Bureau
Next, the Legal Affairs Bureau will go through the procedure for registration of establishment. In addition to the articles of incorporation, registration and license tax (0.7% of capital, but at least 150,000 dollars) and documents certifying payment of investment are required for the procedure .
[For corporations] 3. Notify the tax office
When the registration is completed, submit the “Corporate Establishment Notification Form” to the tax office. The deadline is within 2 months from the date of establishment. As attached documents, the articles of incorporation, certificate of registered information (certificate of all history items), shareholder list, establishment prospectus, and balance sheet at the time of establishment are required.
Documents submitted to the tax office after January 2016 must include a 13-digit corporate number. However, if the corporate number is not specified by the time of submission, it is not necessary to enter it.
[For corporations] 4. Procedures related to social insurance
If you hire at least one employee, you must have labor insurance. The procedure for joining is done at the Labor Standards Inspection Office. In addition, if you are a corporation, you are obliged to take out health insurance and welfare annuity insurance regardless of the size of your business. The procedure for joining is done at the pension office.
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