There are two main types of Non-Profit Organizations (NPOs) you can setup in Japan, the Standard Corporate Organization (SCO 一般社団法人), and the Standard Fund Organization (SFO 一般財団法人). There are other types of NPOs, but due to the difficulty in establishing them, they really aren’t practical.
The SCO requires fewer people and thus is easier to establish than an SFO.
Requirement for SCO 一般財団法人
Two initiating members and one director are required at a minimum.
Initiating members are similar to shareholders in corporation. They have voting right per head-count and elect directors who represent the company and run day-to-day operation. Members can make resolution of the organization on matters, similar to shareholders of a corporation.
The significant difference is members do not have ownership of assets of the organization nor do they receive dividends like shareholders.
Members and directors can be the same person, and a corporation can be a member. But a director has to be a natural person.
You need to state the purpose(s) of the organization. For example, the promotion of specific cultures, enhancement of a certain public community in Japan, etc.
Process for incorporation of SCO
- Prepare a Articles of Incorporation to include:
a) Name and address of the organization,
c) Accounting period. It can start from any date during a year but it cannot be longer than 1 year,
d) Names and address of members,
The Article of Incorporation has to be notarized by a notary public.
After notarizing the Articles, you need to submit the following documents to the Registration Bureau with the main application form:
1) Memorandum to determine the location of the head office in detail, and directors,
2) Memorandum to elect the representing director,
3) Acceptance letters from directors and the representing director,
4) Stamp certificate or notarized signature. For foreigners who do not have one’s seal registered can have their signatures notarized in the embassy of their home country in Japan.
Requirement for SFO 一般財団法人
There is another type of organization a mixture of trust and corporation. It is called a Standard Fund Organization (SFO) or “Ippan Zaidan Hojin.” It requires at least three councilors, three directors and one auditor. Councilors elect directors and an auditor. Councilors and directors have to be different persons. The minimum fund requirement is three million yen.
While the start-up costs for both type of NPOs are the same, the SFO requires a more complex organizational structure than the SCO and future running costs may be higher as well.
Both organizations can be tax free for certain type of income.