RESOURCES
Pros & Cons of a Branch Office vs. KK Subsidiary
The primary benefit of establishing a subsidiary (Kabushiki Kaisha or "KK" corporate subsidiary) vs. a branch office is the appearance of stability and commitment that it gives prospective employees, customers, and distributors. As negatives, it costs $5,000 more to set up and requires 4-6 weeks of shuffling paperwork. 99% of all Japanese companies (even "Mom & Pop" operations) are KK entities.
| Branch Office | Kabushiki Kaisha (KK) | |
| Appearance of stability | Low | High |
| Minimum Capitalization | No requirement of minimum capital | No requirement of minimum capital |
| Registration cost | from Y100,000 | from Y250,000 |
| Liability | Parent company fully liable to creditors | Liability of the KK's shareholders typically limited to the amount of their equity participation |
| Losses of The Entity |
Losses are included in the parent company's income statement | Losses at the KK are not included in the parent company's income statement |
| Corporate income tax | 30-45% of profit | 30-45% of profit |
| Transfer Pricing Issues | Higher risk | Lower risk |
| Directors | None | At least 1 depending on the size and if the entity goes public or not |
| Representatives resident in Japan | At least 1 | At least 1 |