How to set up an NPO in Japan

There are two types of NPO that you can practically set up. One is Standard Corporate Organization (SCO or 一般社団法人) and another is Standard Fund Organization (SFO or 一般財団法人). Others are so difficult that it is practically unrealistic.

SCO is much easier to set up than SFO because the number of people needed to be involved is much less.

Requirement for SCO 一般財団法人

Two initiating members and one director are required at 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 anything like shareholders of a corporation. The significant difference is members do not have ownership of assets of the organization nor receive dividends unlike shareholders.

Members and directors can be the same person. Corporation can be a member. But a director has to be a natural person.

About the nature of activities, you need to mention purpose(s) of the organization. It can be like promotion of specific cultures, enhancement of certain public community in Japan etc.

Process for incorporation of SCO

You need to prepare an Article of Incorporation. This should include:
1) Name and address of the organization,
2) Objects,
3) Accounting period. It can start from any date during a year but it cannot be longer than 1 year,
4) Names and address of members,

The Article of Incorporation has to be notarized by Public Notary.

After notarizing the Article, you need the following documents to submit to the Registration Bureau with its 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 whose nature is more like a mixture of trust and corporation. We call it Standard Fund Organization (SFO) or “Ippan Zaidan Hojin”. It has a nature of organization like a mixture of trust fund and corporation. It has to have at least 3 councilors, 3 directors and one auditor. Councilors elect directors and an auditor. Councilors and directors have to be different persons. The minimum fund requirement is 3 million yen.

Compared to the organization type I was talking Standard Corporate Organization (SCO) or “Ippan Shadan Hojin”, SFO requires more complex organization structure and it seems over-kill for now but you may want to know more.

The cost of setting up an organization will be the same but future running cost may be higher for SFO.

These organization can be tax free for certain type of incomes.