A , or ''gōdō kaisha'', abbreviated GK, is a type of business organization in the

Companies Act of Japan The law of Japan refers to the legal system in Japan, which is primarily based on legal codes and statutes, with precedents also playing an important role. Japan has a Civil law (legal system), civil law legal system with six legal codes, which ...

modeled after the American

limited liability company A limited liability company (LLC) is the United States-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of ...

(LLC), hence its nickname as the . It is a type of mochibun kaisha (

corporation A corporation or body corporate is an individual or a group of people, such as an association or company, that has been authorized by the State (polity), state to act as a single entity (a legal entity recognized by private and public law as ...

having a simplified internal structure like that of a

partnership A partnership is an agreement where parties agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations. Organizations ...

) distinguished by offering

limited liability Limited liability is a legal status in which a person's financial Legal liability, liability is limited to a fixed sum, most commonly the value of a person's investment in a corporation, company, or joint venture. If a company that provides limi ...

for all investors.

Background

Gōdō gaisha was newly introduced by the

Companies Act Companies Act (with its variations) is a stock short title used for legislation in Botswana, Hong Kong, India, Kenya, Malaysia, New Zealand, South Africa and the United Kingdom in relation to company law. The Bill for an Act with this short title w ...

, which became effective on May 1, 2006, replacing

yūgen gaisha A , abbreviated in English as "Y.K." or "Co., Ltd.", was a form of business organization in Japan. were based on the Germany, German and were implemented in Japan in the of 1940. The Companies Act of Japan, implemented on May 1, 2006, replaced ...

Basic structure

A GK is formed by signed between its investors, called . Each member may provide a capital contribution in the form of money or property. Credit and promises to perform services are not valid considerations for an ownership interest in a GK. Following ratification of the agreement, the GK's articles of incorporation and corporate seal must be registered with the . Once the bureau processes the registration, the company may open a bank account, seal contracts, and engage in other activities as a

legal entity In law, a legal person is any person or legal entity that can do the things a human person is usually able to do in law – such as enter into contracts, lawsuit, sue and be sued, ownership, own property, and so on. The reason for the term "''le ...

. The members may, either in the agreement or pursuant to the agreement, choose one or more executive from among their ranks. This executive manager can be either an individual or a corporation; however, corporate executive managers must appoint at least one to perform the actual management duties. The legal duties of GK managers are very similar to the legal duties of KK directors. GK members may sue managers in the same way that KK shareholders may sue directors on the company's behalf. A GK may be converted to a KK with the unanimous consent of all of its members.

Distinguishing characteristics

The following distinguish godo gaisha from

kabushiki gaisha A or ''kabushiki kaisha'', commonly abbreviated K.K. or KK, is a type of defined under the Companies Act of Japan. The term is often translated as "stock company", "joint-stock company" or "stock corporation". The term ''kabushiki gaisha'' in ...

: * All members must consent to the amendment of the articles of incorporation unless the articles of incorporation provide otherwise. (In a KK, only a supermajority of shareholders is required.) * All members must consent to any transfer of ownership unless the articles of incorporation provide otherwise. (In a KK, the transfer of shares is unlimited by default.) * All members are representatives of the company by default unless managers have been appointed. (In a KK, only the Representative Director represents the company.) * Major business decisions (such as large asset sales or winding up of the company) may be made informally. (In a KK, resolutions of shareholder and board meetings are often required for such decisions). * Members may invest any type of asset in exchange for their interest. (In a KK, non-cash contributions require an appraisal supervised by a court.) * Because KKs traditionally required a larger capital and procedural investment, GKs did not initially have the same level of prestige. That has changed with many large foreign companies, including

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Amazon Amazon most often refers to: * Amazon River, in South America * Amazon rainforest, a rainforest covering most of the Amazon basin * Amazon (company), an American multinational technology company * Amazons, a tribe of female warriors in Greek myth ...

and

Walmart Walmart Inc. (; formerly Wal-Mart Stores, Inc.) is an American multinational retail corporation that operates a chain of hypermarkets (also called supercenters), discount department stores, and grocery stores in the United States and 23 other ...

(through Seiyu), opting for GKs in Japan.

Taxation

GKs are taxed as corporations under Japanese law: the company's profits are taxed at corporate tax rates, and dividends are taxed at individual tax rates. In late 2005, following the passage of the Companies Act, the

Ministry of Economy, Trade, and Industry The , METI for short, is a ministry of the Government of Japan. It was created by the 2001 Central Government Reform when the Ministry of International Trade and Industry (MITI) merged with agencies from other ministries related to economic activ ...

pressed the

Ministry of Finance A ministry of finance is a ministry or other government agency in charge of government finance, fiscal policy, and financial regulation. It is headed by a finance minister, an executive or cabinet position . A ministry of finance's portfoli ...

to treat GKs as "pass-through entities" in which only company profits would be taxed. However, the Ministry of Finance refused to allow such treatment. As a result, many new companies are expected to use the more prestigious KK business form rather than the GK business form, especially given the looser regulation of KKs under the new law. The only limited liability business which receives pass-through tax treatment in Japan is the

limited liability partnership A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore can exhibit aspects of both partnerships and corporations. In an LLP, each partner is n ...

. Under

United States The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 U.S. state, states and a federal capital district, Washington, D.C. The 48 ...

tax law, gōdō gaisha are not classified as corporations, and are therefore eligible to make an entity classification election: a single-member GK may be treated as an extension of its member and a multi-member GK may follow the tax rules for

References

External links