[NANTOKA Entrepreneur's Diary] Vol.2 Freelancer or Corporation

This is an "NANTOKA entrepreneur's diary" written by a creative director working at a creative agency in Tokyo, documenting the process of starting an independent business. It will cover the process of entrepreneurship, insights gained, failures, and other related content.

How to start a business?

Broadly speaking, there are two options: "freelancer" and "corporation." In the creative industry, there are quite a few freelancers. The reason is that in this industry, if you excel in your craft, you can make a living on your own. There are actual professionals such as designers, copywriters, illustrators, photographers, stylists, video directors, and producers who rely solely on their skills for work. In addition, I've also come across articles stating that freelancers are respected in other countries as people who can make a living through their work. In Japan, it's similar at the operational and agency levels, but when it comes to clients, there can be a slightly different perception, and sometimes even a sense of being underestimated. Furthermore, depending on the industry of the client, there may be cases where orders can only be placed with companies with a capital of 5 million yen or more for credit-related reasons.

Pros and cons of freelancing and corporations

The summary on the website of Freee Inc., a Japanese accounting software company, was very clear. In short, if you file the necessary paperwork, you can start as a freelancer from the next day with almost zero startup costs. On the other hand, setting up a company requires registration, which costs around 250,000 yen, and there are additional expenses for preparing various items such as company seals and certificates of registration, as well as other additional costs. It takes more than a month for preparation. By the way, you also need initial capital and living expenses to begin with. Yes, it can be tough.
For now, I am focusing on calculating the expenses required to start a business. In practice, you can rely on administrative scriveners for the time frame and budget or outsource to Freee's "Company Incorporation Support" service. If I decide to establish a company, I will consider the respective costs and efforts involved.

Types of corporations

This time, I heavily relied on an article by Freee Inc., but their "Basic Knowledge of Company Incorporation" is easy to understand. Since I also had vague knowledge, looking at it from an entrepreneurial perspective provides various factors for consideration. There are "Kabushiki Kaisha" (stock corporation), "Godo Kaisha" (limited liability company), "Goshi Kaisha" (unlimited liability company), and "Gomei Kaisha" (unlimited partnership company). However, I will exclude "Goshi Kaisha" and "Gomei Kaisha" for now. The reason is that companies can have either "limited liability" or "unlimited liability." The latter means that even if there is a significant mistake, you may have to sell your family home to make money. By the way, freelancers also fall under the category of "unlimited liability." "Kabushiki Kaisha" and "Godo Kaisha" have differences in terms of establishment costs, decision-making within the company, eligibility for listing, profit distribution, and more. Foreign IT companies like Google and Apple, as well as foreign advertising agencies operating in Japan, have deliberately changed their registration to "Godo Kaisha." In fact, I remember there was an announcement when I was working at a foreign agency that they had switched to "Godo Kaisha." The benefits and disadvantages of "Godo Kaisha" are explained in this article, such as being able to follow the accounting rules of their home country and not needing to cater to the whims of shareholders.

Decisions based on business scale and number of participants

In the end, it comes down to whether to be a "freelancer," a "Kabushiki Kaisha," or a "Godo Kaisha." This decision depends on factors such as "how much income you aim to generate," "whether you want to expand your business scale," and "what kind of business model you want to adopt." As a rough estimate, if your annual sales are 8 million yen or less, being a freelancer is sufficient. If it exceeds that amount, having a company has tax advantages, and you need to create a "business plan" to determine how you will conduct your business and make decisions based on your interaction with colleagues. Of course, as a creative director, being involved in supervisory tasks, a larger business scale allows you to fully utilize your skills.

At the moment, it seems like I will go with a "Kabushiki Kaisha," but I still have some leeway and want to make a careful decision.

Well then, until next time!