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General Corporate

Understanding the Differences Between American and Japanese Law: Key Points to Know Before Establishing a Local Entity

General Corporate

Understanding the Differences Between American and Japanese Law: Key Points to Know Before Establishing a Local Entity

One strategy for expanding your business internationally is entering the American market. At the stage where you are concretely considering this move, you may want to become familiar with the laws related to corporate establishment in the United States. The legal system in the United States differs from that of Japan. To set up a company, it is essential to have accurate knowledge of the local laws.

This article provides a clear explanation of the personalityistics and considerations of American law, and further explains the important points to keep in mind when establishing a corporation in the United States.

The Structure of American Legal Governance

United States Flag

The structure of American legal governance is personalityized by the following two aspects:

  • Organization at the state government level
  • The role of state governments

In the United States, which adopts a federal system, the government hierarchy is finely branched from the central federal government down to state and local governments. Among these, the federal government and state governments are defined within the United States Constitution.

Organization at the State Government Level

American legal governance is organized at the state government level.

The United States is comprised of 50 states, each possessing its own autonomy. State governments independently establish laws and administer governance. This decentralized organization differs from a centralized governance system. In America, governance is conducted in accordance with the needs and cultures of each region.

Each state enacts its own state laws (State Law), allowing for responses outside the jurisdiction of the central government (federal government).

The Role of State Governments

The role of state governments is to conduct politics with their own state constitutions, which contain detailed and specific content.

Specifically, matters such as education, taxation, law enforcement, and the judicial system are clearly assigned to the states for their own management. For example, different educational and tax systems exist in each state, and it is personalityistic for states to establish laws respecting their unique cultures and social structures.

As a result, the overall legal system of America takes a composite system of federal and state laws, with central and local governments coordinating governance.

Reference: AMERICAN CENTER JAPAN|Structure of Governance in the U.S. – Federal Government[ja]

Differences Between Japanese and American Legal Systems

Japanese flag

There are several significant differences between the American and Japanese legal systems.

Firstly, the basis of law differs. In America, the United States Constitution is the supreme law, and each state also has its own constitution. In contrast, Japan’s supreme law is the Japanese Constitution (Nihonkoku Kenpō), and laws enacted by the National Diet are in accordance with it. While the U.S. Constitution is amendable in principle, the Japanese Constitution has strict procedures for amendments.

Secondly, there is a difference in authority. America operates under a federal system where states have their own sovereignty, yet the federal government is also powerful. In comparison, Japan has a more centralized system, where local governments exercise authority delegated to them by the central government. For example, Japanese local governments cannot enact laws; they administer affairs based on laws established by the central government.

Lastly, a distinctive feature of the Japanese legal system is the uniqueness of the Japanese Constitution. America established the United States Constitution reflecting its historical context and the outcomes of the Revolutionary War. In contrast, the Japanese Constitution was enacted post-World War II under the guidance of the Allied occupation (GHQ), personalityized by its pacifism and the protection of fundamental human rights. For instance, Article 9 of the Japanese Constitution declares the renunciation of war, and there are unique provisions regarding the existence of the Japan Self-Defense Forces.

As these differences illustrate, America and Japan have developed distinct legal systems based on their respective histories and cultural backgrounds.

Understanding the American Concept of ‘Contracts’

Signing Contract Photo

Let’s explore the American approach to ‘contracts’ by examining two specific types:

  • Employment Contracts
  • Real Estate Lease Agreements

One personalityistic feature is the influence of cultural background and the national personality of the people who live there. The United States is a multicultural nation, composed of various ethnicities and races, which is a significant factor.

In the United States, contracts are legally binding. Compliance with contracts is enforced, and in the event of a dispute, the contract serves as the standard in litigation.

Employment Contracts

In employment contracts, both employers and employees establish clear terms of labor based on the contract. Employees can confirm their salary, working conditions, and period of employment in the contract.

Furthermore, the At-Will employment system is common in the United States, offering flexibility where either the employer or the employee can terminate employment without providing a reason. However, discriminatory dismissals are prohibited by labor laws, and standards such as minimum wage are stipulated.

Real Estate Lease Agreements

In real estate lease agreements, terms such as rent, contract duration, conditions for vacating, and responsibilities for repairs are specified in the contract. The American real estate market is relatively flexible in terms of contract conditions, allowing room for negotiation. Additionally, while the rights and obligations of the lessor and lessee are based on the contract, real estate laws vary by state, which means contract terms can differ depending on the region.

Key Points to Know When Establishing a Corporation in the United States

American office district

When establishing a corporation in the United States, there are three key points you should be aware of:

  • The incorporation process can take several months
  • It can cost several thousand dollars
  • Choosing the right location is crucial

Starting a business in the economically booming United States offers significant advantages. Understand the following points and prepare for the incorporation process accordingly.

The Incorporation Process Can Take Several Months

Incorporating a business in the United States involves various procedures and reviews, and it typically takes several months to complete.

Requirements vary by state, including necessary documentation and the review process, so planning with a schedule in mind is crucial. Additionally, the time required to establish a corporation can vary depending on the type of corporation and its location, so it’s important to plan with ample time.

It Can Cost Several Thousand Dollars

Generally, the cost of establishing a corporation can run into several thousand dollars. This includes registration fees, preparation of legal documents, and consulting fees for lawyers and accountants.

Since the cost of incorporation can vary depending on the state and type of corporation, thorough research is necessary. Estimate the costs associated with establishing a corporation in advance and set an appropriate budget.

Choosing the Right Location is Crucial

The United States is a vast country, and selecting the right area to conduct business is extremely important.

For example, tax systems, business environments, and the availability of talent can vary by area. Understand the personalityistics of each state beforehand and consider the area that is most suitable for the nature of your business. Selecting the right state in alignment with your business objectives will likely lead to smoother operations after the corporation is established.

Key Points to Consider When Establishing a Corporation in the United States

Meeting in progress

There are several important considerations when establishing a corporation in the United States.

Firstly, addressing the language barrier is essential. In the United States, business transactions and legal procedures are conducted in English. Precision is particularly required for contracts and legal documents, so it’s advisable to seek support from professionals to avoid misunderstandings and issues. If your in-house resources are insufficient, using a proxy service is one option to consider.

In addition, understanding the legal system of each state is crucial. When establishing a corporation, a thorough understanding of the laws of the state you choose is indispensable. Since tax systems and regulations vary from state to state, selecting the right state that aligns with the nature and strategy of your business is key to success. Consult with experts and gather accurate information in advance.

Summary: Consult with Experts for Legal Issues Abroad

Checking a tablet

The legal system in the United States is primarily composed of federal laws established by the central federal government and state constitutions enacted by state governments. It is important to recognize that, due to the country’s formation and history, there are distinct personalityistics that differ from the centralized system of Japan and the rules of the Japanese Constitution. A thorough understanding of these is essential for businesses aiming to expand overseas and establish corporations in the United States.

Legal matters often involve complex expertise, and it is necessary to make careful decisions based on a correct understanding. Instead of making hasty decisions, it is advisable to consult with specialists to address any questions and resolve issues.

Guidance on Measures by Our Firm

Monolith Law Office is a law firm with extensive experience in both IT, particularly the internet, and legal matters. In recent years, global business has been expanding increasingly, and the need for legal checks by specialists is growing more than ever. Our firm provides solutions related to international legal affairs.

Areas of practice at Monolith Law Office: International Legal Affairs & Overseas Business[ja]

Managing Attorney: Toki Kawase

The Editor in Chief: Managing Attorney: Toki Kawase

An expert in IT-related legal affairs in Japan who established MONOLITH LAW OFFICE and serves as its managing attorney. Formerly an IT engineer, he has been involved in the management of IT companies. Served as legal counsel to more than 100 companies, ranging from top-tier organizations to seed-stage Startups.

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