A Primer in NPOs, Incorporated Associations, and Voluntary Associations in Japan

Posted on May 28, 2020
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Posted on May 28, 2020

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Reading time: 7 min
Setting up an NPO in Japan can be a serious undertaking. This is particularly so for foreigners due to visa restrictions. For grass-roots initiatives, however, there are other options which still allow you to get a bank account under your association's name - even if you're not a permanent resident. So, if you've got a non-profit group that you want to elevate to a recognized association structure in Japan, read on. In this post, I clarify the different non-profit association types in Japan, and lay out the hoops and hurdles involved in climbing the ladder of organizational structure - including a detailed comparison of the pros and cons of different association types. I also explain what you need to open a bank account under your unincorporated association's name.

Last updated Sep 11, 2020

Preamble

When I founded HokkaidoWilds.org in November 2018, I had lofty goals of perhaps one day elevating the project to fully-fledged NPO status. In Japan, this is NPO-hojin status: NPO法人, or more formally, 特定非営利活動法人 tokutei-hieiri-katsudo-hojin – something akin to a full 501(c)(3) NPO in the US. Some cursory research, however, suggested our cashflows, funding requirements, and current aspirations are far too trivial for the rigors of an NPO structure in Japan (see the comparison chart below). NPOs are highly regulated, rather restrictive, and require strict governance and oversight.

Luckily in Japan, there is a less legally rigorous Non-profit Incorporated Association structure available (非営利型一般社団法人 hieiri-gata-ippan-shadan-hojin). This structure was introduced into Japan legislation as a recognized legal corporate structure in 2006, in order to lower barriers to incorporation for well-meaning associations and organizations in Japan. There’s less reporting obligations and governmental oversight with this structure compared with an NPO. Even still, the costs involved in registration are upwards of more than 110,000yen (US$1,000) – full comparison in the table below. Again, we had to ask whether our cashflow and aspirations really called for incorporation.

To that end, we ‘formally’ settled on declaring ourselves as an unincorporated voluntary association* (任意団体 nin-i-dantai), with the official name of HokkaidoWilds.org. Here’s the association’s charter to prove it. Legally, this means very little. Having a charter, membership list and inkan (official seal), however, has allowed us to open a Japan Post Bank account in HokkaidoWilds.org’s name. Yes, the name on the account is ホッカイドウワイルズドットオーアールジー.

*Alternative translations of nin-i-dantai might include common-interest association, union, etc. The important bit is the ‘unincorporated’ part. Legally, unincorporated voluntary associations in Japan are also referred to as 権利能力なき社団 kenri-noryoku-naki-shadan (literally: “associations with no legal capacities“) (source).

KEY POINTS

A fully-fledged NPO is a serious undertaking in Japan. NPOs are highly regulated and limited in the activities they can engage in . Therefore, many serious, well-established non-profit endeavors may be better served with a less legally rigorous Non-Profit Incorporated Association structure. For foreign residents of Japan, both these structures require a permanent residency visa  or management visa.

As a lower-hurdle option still for grass-roots initiatives in the early days of activities, Unincorporated Common-Interest/Volunteer Association status may be a better choice. Despite next to no legal standing, unincorporated associations can open a bank account under the association name.

Why bother with unincorporated status?

Here at HokkaidoWilds.org, we’re a bunch of weekend warriors who first and foremost love sharing the adventures we have in the Hokkaido outdoors. Our activities go beyond that, however. We spend a lot of time creating English-language, printable GeoPDF topomaps. We volunteer our time to share our perspectives and knowledge. We’ve also pledged to give away revenue from the site to mountain volunteer groups in Hokkaido. In this sense, we feel we’re more than just a website, and certainly more than just Rob, the founder. We’re a rag-tag team passionate about a sustainable and accessible Hokkaido outdoors.

To operate as an entity, we wanted structure. Some of our supporters also wanted us to have organizational structure. “I’d rather my financial support go to an organization, rather than be seen as [Rob’s] personal income,” we were told. The concept of an unincorporated common-interest association – the nin-i-dantai – therefore appealed. While official recognition is limited, it’s allowed us to:

  • Not get taxed on financial support (i.e., donations) for our activities.
  • Apply to government sponsored initiatives where individuals are not allowed to apply (such as the Global Hokkaido initiative – still awaiting the outcome on that).
  • Open a bank account in HokkaidoWilds.org‘s name.
  • Initiate a membership structure with the provision of financial supporters (see the Charter, Article 7).
  • Enjoy the reputational benefits of being recognized as an association with structure.
  • Get many of the documents required for incorporation together – it would now be quite simple to move to an Incorporated Association status.

To be clear, Hokkaido Wilds is little more than a hobby for us editorial members (authors). Therefore, we’re more keen on spending our time producing content, rather than chasing funding and recognition. But it’s nice to have a structure (and the Charter to support it) ready to whip out when needed.

Comparison of Organizational Setups

If you’d like to compare the different kinds of non-profit/voluntary organization/association types, take a look at this table. This is purely for illustrative purposes and it’s not exhaustive. This post is not intended as legal advice. Speak to an expert, particularly if your aspirations are anything more than an unincorporated voluntary association. 

Unincorporated Voluntary Association
任意団体 (nin-i-dantai)
Incorporated Non-profit Association
非営利型一般社団法人 (hieirigata-ippan-shadan-hojin)
Non-profit Organization (NPO)
特定非営利活動法人 (tokutei-hieiri-katsudo-hojin)
Examples Residents' associations, community interest groups, university clubs, mountain clubs, local sporting clubs etc. Mountain search and rescue associations, national mountaineering associations, national/prefecture-level advocacy groups, etc. May also include smaller-scale, more local associations.
Freedom (activities, management etc.)
Social standing
Charter required1
Membership list required1
Japanese documentation required1
Can make bank account?2
Grants available3
Can enter into contracts4
Tax benefits5
Registration required
Length of registration process6
Registration costs7
Number of members required8
Residence status restrictions9
Board of directors required
Public annual reports
Governmental oversight/auditing

NOTES

  1. Charter and membership lists: Conceivably, one could claim unincorporated status without even writing down an official charter or having a membership list. However, any reputable organization with whom you’re looking to work with or receive support from, will likely want to have a copy of your association’s charter and/or members’ list. A charter and member’s list is also 100% required for setting up a bank account in your association’s name.
    • Language of documents: For NPOs and Incorporated Non-Profit Associations, all official documentation must be in Japanese. For Unincorporated Volunteer Associations, it’s preferable to have Japanese versions of your documents, particularly if you plan on interfacing with Japanese organizations. For setting up a bank account, you will need Japanese translations/versions of your charter and membership lists. If you only ever plan to interact with English-speaking/functioning entities in Japan (and don’t need a bank account) then a Voluntary Association could, conceivably, exist only with English documentation.
  2. Bank accounts: As an Unincorporated Association, you’re limited to Japan Post Bank, Mitui-Sumitomo, Risona Bank, and a few others (see this post, in Japanese). HokkaidoWilds currently has an account with Japan Post Bank. Incorporated Associations have many more options available, including most of the popular Internet banks.
  3. Grants: Large grants available to Unincorporated Associations are relatively rare. In Hokkaido, I’ve only seen small-scale grants available to community and volunteer groups with over 10 members. There are relatively greater numbers of grants available to Incorporated Associations, and a huge number of local, prefectural, and national grants available to fully-fledged NPOs.
  4. Contracts: Voluntary associations are limited in the sorts of contracts they can enter into as an association. Real estate contracts are an example. If a voluntary association wants to rent an office, for example, they would very likely need to enter into the rental contract under the association representative’s name (source – but see also this). Incorporated associations and NPOs have full legal status, so can enter into all manner of legally biding contracts under the association’s name.
  5. Tax benefits: For both unincorporated and incorporated associations, membership fees and donations to the association are not counted as taxable income (the association does not pay tax on donations). However, those giving the donations can only apply for tax deductions on donations if they’re giving to an NPO-hojin. Therefore, if you’re planning on collecting large amounts of donations, an NPO is better from a supporter’s point of view.
  6.  Registration process (time): With all documents in order, approvals for new Incorporated Associations are usually processed in about two to three weeks. The approval process for NPOs takes around four to six months.
  7. Registration process (cost): NPO application process is free. Incorporated Associations require notary public fees (50,000yen) and registration fees (60,000yen) to be paid.
  8. Membership: An NPO requires at least 10 members for approval, whereas Incorporated Associations only need three. For an unincorporated association, you’ll have less issues getting a bank account if you have at least three members – a president, vice-president, and treasurer.
  9. Residence status considerations: Incorporated Associations and NPOs are very similar in legal structure and standing as a company. As far as I can gather, being the founder of such an organization therefore requires foreign nationals to have an Investor/Business Manager Visa (経営管理(投資経営)ビザ) (source). This should be applied for in advance of setting up the organization. Being a paid director (理事) may also require a change of status of residence (source). Check with your local immigration bureau in advance to check. Foreign nationals with Permanent Residency Visas, Spouse Visas etc. do not have these restrictions – they can set up incorporated associations and NPOs as they wish, with no change of visa required (source). There are no visa restrictions regarding setting up or running an Unincorporated Association.

Documents required for a bank account application (unincorporated associations)

“I’d like to open a bank account for my voluntary association” I said to the clerk at my local Japan Post Bank. He looked at me with consternation. “You can’t just fill out a form and get an account, you know,” he replied sternly. 

“I know,” I replied, pulling a clear-file from my backpack, stuffed to the brim with supporting documents.

I was at the bank for about one hour. Following that was a two-week wait for the application to be processed higher up in the bank-branch chain. Then I finally received my tsu-cho (通帳 bankbook), ATM card, and bank card pin number in the mail. I was then able to set up Internet banking. All under the account name of HokkaidoWilds.org (spelled out in katakana, of course – ホッカイドウワイルズドットオーアールジー). 

Here’s what you need to apply for a bank account under your unincorporated association’s name (requirements may vary depending on bank):

  • Association charter. Here’s the HokkaidoWilds.org charter (PDF) – feel free to use it as a template (Word template here). We’ve made an English translation of it for reference for members who don’t read Japanese. At the very least, you’ll need the following articles in the Charter:
    • Name of association.
    • Association address – in many cases this will be the president’s home address.
    • Purpose of association.
    • Member qualifications – something as simple as “individuals who agree with the association’s aims” is fine.
    • Date of founding the association.
    •  When submitting the Charter to a bank, you’ll need a statement at the end of the charter confirming the details are true and accurate – in the HokkaidoWilds.org Charter, this is written in the Japanese column.
    • Name and address of the association representative (hand-written).
  • Official photo ID of representative. E.g., drivers license, residence card etc. The bank account will be made under the association’s name, but will also have the representative’s name associated with the account.
  • Proof of associations activities. This is to prove to the bank, beyond reasonable doubt, that your association is active and does actually engage in meetings/activities etc. Print outs of Facebook pages, photos, meeting notes etc will all be fine.
  • Member list. Here’s an Excel template.
  • Inkan seal. A 100yen shop inkan will be OK. For HokkaidoWilds.org, we figure we may want to move to an incorporated association structure (far) in the future, so we opted to get a representative’s seal (代表印 daihyo-in) made. This circular inkan has ‘HokkaidoWilds’ etched in an outer ring, and ‘代表印’ etched in an inner circle. See examples here. These can be ordered at anywhere inkan are made or sold – we got ours at a local Hankoya21 for about 10,000yen. They’re cheaper online.

Comments | Queries | Discussion

4 thoughts on “A Primer in NPOs, Incorporated Associations, and Voluntary Associations in Japan”

  1. Nice succinct rundown on setting up a not-for-profit organisation here. It’s too bad they want a boatload of money for outfits such as yourself to become an incorporated non-profit (but funnily enough not for NPOs) could be worth it down the line to have full legal status however.

    1. Cheers David. We’ll see how things go. The reality is that at this point, we’re quite happy ticking along doing what we love – hanging out in the outdoors and talking about it on the Internet 🙂 Anything that eats up time outside of that is a bit of a chore!

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