The Correlation Between LLC Representative Compensation and Immigration Screening#

When a foreign national establishes a Limited Liability Company (LLC or Godo Kaisha) in Japan and seeks to obtain or renew a “Business Manager” (Management/Administration) visa, determining the amount of “Executive Compensation” (Remuneration) for the Representative Member is a critical decision. This is not merely a matter of tax strategy or corporate finance; it is a fundamental factor directly linked to the requirements stipulated by the Immigration Control and Refugee Recognition Act.

This article provides an objective analysis of how the executive compensation set for a Representative Member of a Japanese LLC correlates with the evaluation process conducted by the Immigration Services Agency of Japan.

The Dual Criteria in Immigration Screening#

To understand the impact of executive compensation on visa approval, it is essential to recognize two conflicting criteria that immigration examiners prioritize: “Independence of Livelihood” for the applicant and “Stability and Continuity” of the business.

1. Independence of Livelihood (Personal Perspective)#

Foreign nationals residing in Japan are required to possess the financial capability to live independently without becoming a burden on public welfare. Consequently, if the executive compensation is set too low, the immigration authorities may question the applicant’s ability to sustain their life in Japan, potentially leading to a denial of the visa.

While there is no explicitly published legal minimum, it is generally understood that a monthly remuneration equivalent to the starting salary of a university graduate in Japan—approximately 180,000 to 200,000 JPY—is considered a baseline threshold. If the applicant has dependents (spouse or children), the required amount naturally increases. Setting the remuneration extremely low (e.g., 50,000 JPY per month) solely for tax saving purposes or to retain company cash flow significantly increases the risk of a negative evaluation during the screening process.

2. Stability and Continuity of Business (Corporate Perspective)#

Conversely, setting the executive compensation too high can jeopardize the company’s financial health. In the immigration screening process, if a business consistently reports losses or falls into insolvency (where liabilities exceed assets), the authorities may judge that the business lacks “continuity,” leading to the denial of a visa extension.

This is particularly critical for newly established LLCs. If a high executive salary is set while revenue is still unstable, the company will record a significant deficit in its financial statements. Since immigration authorities rigorously inspect financial documents (Profit and Loss Statements and Balance Sheets), creating a financial situation where the company’s survival is threatened by excessive officer remuneration must be avoided.

Structure of a Godo Kaisha (LLC) and Remuneration#

A Godo Kaisha differs from a Kabushiki Kaisha (Stock Company) in that it has a broader scope for “autonomy of the articles of incorporation.” While a Stock Company requires a resolution by the general meeting of shareholders to determine remuneration, an LLC determines it through the articles of incorporation or the consent of the members (Shain).

While this flexibility is an advantage of the LLC structure, from the perspective of immigration screening, the decision-making process must be transparent and reasonable. The authorities verify whether the remuneration is paid in accordance with the company’s internal rules and whether it aligns with the business’s scale and profit levels.

The Issue of “Zero Remuneration”#

Many entrepreneurs consider setting their executive compensation to zero during the startup phase to prioritize company cash flow. However, for the purpose of the Business Manager visa, a zero-remuneration strategy is generally not accepted. As mentioned earlier, without remuneration, the applicant cannot prove their “Independence of Livelihood.”

Exceptions may exist where an applicant can prove sufficient personal assets or significant income sources from outside Japan to support their life. However, these are exceptional cases. The standard expectation for a Business Manager visa holder is that the business in Japan generates enough profit to pay a living wage to its manager.

Differences Between Initial Application and Renewal#

The focus of the immigration examination shifts depending on whether it is an initial application or a renewal.

Initial Application (Certificate of Eligibility)#

At the stage where the business has just started or is about to start, there are no financial statements to prove a track record. Therefore, the examination focuses on the “Business Plan.” The applicant must logically explain, based on revenue forecasts, that the business has a profit structure capable of paying a reasonable executive salary. The “feasibility” of the set remuneration amount is scrutinized here.

Application for Extension of Period of Stay (Renewal)#

During renewal, the actual financial statements of the company and the tax payment certificates of the individual are examined. The authorities check the balance: “Has the payment of executive compensation caused a massive deficit for the company?” or conversely, “Has the compensation been reduced to an unlivable level just to make the company appear profitable?”

Furthermore, it is a strict requirement that social insurance premiums (Health Insurance and Pension) and resident taxes are correctly deducted from the executive compensation and paid to the respective authorities. Failure to comply with these social obligations is a common reason for visa renewal denial or a reduction in the period of stay (e.g., receiving 1 year instead of 3 years).

Conclusion#

Setting the executive compensation for a Representative Member of an LLC is a delicate balancing act between “the amount necessary for the individual’s livelihood” and “the amount sustainable for the company’s management.”

In the eyes of the Immigration Services Agency, neither a high salary that bleeds the company dry nor a low salary that impoverishes the manager is acceptable. Establishing a reasonable, explainable amount based on a solid business plan is indispensable for maintaining a stable status of residence in Japan.