Germany is one of the most attractive countries in Europe for foreign investments. Its central location, easy access to other EU markets and its good infrastructure and highly qualified workforce recommend it for investments in several business fields. One sector that stands out, in particular, is research and development but investment opportunities abound, especially in cities like Berlin.
Company Formation in Germany
Company formation in Germany is generally a straightforward process, including a number of formalities that have to be performed. Our firm can help you with the formation of a company in Germany. A German UG or GmbH company could be formed within 2-5 days. The procedures and regulations are not significantly different than in other countries. Company formation in Germany consists of several basic steps that refer to the preparation of the company’s documents and its effective registration with the German authorities. Among the initial steps for starting a company in Germany, we can mention the drafting of the articles of association and all other required documents, such as the specimen signatures, a set of passport copies and the special forms from the company registration office. Investors must officially sign part of the documents in front of a public notary in Germany.
Company formation in Germany also refers to finding a registered office, opening a bank account and hiring a local accountant for the company. Businessmen interested in forming a company in this country are invited to try our Cost Estimator, a free calculator that shows the average cost for starting and operating a company in Germany for an initial 3-month period. Furthermore, if you want to find out what is the amount of money you have to pay in terms of corporate tax, dividend tax, and VAT, please use our instant tax calculator.
The main business entity types in Germany:
– German GMBH: GmbH-Private Limited Liability Company can be incorporated in Germany by at least one investor with a minimum share capital of 25,000 EUR. The company’s capital can be submitted in cash or kind (in this case, the value of the assets must be shown specifically in the articles of association). One issue to consider is that the shares of the German GMBH cannot be transferred to the public nor registered at the Stock Market. The General Shareholder’s Meeting is the one that ensures the management of the GMBH. The day-to-day corporate decisions are made by the company’s director which is appointed by the general meeting of the shareholders.
– AG-German Joint Stock Company: This is suited to large businesses because of the possibility to increase the initial capital through the registration of the shares to the Stock Market. The German AG requires a share capital of minimum 50,000 EUR. The members are only liable up to the amount they have contributed to the capital, just like in the case of the joint stock companies. The management is assured by the management board which is checked periodically by a supervisory board which is formed by at least three members. For this business type, the accounts must be evaluated by a statutory auditor.
– German Limited Partnership: Formed by two types of partners: the silent partners who must bring a contribution to the entity’s capital and has limited liability to the extent of that contribution and the general partners who don’t necessarily make a contribution to the entity’s capital but who have unlimited liability for the entity’s debts and who can claim profits. The general partners are those who have decisional powers in the German limited partnership while the silent partners cannot participate in any of the management decisions.
– Sole Trader: Formed by a single individual with his own personal assets and no protection from liability in case the entity is facing bankruptcy.
– Branch: Branches are also popular methods of entering the German market and many foreign investors choose it as the first step in their business path. The branch is not a legal entity, this is why its assets and liabilities belong to the parent company. You can reach out to our contact our company formation specialists in Germany for more details regarding the particularities of these types of structures.
Steps for company formation in Germany
All rules and regulation regarding the formation of German companies are included in the Company Act. The first steps for company incorporation in Germany include the verification the company name at the local chamber of industry and commerce and are followed by the preparation of the company’s Articles of Association and opening a bank account. The minimum share capital as per the chosen business structure is deposited in that account. Below, we list the steps for company formation in Germany:
1. choose a company type: this can be the limited liability company, the joint stock company or the partnership.
2. choose a company name: the name of the new legal entity needs to be unique and can be checked for availability.
3. execute the deed of formation: this is performed before a notary in Germany; the founders also prepare the Articles of Association.
4. deposit the share capital: some business forms require a minimum share capital, that is deposited in a bank account.
5. register the business: the formation ends with registering the company in the commercial register.
The founders of the company need to sign the application for registration in front of the notary public. Once the company is registered, the liability of the founders enters into effect.
The company incorporation procedure in Germany
The following documents are to be submitted to the German Commercial Register in order to start the registration process: an application for registration, the notarized articles of association, a document showing the management board structure, a certificate showing that the share capital was deposited. The documents must be submitted in an electronic form. The registration of the new legal entity is recorded by the Commercial Register on an electronic platform.
After the submission of the documents, company incorporation in Germany continues by is applying for the trading license from the local Office of Business and Standards followed by the registration with the statistical office (which will send a questionnaire that must be filled with the company’s business data) and at the chamber of industry and commerce and the labour office. The labour office will issue an eight-digit operating number which must be reported for social security purposes. The entity must then apply for the federal health insurance office. A notification must be sent to the Tax Office which reports the formation of the new business entity, this leading to the registration for the corporate taxes and VAT.
After the company is registered, the business can start its commercial activity. Most of the German companies will also hire employees soon after they are incorporated. Employers have access to a well-trained workforce and they can recruit either on job websites or by working with recruitment agencies. The selection process is important so that the employees can find suitable candidates for the open position.
Companies are required to comply with the local accounting, filing and audit rules. The German Generally Accepted Accounting Principles are the standard that is followed for accounting purposes, along with the International Financial Reporting Standards. Medium and large companies need to comply file the annual financial statements, the management report and other supporting documentation within three months following the end of the financial year (which can also be the calendar year). These types of companies must also audit these documents.
Our company formation agents can offer incorporation services in the most important German cities and states, such as: Berlin, Hamburg, Dresden, Nuremberg, Koln, Cologne, Bavaria, Saxony, Hesse.
How can the information about a company be subject to change?
When entrepreneurs need to make a change regarding the trade or business activities, they can do so through a point of single contact. The modifications need to be registered when the business changes its operations or changes the location of the branch in Germany. Company owners must also notify of any changes involving the expansion of the business activities (in addition to the change of the primary activities), changes to the company names, changes that occur in the managerial hierarchy of a company registered with the Commercial Register, as well as changes in the publicly available information about the company directors. A fee will apply for the newly registered changes. One of our agents can help you if you wish to de-register a company or discontinue the activities of a legal entity.
Foreign investments in Germany
Germany is a country that welcomes foreign investors and the Government supports initiatives that create new jobs. The foreign trade law sets forth the main conditions in which foreign entrepreneurs may enter the market. There are a few limitations, namely in areas like defense and there are requirements to maintain public order. Foreign investors in Germany enjoy the same rights for opening a company, for applying for special permits and licenses, applying for building permits as well as obtaining investment incentives. Company formation in Germany is a straightforward process, however, some investors may find that the language is a barrier. In these cases, we recommend that you reach out to our team who has worked with foreign investors and who can help with the communications needed with various German authorities. We can act as a liaison so that you can start the company formation procedures as smoothly as possible.
How we can help you
If you are considering forming a business or you need expert help with company registration in Germany, LegalGenius™ is ready to assist you with its skilled team of lawyers, consultants and tax experts. We are committed to making the process as stress-free and streamlined as possible for you, and we will take care of all your document preparation and administrative tasks regarding the registration forms, payment of government fees, local address registration, banking support, etc., whilst always keeping your exact objectives and unique vision in mind throughout the process.
Please use our Company Formation Wizard if you would like to set up your registered company in Germany or if you would like to know the costs involved prior to proceeding with our exceptional services. For other queries and special requests for complex or customised company formation services, please contact us at email@example.com