Open a Company in Germany
Open a Company in GermanyUpdated on Wednesday 23rd September 2020
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Investors who decide to open a company in Germany need to observe a few basic steps for incorporation, at the same time complying with the ongoing laws for corporate management and control, taxation and other issues. Our German lawyers who specialize in company formation matters can help you open a company in Germany by following the mandatory steps.
One of the first decisions an investor has to make when opening a company in Berlin or another city is what type of legal entity will he use for the future company. This, along with selecting a proper and available company name, are the first steps when opening a new business.
Our team of corporate attorneys in Germany has handled numerous incorporation procedures and can assist investors who wish to open a company as fast as possible and by observing all of the relevant laws and regulations. Working with a local team of experts is of the utmost importance for foreign investors who are interested in starting a business in Germany, especially those who are not fluent in German and those who cannot be present in the country during the entire duration of the procedure.
In the article below, our team of lawyers who specialize in company formation in Germany helps answer some of the most important questions entrepreneurs can have when deciding to start a business in Germany.
What are the types of legal entities I can register in Germany?
Investors interested in starting a business in Germany can choose from the following forms of business: the private limited liability company, the public limited liability company, the partnerships or the sole proprietorship. The list below includes some of their most important characteristics:
- - The GesellschaftmitbeschränkterHaftung – GmbH-Private Limited Liability Company can be formed by at least one investor with a minimum share capital of 25.000 EUR in cash or kind. In the last case, the items used to make the contribution and their values must be shown in the articles of association. The shares of this type of company cannot be transferred to the public, unlike the shares of the public limited liability companies. The general meeting of the shareholders is taking the highest decisions and appoints the company’s director. The director is responsible for taking the daily decisions and represents the company in front of the German authorities.
- - The Aktiengesellschaft – AG-German Joint Stock Company requires a higher share capital, minimum 50.000 EUR and the liability of its members is limited by their contribution to the capital. The founding investors must appoint a supervisory board and an auditor. The supervisory board is formed by at least three members and has the role of appointing and verifying the management board. The management board has the role of taking daily decisions and representing the company on the market.
- - The OffeneHandelsgesellschaft – OHG- General Partnership is formed by at least two investors joined together under the same economic purpose and fully liable for the entity’s debts with their own personal assets. Both members can take management decisions and their personal assets are not protected in case of bankruptcy.
- - The Kommanditgesellschaft – KG- Limited Partnership is formed by two types of partners: with limited liability (silent partners) and with unlimited liability (general partners). Only the general partners can take managerial decisions and their personal assets are not protected in case of uncovered liabilities of the entity.
- - The sole proprietorship is formed by a single individual with no partners and having its own personal assets not protected in case the entity is facing bankruptcy.
- - The branch: this is one manner in which a foreign company can expand to Germany, and the branch will be its German counterpart, with the mother company being liable for all of the debts and obligations.
The choice between these available business forms depends on the available capital upon incorporation, the number of founders, the future plans for expansion as well as the predicted size of the business. The GmbH is one of the most popular business forms not only because it allows for a convenient degree of investor liability but also because it is suitable for small or medium-sized businesses.
What are the steps for incorporation of a company in Germany?
The list below includes a summary of the ten steps to open a company in Germany. In general, investors who are thinking of starting a business in Germany will always deal with these steps in this order and the company formation experts at our law firm in Germany can help you throughout all of these steps. The requirements are as follows:
- The legal form: this will include choosing among the available types of companies as well as establish the business plan and the management of the structure.
- The legal documents: one of our attorneys in Germany who specialize in company formation will prepare the Articles of Association for the new company.
- The name: only unique names are allowed to be registered in the German Trade Register. This is why in the beginning the investors are advised to check it at the local chamber of industry and commerce.
- The setup: the articles of association and the memorandum of association must be notarized and thus the company is set up before a notary public in Germany.
- The bank account: a bank account in Germany is opened in the company’s name and the minimum share capital must be deposited and the certificate from the bank proving this must be issued. A notice of this deposit, along with bank statements are presented to the notary public who handled the set up of the company.
- Document submission: the notarized documents, along with the certificate of deposit must be deposited at the local courts in order to be registered at the local commercial register.
Once these steps are complete, the local office of business must be notified that a new company has been established. Afterward, the registration with the professional association is required as well as the registration with the labor office. If the company will have employees is necessary to register them for the health and social insurance. Any company is liable for taxes so the last step of incorporation is sending the relevant documents at the Tax Office. The tax number or the VAT ID number for the company is issued by the Tax Office.
The registration with the Tax Office is the final step after opening a company. After this is complete, the company is an operational one that can start to engage in its business activities. Before starting a business in Germany, it is important to note that some business fields are regulated and companies in Germany are required to apply for special permits and licenses with the relevant German authorities. One of our lawyers in Germany can also help you during this step. Also, in case you are considering moving to Germany, we can put you in contact with our reliable German immigration lawyers who will help you through the entire process. In case you are interested in moving to other countries, for example Australia or New Zealand, we can recommend reliable local experts.
What are the startup costs when opening a company in Germany?
When starting a business in Germany, investors are advised to consider the overall costs needed for opening the company. The minimum share capital is one of the primary concerns, and as stated above, a private limited liability company (GMBH) is established with a minimum share capital of 25.000 EUR, while the public limited liability company (AG) is established with 50.000 EUR. However, this initial investment will not be enough to start a business. Apart from the share capital investors will also need to have the funds to purchase or rent a property that will be used as the headquarters for the business. Startups can consider working via a virtual office, which can be a more cost-effective solution. Other expenses will include those related to equipping the headquarters as well as those for employee remuneration.
What documents are required for the incorporation of a company in Germany?
The incorporation of a German company is made by registering the notarized memorandum of association, the articles of association and the bank receipt in the Commercial Register. If the entity is a partnership, the agreement signed by the parties must be deposited at the chamber of commerce for registration in the Commercial Register.
This short video will present you the incorporation procedure in Germany:
How quickly can I incorporate my company in Germany?
Before starting a business in Germany, a legal entity can be established in this country in approximately 11 days when investors follow all of the presented steps and prepare their documents accordingly.
Having the proper legal aid during the incorporation phase can be useful to investors in order to make sure that every document is compliant and that the process runs smoothly. Our team of lawyers in Germany who specialize in company incorporation can help investors start a business. we can guide you throughout all of the steps and provide personalized counseling, as need when opening a business in a particular business field. Moreover, we can also assist business owners in applying for additional special permits and licenses once the business is registered.
In case you need other types of legal services, our partners can help you. For example, for immigration services in the Netherlands, our German lawyers can put you in contact with a team of reliable Dutch immigration lawyers. Also, if you are interested in setting up a business in Portugal, we can put you in contact with our local partners.
Once the company is incorporated, it may also need to apply for special permits and licenses as well as for EORI registration in Germany, if involved in trading activities within and outside of the EU.
How easy is it to hire personnel in Germany?
The process of hiring personnel in Germany is usually time-consuming so it’s advisable to contact a recruitment agency in order to find the suitable candidates for the vacancies.
Before hiring a foreign person, the entities must be aware that besides the passport, a residence permit is necessary. The residence permits include work and residence authorization. The permits are issued by the embassy / general consulate in the home country or by the Alien Registration Authority in case the person is already in Germany. Usually a residence permit is usually issued for a period of time so it’s advisable to make employment contracts only on that period of time.
Usually the following documents must be provided after signing the contract: the Wage Tax Card, the German Social Security Card, the Certificate of the Receipt of Child Allowance, the Holiday Certificate, documents on asset-creating benefits, work reference or leaving certificate and for foreign employees from non-EU-member states, their residence permit.
What are the main points of interest for foreign investors?
Germany is by far the most attractive European country for investment. With the largest market in Europe and with a central location, Germany is considered the third strongest economy in the world.
The German economy is characterized by the fact that 85% of all businesses are small or medium-sized (Mittelstand). The quality of the products made in Germany is internationally recognized, the exports are also contributing to the German high standard economy.
The economy is mainly formed by the service sector with a contribution of around 70% of the total GDP, industry 29.1%, and agriculture 0.9%.
Businessmen who are interested in starting a business in Germany should know that the rights of the investors are protected by the transparent and reasonable laws. Actually the legal system is copied by many jurisdictions and the country is situated on the fourth place in the top of legal security issue.
Germany is also in the top of innovations, resulted from the good collaboration between the industry and the research institutes. Import and export activities are popular among investors in Germany and EORI registration is required for these.
What are the advantages of a holding company in Germany?
The holding company beneficiates from a number of advantages which makes Germany an appealing destination for foreign investments. Among the advantages, there are the following: no withholding taxes on incoming and outgoing dividends, no withholding taxes on liquidation distributions, exemption of capital gains on the disposal of shares, deductibility of finance costs, current-value depreciation and goodwill, liberal anti avoidance legislation and thin cap rules, no controlled foreign corporation rules, a large double tax treaty network, low corporate income tax rate (only 15%), low VAT taxation (19% and in certain cases only 9 %) and also no exit taxation.
10 Most Important Business Regulations in Germany
Germany attracts many foreign investors on an annual basis. The first thing to take into account when starting a business in Germany are the business regulations and etiquette which is very important. Here are ten of the most important business etiquette in Germany:
When doing business in Germany it is very important to treat them with respect and correctitude as any unethical behavior could damage business relations with your German counterpart.
2. Business communication
In order to have a successful cooperation with a German company you must get familiar with the notions imposed by the business etiquette. Business communication should be direct and focused on the subject.
3. Business relations
The German people puts a great price on order, punctuality and privacy. They are also perfectionists which is why they are focused on achieving their goals. You must make sure you respect hierarchy and make a clear distinction between private and business matters.
German businessmen are reluctant to physical contact. The usual greeting accepted in German companies’ business meetings are usually restricted to handshakes.
5. Addressing a German partner
Both German citizens and businessmen are very strict about personal titles. You have to try and address people by their full name and title.
6. Corporate social responsibility
German companies are very concerned about environmental issues. That is why it is in the Germans’ business culture to use every opportunity and organize social responsibility actions. Showing them you know some their social achievements is a great sing of respect in the German business culture.
7. Time management
Punctuality defines the German people. In German companies every action is carefully calculated and each calendar or agenda is duly respected, therefore it is very important to be punctual in both business and ordinary meetings.
8. Business dress code
German managers take pride in dressing well which is why the business dress code imposes a certain etiquette. Suits are the most appropriate for men, while conservative dresses are recommended for women.
9. Business meeting planning
It is very important to plan a meeting ahead when doing business in Germany. Appointments are mandatory when going into business with a German company and should be made a few weeks in advance.
10. Follow up after a meeting
Unlike in other countries, German companies are keen on follow-up discussions after a meeting. Emails or letter sent after a meeting will reinforce the importance of the appointment.
Contact us for more details about how we can be of assistance when starting a business in Germany. Our lawyers can also assist you in the trademark registration procedure in Germany.