GmbH is an acronym that stands for Gesellschaft mit beschränkter Haftung. In German, it is translated as “Limited Liability Company”; the Limited Liability Company is familiar to us all.
As you know, various administrative and legal forms of legal entities exist. When buying real estate as a legal entity in Germany, the best choice for a foreign investor is to complete a GmbH (Gesellschaft mit beschrankter Haftung, GmbH) – an analog of an LLC (limited liability company Germany). This is a legal entity whose participants are liable for their debts only with their contributions but not with personal property. Profit obtained at the end of the year is distributed according to the size of the shares of GmbH participants.
An organization’s founders can be one or more someone and legal entities, including foreigners and stateless persons. Establishing a Limited Liability Company is carried out by starting to sign a memorandum of association by the participants (including when the founder is one person).
The contract must necessarily contain the following provisions:
The German Chamber of Commerce and Industry must authorize the company name, and the designation “GmbH structure” is required.
The authorized capital of a GmbH structure must be at least 25,000 euros. It is a legal entity’s property, is formed from the contributions of the founders specified in the constituent agreement, and can only be spent on the business needs. Contributions must be made in cash or in the form of things transferred to society. It is better to contribute the authorized capital in cash since the transfer of things requires an examination of the value, which significantly slows down the establishment process. How much does it cost to start a business in Germany? If there are two or more founders, registering a company is enough to contribute half of the authorized capital – cost of 12,500 euros. The second half is paid during the first year of operation. The authorized capital, from the very first days after it is credited to the account, can be used for the company’s activities, i.e., in other words, it can be used to purchase income-producing real estate.
The Limited Liability Company must have requirements such as legal address and telephone number at the place of registration of the company.
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Starting a GmbH registration takes one day. That is one of the advantages. To follow the incorporation process, the notary who will certify the constituent agreement must be informed in advance of the company’s desired name so that he has time to obtain permission from the Chamber of Commerce and Industry before the investor arrives. After incorporation process GmbH account is opened in the bank on the same day, and the authorized capital is deposited. That is also one of the advantages.
After the memorandum of association has been certified by a notary, the GmbH is registered in court, and an entry is made in the Trade Register. Regarding timing, entering the GmbH shareholder rights into the Trade Register can take 6-8 weeks. At the same time, the founders do not have to be located in Germany.
You should know that a company can immediately engage in business activities when the constituent agreement is certified by a notary. In this case, the founders are liable for all their property and the obligations of the GmbH. Within the framework of the contributed shares in the authorized capital, the founders bear responsibility only after the company is registered in court and its name is entered in the Trade Register.
Popularity and success are due to some requirements of GmbH in Germany:
Taxation is levied by federal tax laws and the laws of each federal state (Bundesland). Here are the central taxes that generally apply to GmbH companies in Germany:
| Income tax (Körperschaftsteuer) | GmbH companies must pay tax on their profits. The income tax rate is 15%, but with the additional solidarity tax (Solidaritätszuschlag). t How much? The total rate is 15.825%.
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| Value-added tax (Mehrwertsteuer) | GmbH companies must also pay value-added tax on sales of goods and services. The standard value-added tax rate in Germany is 19%, but there are also reduced rates on certain goods and services |
| Social insurance | GmbH companies must also pay social insurance contributions, including unemployment insurance, pension insurance, and health insurance. Contribution amounts depend on employee salaries and other formation factors |
| Land and real estate tax formation (Grundsteuer) | If a GmbH company business owns real estate in Germany, it must pay land and real estate taxation, which is levied depending on the value and location of the property.
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GmbH stands for Gesellschaft mit beschränkter Haftung, which translates to “Limited Liability Company” in English. It is a legal entity where the owners’ liability is limited to their capital contributions. A GmbH is commonly used by foreign investors to purchase real estate and conduct business in Germany.
The minimum required capital to start a GmbH in Germany is 25,000 euros. If there are multiple founders, they must contribute at least half of this amount (12,500 euros) at the time of registration. The remaining capital can be paid within the first year of operation.
The GmbH registration process involves several steps:
Required documents include:
Key legal requirements for a GmbH in Germany include:
Advantages of starting a GmbH in Germany include:
GmbH companies in Germany are subject to several taxes:
Yes, foreigners can start a GmbH in Germany. There are no restrictions on the nationality of the founders, and they can be individuals or legal entities, including foreign corporations.
In a GmbH, the liability of shareholders is limited to their capital contributions. This means that personal assets of the shareholders are protected and cannot be used to satisfy company debts.
Shareholder rights in a GmbH are defined in the memorandum of association. Profits are distributed based on the size of each shareholder’s contribution. Shareholders have the right to participate in major decisions, annual meetings, and can appoint and remove directors.
These FAQs provide a comprehensive overview of GmbH in Germany, addressing key aspects such as formation, legal requirements, advantages, taxation, and shareholder rights.
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