German companies enjoy respect worldwide; local registration is a kind of “quality mark” in the eyes of business partners and consumers. But not only that. According to the latest Doing Business ranking, Germany ranks 17th among 189 countries in terms of ease of doing business. The government takes care of small and medium-sized businesses, which, according to various estimates, provide up to 70% of jobs in the country.
You can register business in Germany without having a German passport or residency. Taxes here are far from low, but Germany is an attractive jurisdiction. There are no restrictions on the repatriation of profits and double taxation agreements with many countries. In addition, a legal entity’s German “origin” opens duty-free access to the EU market with almost 500 million consumers.
In Germany, non-residents can register three types of companies: AG (Joint Stock Company), UG (a company with an authorized capital of 1 euro and simplified requirements for registration documents), or GmbH (analogous to our LLC).
Let’s start with Germany’s most popular form of business activity —GmbH. The founders of such a company do not need to permanently reside in the country, be its citizens or residents. But when signing the constituent documents (this happens at the notary), the presence of the director and at least one of the founders is mandatory. The director and founder can be the same person, which will simplify registration.
Requirements for the authorized capital of GmbH – 25,000 euros. If there are several founders, then it is enough to deposit half of this amount at the time of registration. The remaining funds must be credited to the account during the first year of activity. Money from the authorized capital can be used to develop the business immediately after opening.
If you don’t have an extra 25 thousand euros (or at least 12,500), you can register a mini-GmbH (or UG) in Germany. The main advantage of such a company is its authorized capital, which can be 1 euro. The registration document requirements for UG are simplified, making registering easier. However, mini-GmbH has significant disadvantages: you will not be able to dispose of all profits freely; 25% of it must be contributed to the authorized capital until it exceeds 24,999 euros (when this happens, the mini-GmbH can be re-registered as a regular one). In addition, potential partners and banks are very skeptical about UG enterprises; in their eyes, such a company is insolvent: who would want to deal with a company whose authorized capital is 1 euro?
AG is an option for wealthy non-residents to start a business in Germany. The minimum authorized capital is 50 thousand euros; a quarter of this amount must be contributed at registration. AG shares can be registered or bearer; a register of shares must be maintained.
An AG company must have at least 1 shareholder, 1 board member, and 3 supervisory board members. It is not necessary that there are citizens or residents of Germany among them. The chairman of the board of a German joint stock company can also be a non-resident.
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There are several general rules that you need to know, regardless of the form of the enterprise.
| Firstly | you must have a registered address to do business in Germany. You can use a mass registration address, but local banks and counterparties have recently become wary of companies with such coordinates. The alternative is to spend money renting a room or workplace, but in Germany, this is not a cheap pleasure.
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| Secondly | the presence of a German citizen in the company is not necessary but desirable; adding a resident of the country to the staff will simplify relations with banks. |
| Thirdly | opening a company in Germany takes, on average, 2-3 weeks (if there are no weekends or public holidays). However, this can be done remotely; the presence of the director and founder is necessary only when the constituent documents are signed. Registering a legal entity in the VAT register is a separate story: the procedure takes a month and a half. |
| Fourthly | there is no nominal service. At all. So, the company needs to be registered under the name of a real beneficiary or hire real staff. |
| Fifthly | Germany has strict tax reporting rules. Everyone here submits it. For example, GmbH legal entities submit it once a month until the 10th. |
| Sixthly | a German GmbH can begin activities before the company is entered into the commercial register. But remember: in this case, the founders bear unlimited personal liability for the company’s activities. Upon completion of registration of the company in the TR, liability is limited to the authorized capital; the personal property of the founders will be inviolable. |
Anyone wishing to register their business on German territory must go through 8 points:
Open an account in a commercial bank.
Draw up a company charter and have it legally certified.
Register this charter in the Commercial Register of the court at the place where the company is opened.
Notifying the local office for managing the affairs of commercial and industrial enterprises about the registration of the enterprise is necessary.
Agree on Social Insurance.
It is mandatory to notify the labor office about the formation of a company.
Find and register employees in the social system insurance.
Send all documents and certificates (everything we collected above) to the local office of the German Tax Administration.
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Registering a business in Germany offers numerous benefits, including access to a stable economy, skilled workforce, and supportive government policies. Germany ranks high in the Doing Business ranking, indicating ease of doing business. Additionally, the government prioritizes small and medium-sized enterprises (SMEs), which contribute significantly to the country’s employment. Registering a business in Germany also provides access to the EU market with nearly 500 million consumers and favorable tax treaties with many countries, allowing for easy repatriation of profits.
Non-residents can register three main types of companies in Germany: AG (Joint Stock Company), UG (Limited Liability Company), and GmbH (similar to LLC). GmbH is the most popular option, offering flexibility and ease of registration. Non-residents do not need to be German citizens or residents to register a GmbH, but they must be present when signing the founding documents at a notary. AG requires a higher authorized capital and is suitable for wealthy entrepreneurs, while UG has lower capital requirements but certain limitations.
Registering a GmbH (Gesellschaft mit beschränkter Haftung) in Germany requires a minimum authorized capital of 25,000 euros, with at least half deposited at registration. The remaining funds must be contributed within the first year of operation. The presence of the director and at least one founder is mandatory when signing the founding documents at a notary. GmbH offers limited liability protection and allows immediate use of the authorized capital for business development.
Registering a UG (Unternehmergesellschaft) in Germany has advantages and disadvantages. The main advantage is the low authorized capital requirement, which can be as little as 1 euro. This makes registration easier for entrepreneurs with limited funds. However, UG has significant drawbacks, including restrictions on profit distribution and skepticism from partners and banks due to its low capital. Additionally, 25% of profits must be reserved until the authorized capital reaches 25,000 euros, at which point the UG can be converted into a regular GmbH.
When starting a business in Germany, there are several general rules to follow regardless of the company’s form. Firstly, you need a registered address to conduct business, preferably a physical location rather than a mass registration address. Secondly, while not mandatory, having a German citizen in the company can simplify dealings with banks and local authorities. Thirdly, the registration process typically takes 2-3 weeks, with additional time required for VAT registration. It’s important to comply with tax reporting rules and maintain transparency in business operations.
The procedure for registering a business in Germany involves several steps. Firstly, open a commercial bank account. Then, draft and legally certify the company charter. Register the charter with the Commercial Register at the local court. Notify relevant authorities about the business registration, including social insurance and labor offices. Register employees in the social security system and submit all necessary documents to the local German Tax Administration office. This comprehensive process ensures legal compliance and enables smooth business operations in Germany.
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