Germany is the most important market in Europe. Germany’s economy is one of the most stable in the world, and the country’s favorable location offers ample business opportunities. All these factors influence the increasing interest of entrepreneurs in this jurisdiction. In addition, Germany provides a wide choice of organizational and legal forms, allowing you to establish a company that meets your requirements.
The most popular types of companies in Germany are:
Business registration in Germany occurs in 4 main steps:
The business name must be unique and not confusingly similar to the names of existing companies. There are no restrictions on the choice of name; however, it is necessary to be guided by the principle of clarity, according to which the name of the company should not mislead participants in market relations. In addition, according to §4 of the LLC Act, the abbreviation “GmbH” is a mandatory requirement.
An important stage in registering a company in Germany is the conclusion of the constituent agreement, which must be notarized and signed by all company participants. The Law on Limited Liability Companies clearly defines the structure of the agreement. Thus, the document must necessarily contain the following provisions:
The minimum authorized capital of a GmbH is 25,000 EUR. In accordance with the provisions of §7 GmbHG, an application for company registration in Germany can only be submitted after the participants have contributed more than 12,500 EUR.
If the company plans to have 2 or more shareholders, each must contribute their share, the size of which must be at least ¼ of the contributed amount. A larger contribution from another participant cannot compensate for the failure of one participant to pay his share.
The company’s authorized capital can be contributed in kind (Sacheinlagen). Still, in this case, according to the results of an independent assessment, the property’s value must be above the minimum amount of the authorized capital. In addition, if the charter specifies the amount of authorized capital that exceeds the minimum threshold, then the property’s value should not be lower than the stated amount. If, after assessing the property, it turns out that the value of the contributed property does not correspond to the capital stated in the memorandum of association, the founder will need to contribute the missing amount in cash (§9 GmbHG).
An application for company registration is completed by a notary and submitted to the court located at the registered legal entity’s location (§7 GmbHG).
The application must be accompanied by:
After this, information about the company is entered into the Trade Register (Handelsregister) and considered registered.
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Unternehmergesellschaft (UG) is a legal form known as a mini-LLC (mini-GmbH). The reason for assigning such a name is the content of the main provisions on this OPF in the Law on Limited Liability Companies (§5a GmbHG) and, consequently, the identity of the structure and registration procedure for these types of companies.
A distinctive feature of UG is the size of its authorized capital. Let us remind you that the minimum authorized capital of a GmbH is 25,000 EUR, but in the case of a mini-LLC, the authorized capital at the time of registration may be only 1 EUR. However, it should be noted that in this case, the company is obliged to contribute 25% of profits annually as an increase in the capital reserve until its size becomes equal to 25,000 EUR. At this point, the company will become a full-fledged GmbH.
Thus, in addition to the requirement to transfer a quarter of the profits, a disadvantage of mini-GmbH may be the requirement that the company name contain an indication of the OPF: Unternehmergesellschaft or UG, which may lead counterparties to believe that the founders did not have sufficient funds for registration LLC. This fact may also affect the company’s creditworthiness.
In accordance with §1 of the Law on Joint Stock Companies (Aktiengesetz), Aktiengesellschaft is a legal entity whose authorized capital is divided into shares. The shareholders are not liable for the company’s obligations and bear only the risk of loss to the extent of the value of the shares they own.
The minimum authorized capital of an AG is 50,000 EUR, 25% of which must be contributed when applying for company registration. The authorized capital must be divided into shares, each with a par value of at least 1 EUR. Transferring shares at a price lower than the nominal value is prohibited (§ 9 AktG).
The management bodies of the joint stock company are:
| 1 | governing body; |
| 2 | supervisory board; |
| 3 | General Meeting of Shareholders. |
As in the case of a GmbH, a notarized memorandum of association is required to establish a joint stock company. The charter must contain information about:
In addition, a bank certificate confirming payment of the authorized capital must be provided.
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In Germany, a company’s worldwide income is taxed. The income tax rate is 15%. Additional trade tax set by local municipalities averages 14-17%. In addition to this is added a joint and several surcharge of 5.5% levied on the amount of corporate income tax (~0.825%). Thus, the effective income tax rate varies from 30 to 33%.
The choice of legal structure has financial, tax, and legal implications. Before establishing a business company in Germany, you must contact a tax consultant to discuss the future project.
The main types of companies in Germany include limited liability company (GmbH), joint stock company (AG), and various forms of partnerships such as Gesellschaft des bürgerlichen Rechts and Kommanditgesellschaft.
Business registration in Germany involves four main steps: verifying the company name, preparing constituent documents, contributing authorized capital, and completing the registration application. The application, along with necessary documents, is submitted to the court at the company’s registered location.
Company names in Germany must be unique and not misleading. The abbreviation “GmbH” is mandatory for limited liability companies. The name should adhere to the principle of clarity and not confuse market participants.
The minimum authorized capital for a GmbH in Germany is 25,000 EUR. An application for company registration can only be submitted after at least half of this capital, i.e., 12,500 EUR, has been contributed.
Yes, authorized capital for a GmbH can be contributed in kind, but the value of the property must be assessed independently and meet certain criteria. If the value falls short, the founder must make up the difference in cash.
A mini-GmbH, known as Unternehmergesellschaft (UG), is a legal form with a lower initial authorized capital requirement, starting from 1 EUR. However, it must gradually increase to 25,000 EUR by contributing 25% of profits annually.
The minimum authorized capital for an AG in Germany is 50,000 EUR, with at least 25% required upon registration. A notarized memorandum of association and a bank certificate confirming capital payment are necessary.
In Germany, companies are taxed on worldwide income at a rate of 15%. Additional trade tax set by local municipalities, averaging 14-17%, and a joint and several surcharge of 5.5% are also applicable, resulting in an effective tax rate of 30 to 33%.
The choice of legal structure in Germany has significant financial, tax, and legal implications. Consulting a tax consultant before establishing a business is essential to understand these implications and optimize tax obligations.
To ensure a smooth business registration process in Germany, it’s crucial to meticulously follow the steps, adhere to legal requirements, and seek assistance from legal experts or consultants familiar with the German business landscape.
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